WELLFLEET — The town’s “free cash” account has not been certified by the state Dept. of Revenue for the last three years. This is just one of the mind-bending problems facing the volunteer and temporary workers who are racing to prepare a budget and a town meeting warrant by a May 21 deadline.
In municipal accounting, free cash is unrestricted funds left unspent as of June 30, the last day of the fiscal year. Town officials may use this money to pay future expenses, with the approval of town meeting voters. The funds are not available, however, until the state certifies the balance sheet from the previous year. This normally happens within two or three months.
But there hasn’t been a balance sheet since 2018.
The accountant who prepared Wellfleet’s books for fiscal 2019 never completed the work, said Interim Town Administrator Charles Sumner this week. Thus, 2019 free cash was never certified. And the incomplete work has never been finished. So, there is no free cash available from fiscal 2020 either, and none can be anticipated for fiscal 2021, which ends in six weeks.
“It’s been a rolling ball effect,” said Sumner, who began work in Wellfleet one week ago.
Sumner also reported that the town accountant has not kept a general ledger for the entire town that tracks all expenses, wages, and revenues. In the absence of a general fund chart, the department heads have been keeping their own books with Excel spreadsheets, Sumner said.
“Thankfully, they’ve done a good job,” he said.
Without Dept. of Revenue certification, Wellfleet cannot use its free cash, which amounts to about $1 million, at town meeting on June 26, according to select board chair Mike DeVasto.
Sumner is assembling an accounting team to address the town’s long-festering financial control problems. He hired Lisa Souve, who was the town accountant for Brewster, where Sumner served as town administrator for 29 years. He planned to interview a second accountant on May 19.
Sumner’s plan is to have one accountant work to correct the errors and omissions going back to fiscal 2019. The other will be tasked with putting proper procedures in place going forward by creating “a general fund chart of accounts that makes sense,” he said.
“It will take several months to work our way through this,” Sumner said on Monday.
An auditor from Powers & Sullivan who found “substantial issues” with the town’s accounting practices will make a presentation of findings to the select board on May 25, Sumner said.
Last week, town officials provided the Independent with a copy of the most recent audit, after the newspaper filed a formal public records request. The document is being studied by newspaper staff, including a certified public accountant, and an independent analysis will be published before the upcoming town meeting.
Wellfleet’s accounting problems came to light during a leadership vacuum in the fall of 2020. On Sept. 22, the newly hired Town Administrator Maria Broadbent fired the town accountant, Gene Ferrari, who had been on the job for one year. This was shortly after the annual town meeting on Sept. 12, during the time when free cash from the previous fiscal year is generally certified. Though Broadbent would not state her reasons for firing Ferrari, she hinted at several problems.
On Dec. 14, Broadbent hired Heather Michaud as the new town accountant. On April 23, Broadbent and the select board “mutually agreed” that Broadbent would resign on April 30, more than two years before her contract was up. And Michaud announced that same day that she, too, was quitting for personal reasons.
“We lost two town administrators and two town accountants,” said select board member Justina Carlson, referring to Dan Hoort, the town administrator until 2020, and Broadbent. “So, it’s understandable that we have had bookkeeping snarls.”
$8.5M in Overrides and Exclusions
As the interim management team is assembled, town officials have been feverishly cutting articles from the draft town meeting warrant to get it to the printer by Friday, May 21.
Town officials met on May 12, May 17, and May 18, and will meet again May 20 as the deadline looms.
They slashed $5 million in wastewater expenditures from the warrant on May 12. The money was part of a single $6.9-million article comprising several projects offered by the town’s comprehensive wastewater planning committee. Select board member Ryan Curley said the proposal needed to be split into nine separate articles, one for each project.
Harry Terkanian, the retired attorney and former town administrator who is volunteering to prepare the town meeting warrant, said there were 26 articles on the draft 53-article warrant containing debt exclusions or budget overrides, totaling $8.5 million.
“That’s a huge ask of the voters and many are not essential,” he said.
The largest of the wastewater projects asked voters to spend $3.7 million on a septic system upgrade subsidy. It would provide home owners who have failed septic systems with $12,500 subsidies to buy enhanced innovative or alternative systems, which can reduce nitrates to a level far below traditional Title 5 systems and thus keep groundwater cleaner. The fund could be tapped by anyone constructing a new system or upgrading an old one. The $12,500 subsidy, according to the warrant article, would lower the home owner’s costs down to the price of a Title 5 upgrade.
The wastewater articles can wait, DeVasto said, because they need more “feedback and buy-in” from the public.
The select board did leave one wastewater article on the warrant, however: Article 19, to raise $1.9 million to design and construct a wastewater facility for the 46 units at the future 95 Lawrence Road affordable housing project. This system would also serve the school, police and fire stations, and, eventually, other nearby properties.
On May 17, the select board kept on cutting the draft warrant, removing capital purchases such as a new bandstand awning at the pier, basketball court resurfacing, and an all-terrain forklift for the marina. More cuts were expected.
If getting the town meeting warrant ready is a sprint, solving the town’s accounting issues will be a marathon.
“The public can have confidence that it is possible to go back and correct these problems, but it will take time,” Sumner said. “The public needs to have a little patience.”
“We’re not in bad shape,” Carlson told the Independent on Tuesday. “The real story in not the crisis — it’s how we all came together to respond to the crisis.”