Winchendon, millions in the red, calls for town manager to step down; he refuses

Winchendon, millions in the red, calls for town manager to step down; he refuses.

By Paula J. Owen TELEGRAM & GAZETTE STAFF

WINCHENDON — Selectmen voted 3-2 Monday night to ask for Town Manager James M. Kreidler Jr.'s resignation in the aftermath of a recent audit that found deficiencies in the town's accounting and budgeting practices that the Department of Revenue estimates put the town in the hole from $3 million to $5 million this fiscal year.
Mr. Kreidler responded that he will not resign.

To fill the hole, Mr. Kreidler — who said he estimates the deficit to be closer to $2.3 million — has compiled a preliminary plan that he submitted to the DOR that includes cuts that would take effect in the coming months. They include slashing the town and school budgets by $250,000 each and taking $500,000 from the town's stabilization fund. However, he still needs to make up another $1.7 million of the deficit, if his estimate is correct, he said.

Mr. Kreidler said he relied on figures provided to him by the previous town accountant, who was mismanaging the town's health insurance trust. The town switched from premium-based insurance to self-insurance around 2002, he said, and the trust was underfunded on an annual basis.

He said that unbeknownst to him, for years the accountant was not recording all of the town's health insurance liabilities, which went unnoticed when that account was running in the black.

However, when several town employees ran into severe health problems, the trust was operating in a deficit that somehow went unnoticed by the town's financial team, including Mr. Kreidler and an independent auditing firm.

The problem was cumulative, with the deficit carrying over year after year, current Town Accountant Donna Allard said, snowballing to a deficit in the millions. Ms. Allard said auditors uncovered it when she started asking questions and refused to sign off on documents.

However, some selectmen blamed the town manager and also blamed the auditing firm for not uncovering the issue previously.

In an email Monday to Selectman C. Jackson Blair, the board's chairman, Gerard D. Perry of the DOR said a preliminary estimate for fiscal 2015 indicates a deficit of $3 million to $5 million.

"The audit suggests we've been sloppy," Mr. Blair said.

The town's free cash, or unexpended funds from previous budgets, is in the negative and is the lowest in all 351 communities in the state, he said. Other issues uncovered in the audit that Mr. Blair pointed out were a "lack of ongoing budget monitoring that contributed to the situation," unacceptable recurring deficits in accounts other than snow and ice, severe structural deficiencies in the budget monitoring process and overall spending for the schools that did not meet the state's funding threshold.

An emotional Selectman Beth Hunt, who said she was insulted, embarrassed and ashamed by the discovery and made the motion for Mr. Kreidler to resign, said she knew several years ago something was wrong and asked auditors to dig deeper.

"I don't know how I saw it and he (Mr. Kreidler) didn't," she said.

She said Mr. Kreidler stood before selectmen year after year with a balanced budget for their approval to present to voters at town meeting, and she wondered how he did it.

"I don't think he knows how he did it, either," she said.

Selectmen also asked Mr. Kreidler to freeze any future spending.