WELLFLEET — The town’s interim administrator and accountants like to refer to the journals and records they are working to make sense of as a “ball of yarn” that is continually unraveling.
“You follow it,” wrote accountant Mary McIsaac in an August report to the select board. “There are journal problems that send you in one direction, and then you get there and you find more problems that send you in more directions.”
Deciphering the story of how the town’s accounts got to be in such terrible shape — which clearly took a number of years — while the select board, finance committee, and other town officials were apparently completely unaware of the problems requires another kind of detective work.
At the start of 2021, Maria Broadbent was just a few months into her three-year contract as town administrator. She had already fired former Town Accountant Gene Ferrari without explanation and hired a new accountant, Heather Michaud, on Dec. 14, 2020.
There were a few other indications of trouble. The fall tax bills had gone into the mail almost two months late. But Town Treasurer Miriam Spencer predicted that “things will be better going forward.”
Instead, the town budget process quickly came apart, as Broadbent made massive cuts in department budgets without telling the heads of those departments, and then denied that she had done so.
Meanwhile, Michaud had identified alarming discrepancies in the town’s books.
The previous audit of the town’s accounts, for fiscal 2019, did not include a management letter, which normally identifies problems that need to be addressed.
“Heather came in and said, ‘We want a management letter that’s going to spell out everything we need to fix,’ ” Spencer said following her resignation on Nov. 23.
The auditors from Powers & Sullivan responded to Michaud’s demand with a management letter that Spencer described as “scathing.” It detailed material weaknesses in cash management and internal controls, a $765,000 “unknown variance” that remains unresolved, and 14 other serious deficiencies.
“Everything from the chart of accounts being insufficient, to supports the town needs from a financial perspective, to the actual system that runs them, and then of course the policies and procedures that govern the finances spent, and people paid — they all require some review or overhaul,” Michaud told the select board on April 13. The problems would take two to three years to fix, she added.
On April 23, Broadbent and Michaud both resigned. No explanations were given by town officials for either resignation. The select board announced that the annual town meeting would be delayed by three weeks.
Powers & Sullivan has conducted the town’s annual audits for 25 years. The audit team was scheduled to discuss the findings of the 2020 management letter with the select board on May 25, but the auditors failed to show up. They later blamed the failure on technology problems.
At the next select board meeting, on June 8, audit manager Mike Nelligan attributed the town’s accounting deficiencies to high turnover and a new accounting system. When asked why there had been no 2019 management letter, Nelligan said the audit was already late and he thought the town should have another year to get its new accounting software system up and running. The $765,000 unknown variance in the accounts, he said, was probably in “the agency fund,” which was “totally out of balance.” Agency funds are accounts that collect funds destined to go elsewhere, like meals tax revenues. There are, in fact, nine different agency funds on Wellfleet’s books. Nelligan has consistently refused to answer questions from the Independent.
The only one of the five select board members to express alarm about the auditors’ performance was Ryan Curley.
“I am concerned the communication was bad,” Curley said. “There was no forewarning of the seriousness of the issues, even though it’s pretty obvious the auditors knew there were issues in the accounting department and they should have issued a management letter. Not doing so was remiss and did not serve the town well.”
Select board member Mike DeVasto blamed the town administrator.
“Typically, the town administrator should be reporting to us what was going on in the accounting department,” he said. “That wasn’t happening.”
And board member Justina Carlson offered Powers & Sullivan a bouquet: “I think our auditors have done a wonderful job,” she said, “and I appreciate that Mike [Nelligan] is here tonight and all the work the firm has done for the town since 1996.”
In the following weeks, town leaders cobbled together a budget and warrant. Fire Chief Richard Pauley had served as acting town administrator until interim Town Administrator Charles Sumner, the longtime town administrator of Brewster, came on in June. While the auditors suggested writing off the unknown variance, Sumner and his two interim accountants, Mary McIsaac and Lisa Souve, decided to trace the errors in the books to find out what actually happened.
The fiscal 2022 budget, adopted at the annual town meeting at the end of June, turned out to be rife with errors. Sumner hoped to convene a special town meeting in December to correct the errors, but that plan had to be abandoned when the state Dept. of Revenue would not certify the town’s free cash account.
With help from the Dept of Revenue, the town managed to set its tax rate for the year by using several one-time transfers to balance accounts.
The timeline for closing the town’s books continued to be derailed, as Assistant Town Accountant Jane Tesson took a leave of absence and Spencer resigned. Sumner brought in another temporary accountant, Judy Sprague, and continues to look for someone to become the town’s permanent accountant.
More than 1,000 errors have been corrected in the town’s books for fiscal year 2020, Sumner announced to the select board at its Dec. 14 meeting. Free cash will likely be certified by the state in January, he said.
“When we get it done, it will give the community confidence that we have thoroughly looked at these valid concerns these people have and dug deep,” Sumner said. As the town prepares for the next annual town meeting, Sumner suspects a Proposition 2½ override will be needed to cover the town’s budget shortfalls.
In May, former Town Administrator Dan Hoort attributed the mess to “bad hires” he had made, but he has since refused to comment, saying the Independent is biased against him. Sumner and crew continue to try to untangle Wellfleet’s ball of yarn, though the source of the biggest knots and the unknown variance remain hidden somewhere in the mess.
