Shareholders of the Multiple Listing Service of Northern Illinois, one of the largest MLSs in the country, have voted to conduct a forensic audit of the operation and its CEO Jay Huffman. The MLS has about 37,000 members in more than 6,000 realty offices in the Chicago area.
A forensic audit is different from most audits in that it involves auditing, accounting and investigating. Forensic accountants engage in “factual economic transactional analysis that requires a level of detail and precision sustainable in an adversarial legal proceeding,” according to the Journal of Forensic Accounting.
PriceWaterHouseCoopers will conduct the audit, which is expected to be complete in approximately 60 days, according to Huffman. Steve Bochenek, attorney for the Illinois Association of Realtors will oversee the process.
Huffman estimates the procedure will cost MLSNI upwards of $50,000.
Terry Penza, president of the Northshore-Barrington Association of Realtors, initiated the motion for the audit at a special shareholders meeting April 6. At that time, the release to shareholders of the MLS’ financial statements had been delayed for several months.
“On April 6, when the shareholder meeting took place, no one had seen a financial (statement) since June 30, 2003. That was the issue,” Penza said.
Penza said she wouldn’t comment further until after the audit is completed.
Two days after the shareholder meeting, Huffman produced the delayed financial statements. The MLS’ annual audit caused a delay in the production of financial statements, he said. The fall and first-quarter financials were late because auditors needed extra time to coordinate with an outside accounting firm.
Huffman said there was nothing dishonest about the delay. He called the Illinois association’s attorney the day after the April 6 meeting to set the forensic audit in motion.
“The way I see it, I’ve been accused of fraud. My corporation has to go through a forensic audit. The implication is that I’ve done underhanded deals, which I have not,” he said.
Huffman believes the shareholders who voted for the forensic audit didn’t fully understand the implications of the procedure at that time. He said he didn’t comprehend it himself until he researched forensic auditing after the meeting.
Several other MLSNI shareholders weren’t immediately available to comment.
While Huffman said he has nothing to hide, he admitted to being anxious about the procedure.
“I’m a little scared, but not threatened by it. I’ve done nothing wrong,” he said. “Everything I’ve done has been for the corporation.”
Huffman was MLSNI’s first employee in 1991. Under his direction, the organization consolidated 13 MLSs in the Chicago region into one.
Huffman called the April 6 meeting to propose adding additional seats on MLSNI’s board of directors for direct broker representation. The board voted to add four additional broker seats for a total of 10, which gives brokers the same amount of seats as the shareholders, he said. He expects those seats will be filled some time this summer.
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