WELLFLEET — After meeting with a team from the state Dept. of Revenue (DOR) on Tuesday, interim Town Administrator Charles Sumner had more bad news about the town’s financial condition: the accounts are in such disarray that it is not possible to set the tax rate and send out property tax bills this fall. Moreover, he told the select board that evening, the town does not have enough money to pay its own bills and will have to cut spending or find other revenue sources.

“Should we look at short-term borrowing?” asked finance committee vice chair Kathy Granlund.

“Most likely, yes,” Sumner responded.

One option for raising money could be a town meeting override vote, but the planned special town meeting on Dec. 4 must be postponed, Sumner said, because the town’s “free cash” account has not been certified by the DOR.

“If we don’t have free cash certified, then we just don’t have any money to spend at a town meeting,” Sumner said. No new date has been set for the meeting, which probably can’t be held before January.

“It’s really distressing for me to have to tell you about this,” Sumner said to the select board. “These problems are significant and even a bit overwhelming.”

The DOR team was going to stay in town for the rest of the week, Sumner said, and he expected to present more details about the accounting deficiencies and a plan to fix them at next Tuesday’s select board meeting.

“I have a lot of work to do,” he said. “Time is of the essence.”

Typically, free cash is certified annually upon the submission of a town’s balance sheet, according to the DOR Bureau of Accounts. But when Sumner arrived in town in May to take over from Maria Broadbent, who resigned abruptly, he found there was no balance sheet or general ledger. He and a team of accountants have been trying to make sense of the town’s chaotic books ever since.

The special town meeting was scheduled in part to correct suspected errors in the fiscal 2022 budget adopted at the June 30 annual town meeting. That budget was put together hastily by volunteers after Broadbent and former Town Accountant Heather Michaud left in April. At that meeting, voters approved a $21-million operating budget, up 4.82 percent from the previous year. A series of other expenditures were approved in separate warrant articles.

But problems emerged because of missing information. “A third of the town budget is based on state aid and estimated receipts — including meals tax, excise tax, room occupancy tax, shellfish permit revenues, and beach permit revenues — that at the time and continue to be a little askew,” Sumner said this week.

The town has still not closed its books for fiscal 2020 or fiscal 2021. “Part of that is difficulties with the cash reconciliation, which is the most important work that we’re doing,” Sumner said. For example, there are over 500 unposted entries in the cash book for fiscal 2020, with little documentation.

“We’re driving the bus backward to July 1, 2019, reviewing every transaction, correcting errors and omissions, which are more far-reaching than we might have imagined,” said Sumner.

Assistant Town Accountant Jane Tesson has taken a leave of absence, he reported, and he has hired another temporary accountant, Judy Sprague, who is to start this week. Sprague will join interim accountant Lisa Souve and interim financial assistant Mary McIsaac.

Most of the 15 articles on the postponed town meeting warrant can wait, Sumner said. They include budget transfers, prior-year invoices, and a contribution to the stabilization fund, which is “important to replenish for bond rating purposes,” he said.

“I will say the harbor flora and fauna survey and the multi-hazard mitigation plan update are problems,” Sumner commented.

The Natural Resources Advisory Board has asked for $60,000 for a field survey of Wellfleet Harbor, “especially shellfish and finfish, as a basis for future actions to preserve and enhance this environment,” according to the draft meeting warrant. The multi-hazard mitigation plan update, requested by the select board, needs a transfer of $18,000.

“I’ll have to come up with some other ideas to solve those,” Sumner said. He said a new warrant will be submitted to the finance committee and select board sometime after the holidays.

Town Audit

Despite doubts about their prior work here, auditors from Powers & Sullivan are scheduled to start their annual review of the town’s accounts on Dec. 13. “We have a lot of work to get ready for them,” Sumner told the select board on Oct. 26.

“I don’t have a huge amount of trust in the previous audit or the reports generated by the auditors,” board chair Ryan Curley said.

“I understand,” Sumner responded.

Powers & Sullivan has audited Wellfleet’s books for at least 20 years. When asked whether the town was considering switching to a different firm, Sumner replied that there was one year left on the Powers & Sullivan contract and he didn’t blame them for the town’s current predicament.

The audit of Wellfleet’s 2020 accounts found an unexplained variance of $764,489. According to Powers & Sullivan, the problem was likely in “an agency fund.” Agency funds are accounts that collect funds destined to go elsewhere, like meals tax revenues.

“Uncovering the problem is like peeling back the layers of an onion,” said Sumner. “The town has already identified several errors in stabilization and other funds. We want to take that confusion about the $760,000 and identify where those errors occurred and correct them now. Will we get to zero? Probably not. But we think we’ll make really good progress.”

Budget Policy and Goals

The select board also clarified language in its budget policy and made some adjustments to incorporate provisions for allocating funds to housing.

“We’re taking in probably a million dollars a year in short-term rental tax,” said select board member Michael DeVasto. “I think it’s important that it’s in our policy.”

The board’s budget goals for fiscal 2023 include replenishing the stabilization fund, improving the town’s financial functions, instituting financial forecasting, setting aside a percentage of rental taxes for housing, and maintaining reserves of approximately 4.5 percent of the operating budget.

Sumner plans to complete a five-year financial forecast by Jan. 12, in which he will evaluate the town’s funding plan and project revenues and expenditures.

“It’s developing a budget that looks over the horizon and tries to evaluate if there are any weaknesses and problems that have to be addressed,” Sumner said. “Normally, I would already have it done, but I am lacking the data to complete it.”