WELLFLEET — In a long line of financial updates to the Select Board, Interim Town Administrator Charlie Sumner Tuesday said a “series of unfortunate events” caused Wellfleet to find itself in troubling financial waters.
That is how Sumner explained how the town found itself with a $764,000 variance, or discrepancy, in town accounts, and a shortfall of $546,000 between town expenses and revenues.
But Sumner said he and his interim team of professionals are closing in on closing the books for fiscal year 2020 and 2021. Sumner promised the draft of a budget and warrant by today.
He expects to finish a financial forecast for the town by mid-January, after which the select board and finance committee can work on an expenditure plan. He said he hopes free cash will be certified by the end of January.
Those will be significant steps in establishing the financial foundation for the town moving forward.
Sumner’s report this week laid out the progress that he, interim accountant Lisa Soave, interim treasurer Mary McIsaac, and temporary accountant Judy Sprague have made in zeroing out the $764,000 variance.
“We found a lot of errors,” he told members. “We made a lot of corrections. Will we get to zero? No. Will we get to a better place? Yes.”
Sumner acknowledged that there was a sense of concern in the community, but he said there has been no evidence of criminal conduct. Money was entered into the wrong accounts.
“The fiscal management system went off the rails,” he said.
Signs of trouble and its roots
In June, auditors from Powers & Sullivan found a $764,000 variance in town accounts. Auditors said the variance closely matched the difference between the general ledger and an agency fund.
Michael DeVasto, vice-chair and former chair of the select board, said the auditors were sure the variance matched an agency fund because that fund was “upside-down” in roughly the same amount.
“They (auditors) recommended the town make one adjustment,” DeVasto said. “Charlie wanted to go through and correct every mistake.”
State Department of Revenue officials discovered a $564,000 gap between expenses and revenues in November when the town was setting its tax rate. The town worked with DOR officials to address the gap using adjusted estimates for short-term rental taxes, local receipts, and cannabis excise and community impact fees. An overlay account was also reduced by $100,000.
The roots of the financial problems can be traced back years, according to Sumner. In that time, the town had four different town administrators, three town accountants, two town treasurers and began working with a new financial software system, VADAR.
But the training on the VADAR system, instituted in July 2019, was problematic and insufficient.
And the turnover in top-tier positions was brutal.
Not closing the fiscal records for 2020 and 2021 was alarming, Sumner acknowledged. So was the firing of accountant Gene Ferrari in 2020.
“Things get disrupted, there was turnover, but I think there had to be a moment when they should have been concerned,” Sumner said when asked if select board and finance committee members should have known something was wrong.
“I think there were some indicators people should have picked up on,” he said.
DeVasto said former Town Administrator Dan Hoort should have shared that information with the board.
“To me, it’s incumbent on the town administrator to communicate the issues going on to the select board,” he said. “It’s negligent to not have informed the executive branch of town government that we had issues with accounting.”
The select board are not administrators, DeVasto said. “We’re supposed to set policy and make policy decisions,” he said. “The administration is supposed to be done by the town administrator.”
Seeking new leadership
The first meeting of the Town Administrator Search Committee will be held next week. The search process could take three to four months.
Sumner hopes to be finished with his interim position by March or April. He suggested the select board might hire a private firm to review the work he and his team have done, as a sort of peer review.
“I’m confident in Charlie and his team’s ability to do the work,” DeVasto said.
Engaging the services of a forensic auditing firm seemed a good idea to select board member Janet Reinhart.
“Given the seriousness of the systemic failure and the period of time over which it took place, a ‘peer review,’ as Mr. Sumner accurately phrased it, has much to recommend it,” she said in an email. “It might also serve as a mechanism for fine-tuning the procedures put in place by our team to prevent this from happening in the future.”
Contact Denise Coffey at [email protected]. Follow her on Twitter: @DeniseCoffeyCCT.