Audit report details Woonsocket's deficient financial records

By ETHAN SHOREY, Valley Breeze Staff Writer

WOONSOCKET - Accounting policies are lacking, employee tax forms are missing, petty cash receipts weren't submitted, and competitive bidding rules have been ignored.

A new audit of the city's finances suggests the most basic of accounting principles are lacking in this city.

While many municipalities get back a list from their auditor on ways to improve financial record keeping, a newly-released audit report and synopsis from Braver Accountants and Advisors shows that many policies on keeping records don't even exist in Woonsocket.

Click here to read the audit report:

www.valleybreeze.com/www/finalreport.pdf

That's a scary proposition, say some city leaders, when trying to identify the city's true financial state.

The audit report and accompanying statement from Braver left City Council members shaking their heads at the City Council meeting Monday evening as they wondered if they can truly evaluate Woonsocket's declining financial state.

What others call "basic" financial expenditures, say councilors, have been tracked incorrectly or not at all.

It was last year when the council eliminated Parmalee, Poirier and Associates as the city's auditor after City Council President Leo Fontaine discovered Bernard Poirier had made donations to Mayor Susan Menard's campaign.

The council instead hired Braver.

Now, say council members, they're getting a different perspective on the city's finances.

"This is something we really have not seen from a council standpoint," said Fontaine by phone, of the much harsher perspective from an auditor. "We have always been given kind of a rosy picture."

Woonsocket, states the report, does not have an accounting policy and procedures manual.

"We believe that the city does not have a policy or procedure in place to ensure the completion of financial statements in accordance with generally accepted accounting principles," states the accompanying statement to the audit from Braver.

Menard's now infamous "special contingency account" of $10,000 is criticized in the report. Other than car lease payments, most expenses for the account are not accounted for, and it has now been discovered that even some of the lease payments came from other unknown accounts.

Council member John Ward said during the council meeting on Monday that if Menard can't account for where each dollar of the $10,000 went, as stipulated by law and the IRS, all of it could be counted as added income and she could pay taxes on it.

The contingency account will be revamped, the mayor and staff are responding.

After previously indicating that there were no cash receipts for the account, Menard has now come up with $1,550 in receipts, according to the management response to the audit. On Monday, she blasted City Council members like Bill Schneck, whom she says benefited from both her campaign funds and funds used from the contingency fund for campaign events in the past.

Menard said she was insulted at even the potential implication from Schneck that she may have done something inappropriate with the account, and then stormed out of City Council chambers for perhaps the final time, despite Schneck telling her that he was making no such accusation.

Woonsocket's audit report for the year ending in June of 2007 showed the following deficiencies, among others:

* Instead of an announced small surplus, the city now has an unknown deficit to go with a significant shortfall for the next fiscal year.

* An "administrative fee" of more than $503,000 was charged to the city's pension fund in an apparent attempt to help balance Woonsocket's budget, with no documentation backing up the number of hours claimed for eight city employees working on the administrative end of the fund.

* The auditor randomly selected 20 files from the school department. Of the 20 files, nine tax forms were missing, and the report claims that employees were not always required to maintain time sheets or reports to detail hours worked, vacation or sick time.

* The auditor randomly selected 25 city files also to test compliance with the city's internal control policy. Among those, 10 time reports were not approved and one was approved by the person who completed the time, seven tax forms were missing, one employee's rate of pay did not agree with the contract, and compensation to one person for services provided was not processed as payroll and the person did not receive a W-2 form.

* The city's lack of controls over the compilation and maintenance of capital asset records means there is no way of knowing whether a claimed city land value of $21 million and infrastructure assets of approximately $77 million are accurate.

* Many purchases that should have gone out to competitive bid did not.

* Reimbursements up to $500 were made out of petty cash, with no receipts, and such reimbursements are supposed to be limited to just $30.

* Assets were overstated by nearly $2 million, after the city included cash from a sale of land to Wal-Mart that had not yet happened.

The new audit repeatedly emphasizes that all financial expenditures and statements need to go through Finance Director Robert Strom and the finance office, which is not happening now.

The city's response promises that the finance department will now "process all payments and maintain the accounting activity in conjunction with the staff of our enterprise funds."

Asked whether Strom is the one responsible for the ongoing lack of financial oversight repeatedly cited in the audit report, Fontaine was non-committal, saying that it's not any one person's fault.

"(It does) raise the question of where we need to make the changes," said Fontaine, who will take over as mayor when Menard leaves office in mid-June.

Strom did not return calls seeking comment.

The management response to Braver, obtained by The Valley Breeze this week, details many instances in which the city agrees that policies need to be reviewed, have changed, will soon change, and that the city will work to "comply with" the recommendations of the auditor.

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