Pownal forensic audit preliminary update finds process, communication concerns
POWNAL — An unusual Tax ID number system, somewhat weak internal controls, lack of oversight on adjusting account entries and issues with sharing information were highlighted in a preliminary report on the town's forensic audit delivered to the select board.
The report was given in a two-hour presentation to the board at a special meeting on Thursday. Graham & Graham P.C. of Springfield is conducting the forensic audit, which is separate and in addition to the routine external audit the town undertakes every fiscal year.
"At this point, we haven't really finished anything in total," said Jeff Graham, of Graham & Graham. "But, I have a lot of early on, sort of `weather report' findings for you."
Graham said that there are changes to make, but thus far, auditors have not found any fraud. "There are some things on our watch list that are tweaks to the system, not major failures to the system," he said.
Graham said the previous town clerk's records have not yet been examined. He said he would tell the board by Dec. 31 where the project stands, and give the board a timeline for completion.
Graham mentioned broad concerns with how elected officials work together, specifically how they can sometimes each have their own "little silo" that they keep tabs on, which negatively impacts communication.
Graham called elected positions "the elephant in the room," and suggested the town develop an internal document explaining how everyone should work together and share information. He said he has seen some internal "turmoil" in the town hall, which he connected to a lack of sharing information.
Segregation of duties is also important, he said, as risk in financial transactions comes when a person considers the money they handle to be their own, rather than the town's.
"You should have four different people doing four different incompatible jobs," Graham said. And if that's not possible, that's where the internal auditors and the board come in, he said.
The board has learned that duties outlined under the administrative secretary's job functions have been done by the treasurer, board member Marlena Pellon said.
"Because it's an elected position we can't hold [the treasurer] accountable," she said. "Theoretically, we could, but we've been told that they don't report to us, so we can't do anything. It's tough when you're in that situation where if we're being told by the treasurer, who's elected, 'I don't report to the board, and you can't tell me what to do' ... but they're doing job functions that are under the administrative secretary's role."
Contacted Wednesday, town treasurer Ellen Strohmaier said the town does not have an administrative secretary, rather an administrative assistant, and she is not doing that person's job.
"As elected officials, we are supposed to put any personal feelings aside," she said. "And be working for the townspeople that elected us in. We're not supposed to have any personal agendas as such. I work with the board of selectmen as an elected official."
Strohmaier said she has never told the board that she does not work for them. "We are supposed to be working together, to the best of our ability."
Accounting control system
Graham said he always examines the strength of the internal accounting control system for accounting transactions. Pownal's system "a little bit weaker" than what he'd like in the area of checks and balances, he said.
"In this control system, in essence, you should capture every one of those transactions, and have somebody actually look at those transactions and go through the process of reviewing what's been done, to see if they agree that that's actually proper, and complete, valued properly," he said.
"I think part of that is — there's no real definite description of what everybody's responsibility is in that process," he said.
Graham said he has a couple recommendations for changes to that control system in Pownal.
"Part of that is just the regular oversight," he said. "Somebody has to be the keeper. You really shouldn't have 12 cooks in there. so somebody has to be the cook."
Carry forward number errors
The nature of the town clerk's office is to handle a lot more cash transactions, which represent the town's greatest financial risk, Graham said.
Dave Adams, an internal auditor for the town, created a spreadsheet for the town clerk, Julie Weber, Graham said.
"And I'm not really a fan of it, to be honest," he said. "It does its job for a lot of things, but the carry forward part of it is what bothers me."
When he looked at about 60 Excel spreadsheets, there were numbers that were carried forward from previous spreadsheets, he said.
"When we went through the 60, 39 of them had errors," he said. "When we looked at the errors, we were looking at beginning balances as being problematic."
Namely, the carry forward number from week to week had errors — four weeks in a row, it was not correct.
"Now, we had numbers that are either owed to the town, or owed to the clerk," he said.
At the end of the 60 spreadsheets, $129 was owed to the town, but it was at one time roughly $2,000, he said.
"I think we can conclude from that that there's nothing nefarious here," board member Robert Jarvis said. "It's just a bad process that seems to stay fairly level, not that it's a good thing. It's not."
"It's not a good practice," added Harry Percey Jr., clerk of the board.
Pellon said when the board learned Adams was doing a spreadsheet with Weber, the board got confirmation the spreadsheet was handed in, but it was not included in the board's warrants.
"So we've never seen that spreadsheet," she said. "So we didn't even have an opportunity to double check to see if there was something off about it, because it's not coming to us. So we're not sure why it comes in, and then it gets taken away."
Graham advised the board to ask that documents be included in what it is being asked to sign off on.
Jarvis asked what the rationale is to even have a carry forward amount.
"My understanding was that the clerk wanted to have sort of a level paycheck, if you will," Graham said. "I don't know that that's the only reason for it, but by doing that process, it makes more work for the town and it gives you a higher risk factor of cash."
Tax ID number
Town auditor Crystal Gardner asked Graham if these issues would potentially not have arisen if the town clerk had had access to the town Tax ID number.
Weber uses a different tax ID number than the town in the course of conducting town business, as the previous Select Board told her she couldn't have the town's number, she previously said.
Any business, including a municipality, has a federal tax ID number. A municipality would have only one tax ID number. It's used in many types of transactions to identify an entity, for things like payroll taxes, when doing business transactions with companies, or when applying for grants.
"We also have the issue of, the town clerk is eating the credit card charges on her personal end," Gardner said. "If she collects $1,000, she can't always give you $1,000, because one, there's credit card fees taken out that she's eating, and she has to keep a balance in her checkbook."
Graham said in his experience, it's unique that Pownal has a separate ID number used by the clerk. That's a bad decision for the town, he said.
Given bank requirements, there's probably no way the town clerk could have opened an account in the name of the town, Graham said.
"So she must have it in her personal name," he said. "You have a part of your operation that you may or may not be able to actually get access to. Because you're not privy to those transactions. It means that you may not have access to her original transactions to audit."
Asked by Chairman Bryan Harris how the board would go about fixing the situation, Graham said he would recommend the board ensure it has access to all background information that comes to Weber, and make Weber's account official under the town Tax ID number.
"What that does is it means you have total access to everything that happens," Graham said.
Having Weber's account under the town tax ID number means all those transactions are auditable, he said.
Graham also told the board about concerns with adjusting journal entries, which are changes to account balances that are done by the town treasurer in Pownal's case.
Graham said he believes the Select Board should have those changes provided it to before they are posted, or before the close of the month.
"The original stuff gets looked at by everybody here — the auditors, the treasurer, the clerk," he said. "And then somebody else, at the very tail end of that, changes the account. If somebody decides that they're going to change that, and you don't know about it, you've defeated the entire control purpose."
People singularly deciding to make changes to account balances is the town's highest non-cash risk, Graham said.
"You have a lot of that happening in your books," he said.
Pellon asked Graham if he would be presenting to the board the total dollar amount that has been changed after the formal approval process.
"That number's really easy to find," Graham said.
"But it's not missing, it's just in the wrong ledger, is what you're saying," Percey said.
Graham clarified that the changes that are made have not been approved.
"So you all said, `put it in Box A,'" he said. "Somebody goes and puts it in Box B."
Most of the time, that change is probably correct, but the Select Board would want to know of that change, he said.
Graham & Graham hiring
The board unanimously voted to enter into a contract for financial consulting with Graham & Graham at a regular meeting on Sept. 26, according to meeting minutes. The audit comes in response to concerns brought to the Select Board's attention.
Harris has said that the board decided to have a forensic audit done because "We as a Select Board had some concerns brought to us that we felt warranted further investigation."
Harris said he could not speak to the substance of the concerns, and would rather not say why that was so.
"Once everything is completed, we'll be making as much of the results public as we can," he previously said. "We're going to be keeping the public informed. But right now, I'm not at liberty to say."
The audit will cover six years' back from the day it begins, Harris previously said.
A previous routine audit of the town's books from fiscal 2017 and 2018 revealed thousands of dollars in errors, but no missing money.
Patricia LeBoeuf can be reached at email@example.com, at @BAN_pleboeuf on Twitter and 802-447-7567, ext. 118.
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