"Selectman Stephen Castinetti found it troubling that previous auditing firm Melanson Heath gave the town a clean bill of health every year and was curious why the company didn’t pick up the violations cited in the Powers & Sullivan audit."
Auditor Jim Powers reported that certain
municipal employees knew the transactions they processed were wrong and
could have stopped them, one of many alarming findings accounting firm
Powers & Sullivan highlighted as part of its forensic audit into the
town's books.
Auditor Jim Powers reported that certain municipal employees
knew the transactions they processed were wrong and could have stopped
them, one of many alarming findings accounting firm Powers &
Sullivan highlighted as part of its forensic audit into the town’s
books.
“There’s a lot of people who allowed this to happen,” Powers said to a crowd of town officials and residents gathered at Town Hall last Wednesday for a joint meeting of the Board of Selectmen and Finance Committee.
Last month Powers & Sullivan released a partial audit that
documented numerous violations of municipal finance laws related to
expenditures and payroll posted to the water and sewer enterprise funds
over the last two years. The firm characterized the transgressions as
systematic and intentional so as to mislead the actual nature of the
financial transactions.
Powers said the issues spelled out in the audit — such as posting $1.4 million of general fund related payroll, vendor expenses, fringe benefits and indirect overhead charges to enterprise fund appropriations — are clear violations of municipal finance law. He noted that Town Accountant Joan Regan was aware the transactions were questionable but still went forward with them.
“I asked the town accountant why she processed it and she said she was told to do it by the former town manager (Andrew Bisignani),” Powers said, adding that other employees Powers & Sullivan interviewed made the same claim but that doesn’t relieve them of their responsibilities.
The Powers & Sullivan audit turned up many instances of breakdowns with internal controls, Powers said. If people had done their jobs correctly they could have stopped the violations at any point, he noted.
Powers also singled out Department of Public Works Director Joseph Attubato as someone who knew that some employees being charged to the water and sewer enterprise funds didn’t actually work in those departments, but rather in cemetery, highway and forestry.
Selectman Stephen Castinetti found it troubling that previous auditing firm Melanson Heath gave the town a clean bill of health every year and was curious why the company didn’t pick up the violations cited in the Powers & Sullivan audit.
Powers responded that he couldn’t say for sure why the issues weren’t caught, but he stressed that if people did their jobs they had the opportunity to put a halt to the practices.
Selectman Debra Panetta asked Powers if he has seen any violations in other communities that rise to the level of what has been reported in the Saugus government.
In fact, Powers said he has reviewed worse situations elsewhere involving scenarios such as employees stealing hundreds of thousands of dollars.
“What we found (in Saugus) were misleading financial statements as opposed to personal gain,” Powers said.
Selectman Stephen Horlick asserted that Bisignani bullied employees in order to get them to do his bidding.
“What I heard is that if you open your mouth you’re going to lose your job,” Horlick said.
To support that viewpoint, Horlick pointed out how Regan and other employees approached then Temporary Town Manager John Vasapolli earlier this year to report the violations of municipal finance laws.
“Employees said they felt intimidated and succumbed to what they
perceived as pressure to process transactions they knew weren’t
correct,” Powers said.
From speaking to town employees, Castinetti said it was obvious they felt intimidated to come forward with their concerns.
Concern over budget
Finance Committee Chairman Bob Palleschi asked Powers where he recommends the town goes now that the first of three audit reports by Powers & Sullivan has been completed.
For starters, Powers advised town officials to square up their fiscal 2012 ledgers so they reflect the correct numbers. He added that the Department of Revenue has provided Town Manager Scott Crabtree a list of 12 actions to complete in order to set the fiscal 2013 tax rate.
Powers acknowledged that putting all of the positions and expenses in the right place would put the town in a difficult spot as it is facing a deficit projected to be in the neighborhood of $3-4 million.
Tough decisions will have to be made, Powers said, such as whether employees whose salaries were being paid from improper enterprise funds have to be laid off.
Palleschi protested that the fiscal uncertainty puts the Finance
Committee “under the gun” because it is supposed to provide its
recommendations to Town Meeting in May, yet at this point the Board of
Selectmen has yet to send along its proposed budget.
Crabtree said the goal is to provide a revised budget and explained that he is getting closer to that everyday as more information comes in.
Several votes taken
After the selectmen voted 5-0 to accept the report from Powers & Sullivan, Horlick said he would like to hear Bisignani come before the board to answer questions about the audit. The board also voted to send the former town manager a letter asking him to show up at a future meeting to explain the findings.
Town Meeting member Peter Manoogian wondered if Powers could share any advice on what the town could do to make sure the violations spelled out in the audit never happen again.
Powers stressed that transparency is crucial in town government and that if the Board of Selectmen or Finance Committee requests information they should receive it.
To that point, Palleschi lamented how the Finance Committee never received the financial information it requested from the previous administration during its deliberations.
Another observation Powers shared is that the town has an extremely
strong town manager form of government. He noted that under the town
charter the town manager appoints the treasurer, accountant and auditor
and that in his estimation he doesn’t see a lot for the Board of
Selectmen to do.
Powers suggested the town could look into a segregation of duties, pointing out in many well-run communities the Board of Selectmen hires the town accountant, not the town manager.
Selectmen Chairman Michael Serino noted that an article on the annual Town Meeting warrant seeks to add a new section to the town charter making it the Board of Selectmen’s responsibility to hire the firm that conducts the state-mandated annual independent audit.
Calls to Regan and Attubato weren’t returned.
“There’s a lot of people who allowed this to happen,” Powers said to a crowd of town officials and residents gathered at Town Hall last Wednesday for a joint meeting of the Board of Selectmen and Finance Committee.
Powers said the issues spelled out in the audit — such as posting $1.4 million of general fund related payroll, vendor expenses, fringe benefits and indirect overhead charges to enterprise fund appropriations — are clear violations of municipal finance law. He noted that Town Accountant Joan Regan was aware the transactions were questionable but still went forward with them.
“I asked the town accountant why she processed it and she said she was told to do it by the former town manager (Andrew Bisignani),” Powers said, adding that other employees Powers & Sullivan interviewed made the same claim but that doesn’t relieve them of their responsibilities.
The Powers & Sullivan audit turned up many instances of breakdowns with internal controls, Powers said. If people had done their jobs correctly they could have stopped the violations at any point, he noted.
Powers also singled out Department of Public Works Director Joseph Attubato as someone who knew that some employees being charged to the water and sewer enterprise funds didn’t actually work in those departments, but rather in cemetery, highway and forestry.
Selectman Stephen Castinetti found it troubling that previous auditing firm Melanson Heath gave the town a clean bill of health every year and was curious why the company didn’t pick up the violations cited in the Powers & Sullivan audit.
Powers responded that he couldn’t say for sure why the issues weren’t caught, but he stressed that if people did their jobs they had the opportunity to put a halt to the practices.
Selectman Debra Panetta asked Powers if he has seen any violations in other communities that rise to the level of what has been reported in the Saugus government.
In fact, Powers said he has reviewed worse situations elsewhere involving scenarios such as employees stealing hundreds of thousands of dollars.
“What we found (in Saugus) were misleading financial statements as opposed to personal gain,” Powers said.
Selectman Stephen Horlick asserted that Bisignani bullied employees in order to get them to do his bidding.
“What I heard is that if you open your mouth you’re going to lose your job,” Horlick said.
To support that viewpoint, Horlick pointed out how Regan and other employees approached then Temporary Town Manager John Vasapolli earlier this year to report the violations of municipal finance laws.
From speaking to town employees, Castinetti said it was obvious they felt intimidated to come forward with their concerns.
Concern over budget
Finance Committee Chairman Bob Palleschi asked Powers where he recommends the town goes now that the first of three audit reports by Powers & Sullivan has been completed.
For starters, Powers advised town officials to square up their fiscal 2012 ledgers so they reflect the correct numbers. He added that the Department of Revenue has provided Town Manager Scott Crabtree a list of 12 actions to complete in order to set the fiscal 2013 tax rate.
Powers acknowledged that putting all of the positions and expenses in the right place would put the town in a difficult spot as it is facing a deficit projected to be in the neighborhood of $3-4 million.
Tough decisions will have to be made, Powers said, such as whether employees whose salaries were being paid from improper enterprise funds have to be laid off.
Crabtree said the goal is to provide a revised budget and explained that he is getting closer to that everyday as more information comes in.
Several votes taken
After the selectmen voted 5-0 to accept the report from Powers & Sullivan, Horlick said he would like to hear Bisignani come before the board to answer questions about the audit. The board also voted to send the former town manager a letter asking him to show up at a future meeting to explain the findings.
Town Meeting member Peter Manoogian wondered if Powers could share any advice on what the town could do to make sure the violations spelled out in the audit never happen again.
Powers stressed that transparency is crucial in town government and that if the Board of Selectmen or Finance Committee requests information they should receive it.
To that point, Palleschi lamented how the Finance Committee never received the financial information it requested from the previous administration during its deliberations.
Powers suggested the town could look into a segregation of duties, pointing out in many well-run communities the Board of Selectmen hires the town accountant, not the town manager.
Selectmen Chairman Michael Serino noted that an article on the annual Town Meeting warrant seeks to add a new section to the town charter making it the Board of Selectmen’s responsibility to hire the firm that conducts the state-mandated annual independent audit.
Calls to Regan and Attubato weren’t returned.
I am afraid I am not the only person questioning why we would have the same DOR rep. year after year, and why she did not do her job. How could a person in the capacity of being a representative of the Department of Revenue, allow a Town to go so many years without auditing their books ?? I hope her boss asks her the same question.
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