The auditors’ 2020 management letter to Wellfleet town officials raised more questions than it answered.
Auditors Powers & Sullivan of Wakefield headlined the letter “Material Weakness.” In summary, it indicated that some $23 million in revenue from taxes, fees, investments, and other sources had been rattling around Wellfleet Town Hall in 2019. There were few controls, scant oversight, and no one willing to accept responsibility for a mess that goes back at least several years. (See “Routine Financial Audits Don’t Tell the Entire Story,” Dec. 9, page A1.)
Worse than a still-unresolved variance of $765,000 is the lack of a plan to right Wellfleet’s financial ship and to put it on a good course. Where there should have been transparency there was darkness, as evidenced by the audit manager’s “no comment” in response to a reporter’s question.
The buck stopped nowhere, and the excuses that town employees were dumb, inexperienced, untrained, or disaffected don’t add up to solutions to a problem that it took a whistleblower to reveal. This failure also did a disservice to hardworking employees who were probably doing their best to keep things afloat.
The initial finding of the auditors was that the town’s 2019 books were off by more than $5 million. The variance was whittled down to a mere $765,000 after two transactions not properly posted totaling over $4 million were spotted, and $56,000 in outstanding checks were accounted for. (How you could miss two $2-million-plus transactions in a town Wellfleet’s size is a story for another time. I understand that it might have something to do with the town’s purchase of some shellfish flats.)
Town officials seem reluctant to make substantive changes or to dig deeper than required to just balance the books. Officials say that there’s no need to conduct a forensic audit because they have no suspicions that people in the accounting department were dishonest.
This may well be so, but you don’t have to actually filch cash from the till to misappropriate funds or to enable it.
How could officials know for sure, when there was little oversight relating to time sheets? Or sufficient backup to support receivables and payables? Or a system for collecting the W-9 forms required for generating 1099 forms for suppliers and freelancers? Or accurate recordkeeping of employee vacation time and personal days? Or adherence to union contracts when determining pay rates?
These are just some of the problems indicated in the auditors’ 2020 management letter — presented only after the whistleblower blew her whistle. Powers & Sullivan failed to produce the customary annual letter in 2019, the year when these problems appear to have gone off the deep end.
Going back to 2014, the earliest year that the town’s financials are online, the auditors point out some deficiencies, but in a much kinder and gentler way. You never get a sense of the seriousness of the situation until officials had to respond to the blowing of the whistle.
These problems didn’t occur all at once; they accumulated one upon the other until things boiled over.
Experts say that, in the best case, clients should change auditors every five years, and at least every eight years. Powers & Sullivan has been Wellfleet’s auditors for over 20 years. The relationship between auditors and clients should be arm’s-length, skeptical, rigorous, and, at times, contentious. Sort of like a referee making calls in an important game. But calling fouls on an old friend is a tough thing to do.
Maybe it’s time to build back better.
Stan Bratskeir underwent seven audits as the CEO of a subsidiary of a public company. He lives in Truro.