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Closer look reveals dire condition of CB finance records

   There has never been any missing money, but auditor Nancy Miller’s high definition scrutiny of Colonial Beach’s town and school division finance records uncovered no fewer than twenty-two areas in need of immediate improvement.
   The Miller Foley Group was tasked last year with taking its evaluation beyond the scope required by law in order to generate a set of findings whose level of detail might optimally facilitate the remediation of the faulty accounting practices.
   As reported in last week’s Journal, problems uncovered during the audit of Colonial Beach’s Fiscal Year 2008 financial records were several decades in the making, but the results reported last Wednesday could have serious consequence if appropriate remedies are not introduced in a timely manner.
   On Wednesday Miller counseled town officials to take their time and avoid any attempt to hastily remedy all twenty-two of that audit’s findings.
   “None of these things happened last year and it’s not practical to think we can fix everything overnight,” Miller told members of the Colonial Beach Town Council and School Board.
   “Remember that it isn’t possible to have a perfect system of internal controls,” she stated in her opening remarks.
Later in the briefing Miller emphasized the need to avoid an attempt to address all the findings of internal control weaknesses in a hasty manner.
   “Fixing this is going to take a lot of time and a lot of resources. The problems won’t be solved by June 30, 2009,” when financial records associated with the current twelve-month fiscal period are closed.
   “You will probably have findings in your 2009 audit,” Miller then stated. “Right now you need to prioritize. To try and tackle all this right now is a recipe for not doing anything well.”
   According to the auditor, the town should expect “to address no more than three things in a single year. Then,” Miller related, “you can realistically expect to do them well.
   “Your role,” the auditor then advised the two sets of elected officials, “it to keep [the finance office employees] on task. It will be a great process if you allocate the resources and set a tone that is consistent with greater accountability.
   “You are the governance and you need to hold management accountable,” she explained.
   The auditor recommended that the Council and School Board waste no time in establishing a task force charged with addressing financial record keeping problems identified in the report.
   Council responded the following evening. Mayor Fred Rummage and Vice Mayor Trish King will represent the local government on a task force whose first mission will be implementing the computer-based accounting program known as the Bright system in the school division’s finance office. Two School Board members will complete that task force membership.
   Miller advised that June 30, 2010 “should be the timeline to really turn this thing around.” She made it clear that addressing problems associated with the school division’s financial records keeping practices should be all parties’ top priority.
   In a worst scenario the federal government could demand that Colonial Beach return almost $444,000 that its school division received as grant money from the federal government.
   “The federal authorities could ask for the money back, but I have never seen it done,” Miller related. “You just don’t want to have these [same findings] in the 2010 audit. A corrective action plan will be looked on very favorably” by federal government authorities.
The auditor made it quite clear that the school division’s finance office is seriously under-staffed, that existing personnel are being expected to utilize skill sets that they lack and that a properly trained financial staffer charged with tracking federal grants would expect to earn no less than $100,000 a year.
   In Town Hall and in the School Board office finance employees “are being asked to do three to four times what they should reasonably be expected to be doing,” explained Miller.
   In the school division’s finance office, “program people are asked to do accounting when they don’t have the training. Very few localities have the resources to hire a grant manager, and you guys are so tiny that the State Department of Education budget is really not focused on you guys.
   “Ninety-eight percent of the federal money is coming in on the state side, but there’s not much coming into the town right now. For the school system it’s a priority to understand grant management and ledger accounting,” along with creating a mechanism for the filing of timely reimbursement reports to better manage federal grants.
   The audit disclosed that lax procedures resulted in actions that caused the school division’s debt to the town to climb to $662,000. Coupled with the previously referenced federal grant accounting issues, a worst scenario consequence would require the Colonial Beach school division to raise a million dollars just to satisfy local and federal government demands.
   The three hour briefing included a warning from the auditor that the twelve-month budget period ending June 30, 2012 will likely reflect what state budget experts fear may be dire economic conditions. The town was advised to have a reserve balance it can draw from at that time.
Miller additionally delivered a warning about the unprecedented level of strings and accounting protocols attached to the federal government’s economic recovery allocations to local jurisdictions.
   According to information gathered by Miller, the oversight required from local finance employees in tracking allocations from the federal stimulus package will be no less than ten times greater than anything that was experienced in the past.
“There will be such a high level of review on how the money is spent,” the auditor counseled. “You got some pretty big stuff that was packaged really fast.” The details, she related, have not yet been disclosed.
   More will be published in subsequent weeks about the latest Colonial Beach audit findings. The final Miller Foley document is scheduled for release later this week.
During last Wednesday’s deliberations, parties refrained from finger pointing. Members of the town government must remedy their own accounting problems and Miller made it clear that all the players have expressed a willingness to embrace the appropriate sets of remedies as soon as possible.
   “They already have started working on the problems,” said Council member Sparky Ridgely in the final comment before the March 25 meeting was adjourned.

 

By Betsy Ficklin

Beach financial records are this Wednesday’s discussion topic

   Colonial Beach financial record keeping difficulties that have been at least twenty years in the making are this Wednesday morning’s topic of discussion in the Town of Colonial Beach. Town and school audits will hear from auditor Nancy Miller at a meeting scheduled to begin at 9:00 a.m.

The Miller Foley Group’s audit of town government and school division financial records associated with the 12-month fiscal period that ended on June 30, 2008 identified a multitude of problems.
Numerical values associated with auditor findings were unavailable at the time of this reporting, but Colonial Beach Mayor Fred Rummage told The Journal on March 9 that problems are far worse than he had previously supposed.
Rummage won election to the office of Colonial Beach Mayor in May 2008, following two years of service on Town Council. A retired attorney and former Maryland legislator, he vowed to introduce a greater level of transparency to town business that would be dominated by concerted efforts to resolve the problems that had not been properly addressed by prior administrations.
New in 2009’s audit reporting is the return of auditor Nancy Miller to review the town’s financial records. Miller was previously associated with an audit firm known as Tingler and Miller, whose services as town auditor ended approximately seven years ago.
According to the narrative  portions of Miller’s February 2009 draft report, the problems cited as a result of the financial professional’s past visits to the town were never properly resolved.
The difficulties associated with financial record keeping in the Town of Colonial Beach were not altogether unanticipated. During 2007 some elected officials identified instances in which unappropriated monies had been expended by the school division and also by the municipal government.
The town government’s introduction of a more modern financial accounting computer software program was intended as a measure that would correct shortcomings associated with previously financial record keeping efforts. Improvements were noted by Colonial Beach’s previous auditors.
Those reports encouraged the school division to convert to the same financial accounting computer software program that the local government converted to as long ago as 2004. Despite ongoing discussions, the school division has continued to use a computer-based accounting program of its own.
By April 2008 Town Council had instructed the town’s chief finance officer to implement a new set of protocols in order to ensure that the Colonial Beach school division expenditures did not result in financial deficit conditions.
In order to comply with modern accounting requirements, a Colonial Beach police officer, Ryan Hood, was charged several years ago with developing an inventory of the municipality’s fixed assets.
The tasking included compiling a list of all town owned properties and equipment, including an inventory of office computers, copy machines and miscellaneous equipment. The new audit asserts that as of June 30, 2008 the inventory of the town’s fixed assets fails to meet the requisite standard.
Financial records were a major issue in Colonial Beach’s 1990 and 1992 general elections. By 1992 it had become understood that the town’s government and school division needed to invest in an integrated financial accounting software package and a program known as SDS was purchased by the town.
Hopes that the new accounting system would resolve lingering financial records keeping problems were thwarted as quickly as the Robertson, Farmer and Cox audit firm released the findings associated with its audit of the 12-month budget period that ended on June 30, 1993.
Internal controls were that audit’s big issue and efforts were made to create a system of checks and balances that would provide appropriate oversight. Despite the town’s concerted effort, accounting problems continued to be identified in annual audits. SDS went out of business and successor computer software vendors attempted to improve the workings of the integrated computer software program.
As long ago as summer 1992 a Colonial Beach Treasurer had attempted to persuade Town Council to purchase the integrated financial accounting computer software package known as the Bright System, but the town delayed its conversion to the Bright System until 2004.
When Council became vocal during 2008 about the school division’s need to utilize the Bright accounting system, proponents of the transition were advised that the Bright package may be already obsolete.
  Nancy Miller is expected to make it known on March 25 just exactly how problematic Colonial Beach government and school division financial record keeping problems have become.
  Westmoreland Commonwealth’s Attorney Dean Atkins will reportedly review the final report and then determine whether or not criminal charges should be brought.
The already disclosed audit finding that Colonial Beach school division expended unappropriated monies may or may not have a serious legal consequence. The audit identifies as many as 19 serious town government and school division financial accounting shortcomings whose cause may be linked to inadequate checks and balances or, in auditor language, internal controls.
   Once again Colonial Beach has an audit suggesting the town is unfamiliar with modern accounting principles. Problems include the manner in which trial balances, account reconciliations and debt service payments are recorded. The report asserts that proper levels or monitoring did not occur and senior management may have over ridden the established set of internal controls.
   A portion of the reported record keeping problems may be associated with inadequate communication between  the members of the local government and the Colonial Beach school division.
   School division and local government changes in administrative personnel  may have created additional financial reporting difficulties identified in the audit that will be this Wednesday’s discussion topic in the Town of Colonial Beach.

Betsy Ficklin

Council, Mayor hash out committee system, communication, power

   In June, 2008 Mayor Fred Rummage assigned “monitoring and oversight appointments” to oversee issues that previous administration appointed committees had been responsible for; Budget (Mr. Ridgley); streets and roads (Mr. Kennedy); planning and zoning (Mr. Coombes); water and sewer (Ms. Payne); public safety (Mr. Lyburn); and economic development (Ms. King).
   Councilman Kennedy raised the issue of returning to the committee system at the last Council work session on January 29th.  “The oversight appointments have fallen short of my expectations as I see it. I have a number of reasons for feeling that way. I think communication between council members has fallen, we don’t have a good conduit of communication. I think that we are chasing rabbits; sometimes I don’t know who’s doing what.”
Kennedy concluded his presentation by saying, “I think these committees served a better purpose by having two to three people on each committee, there was a better line of communication, there was more input into what we were doing.”
   Kennedy’s concerns stem from the fact that although these appointments are separate matters, members often end up researching the overlapping information but never confer with each other. For example, when dealing with public works, Kennedy handles the roads and Councilwoman Payne handles water and sewer. Payne confirmed in last week's meeting they have never met to discuss public works, yet they both have to meet with Public works director Rob Murphy.
   Mayor Rummage replied, “I was surprised to see this on the agenda because I never heard that you were dissatisfied with the assignment that you agreed to.”
   Kennedy clarified that he was not dissatisfied with the appointment but that he was dissatisfied with the lack of communication. Kennedy proposed instituting the resolution to reinstate committees on July 1st of this year to coincide with the new fiscal year. “I’m open for any discussion on this matter.”  Kennedy indicated that he wanted input from the Council and if it was voted down he would accept that but he didn’t want the issue to fall through the cracks.
   Originally when Mayor Rummage asked for comments from the Council, there were none, but as discussions between Rummage and Kennedy continued all members joined in to give their opinions.
   Rummage began his argument against the resolution by saying, “The ways and Means Committee to my knowledge, in the past two years prior to July 1 of this year has never met! Were you aware of that?”
   To which Kennedy replied, “No.”
   Rummage continued, “The administration of the finance committee according to my predecessor was set for the convenience of an individual that wanted to chair a committee. Nothing ever came out of that committee.”
   Rummage explained that the Finance committee and Ways and Means committees are a duplication of effort. He told Kennedy, “If you're willing to settle on Public works, public safety, and planning and economic development, I don’t have a problem.”
   Appearing to reach a compromise Kennedy said, “I’d still like to see adding a finance committee in there. We can combine the two.”
   Other Council members finally began to join the discussion; Ridgley stated that when he was appointed to oversee the Budget he did not receive any written information from his predecessors or any committee concerning finances.
Coombes said in the past the success or failure of a committee was due to its chair and said, "We have had some weak chairs in the past."
 Payne had no objection to going back to committee system.
   King's general comment was to point out that with a committee meeting, several people engage in the discussions and others can attend. With the present system "Council members are only given a report and are not privy to how decisions are reached."
   Finally Lyburn said he doesn’t feel left out because he just goes out and asks people to find out what he wants to know.
    Lyburn said he is happy to share information any time it is requested. He is not opposed to committees but he cautions the time consumption issue and he addressed the need to find ways to share information. If three or more members of council meet to discuss town issue it must become public and advertised adding to the burden of scheduling.
   After much discussion the majority of the Council voted in favor of tabling the issue till May.
   The next two items on the agenda seamed to set an atmosphere of addressing uncertainty in the rolls of the Council members and the Mayor.
   Kennedy presented a list of Bylaws and Rules of Procedures drafted by Town Attorney Erard which the council covered line by line. The Resolution following this list addressed, commitment to excellence, the Mayor and Council complying with the letter and spirit of the laws affecting the operation of town government as well as being required to be impartial and fair in judgment and actions while in public office.
   Mayor Rummage presented a document also prepared by Erard outlining the powers, duties and authority of the Mayor compiled from the Town Charter, Town Code and The Code of Virginia and other legal precedence.
   Although there was no formal discussion on the documents concerning the Mayor he apparently was responding to the opposition he has received from Council in the past.

Linda Farneth

 

Public hearing to raise water and sewer fees . . . continued

Town Council held its public hearing to decide the issue of raising water and sewer rates and connection fees on January 8. The proposed rate increase has been a subject of regular meetings since January 2007 when it was first introduced by Town Manager Tim Krawczel.
During its development many citizens have spoken out against the increase, causing it to be revamped with various different proposed rate increases. Each time the amount is changed a new hearing has been set.

The latest proposal is the combined efforts of a committee comprised of five members; Council members Karen Payne, Sparkey Ridgley, Director of Public works, Robert (Rob) Murphy, Chief financial officer, Joan Grant and the Acting Town Manager, Val Foulds.

Krawczel’s original proposal was to raise water and sewer fees by roughly 41%. The newest proposal would, if passed, be a 20% increase. Combined water and sewer rates would be $600.00 per year and connection fees would be raised to $9600.00 until June 30th when they would increase to $12,000.00 on July 1st.

Karen Payne explained that the raised fees are needed to cover the 6 million dollar grant for new upgrades to the power plant that were required by the Department of Environmental Quality (DEQ) and that more improvements will ultimately be needed. Payne said the cost of running the plant has increased as well as the need for a larger crew. The town is scheduled to start repayment of the grant in January, 2010 at the cost of $2,671,606.00 a year.

“The fees have not been raised in 14 years and we are paying for that lack of attention now,” Payne said.

The first to oppose the rate hike was Jay Breedon who said, “I don’t believe this time is the right time to raise anything in this town.” Breedon spoke of the elderly as well as construction workers who are out of work due to the slow housing market. “This council turned down another tax earlier.”
Breedon said he feels the elderly are being asked to pay the burden.

John Gleason asked why this meeting could not be postponed and heard during the summer when the summer people are here and senior citizens could get to the meetings.

Three representatives from the Monroe Point housing project spoke in opposition of raising connection fees.  Monroe Point is the plaintiff in a case against the town. The company is seeking relief from certain aspects of their contract to replace vegetation as per requirements of the Chesapeake Bay Act. Jonathan Natelson, One of the developers of Monroe point Subdivision was the key speaker for the group.

He began by saying “We, meaning all of us, are facing a financial crisis. The government is taking action to try to stimulate the housing market.” He apprised the Council of their production at Monroe point reporting that the company has 65 homes built and are building 40 more homes. The company has had negative sales in the last 3 months meaning there have been no new sales and there have been cancellations. Natelson says they have cut prices to “at cost of production” to keep the project alive.

“We understand that the town has financial needs especially in the Water and Sewer plant. We don’t expect the connection fee to stay static forever but we absorbed an increase in connection fees about 3 years ago. We are asking that you defer an increase in connection fees until there is a demonstrable change in the housing market in Colonial Beach.

 “We think this connection fee increase will backfire. It will make [housing] sales impossible.”
Sales Rep, Mark Sheppard for Ryan homes has had to be reassigned as a result of the slow market at this project. Sheppard spoke mainly to support his colleague, Natelson, but had this to add, “I’m not sure I understand why this needs to be executed at this time. I think most of us would consider this the most absolute worst time and economic environment.”

Developer, Mr. Dzaman reminded the Council that when they came here 3 years ago the connection fees were $3500.00. The company priced their homes based on that price. Since then the company has seen almost a 100% increase to $6000.000. Dzaman argues that the company can’t absorb this type of increase during this economic stall in the housing market. “We are the housing market in this town right now.”

When the resolution came up for vote Councilman David Coombes appealed to the other members of Council to continue the matter till the following week. His reasons ranged from his agreement with testimony regarding the economic impact on the town and housing to the financial burden already brought about by the economic crisis.

Coombes feels that cut-backs and raising fees go hand in hand. “We need to work at this and this council has not done that. No one has called us together to do it… and I find it, in this day and age, almost intolerable that we’re going to raise the tax without having looked as a collective group at where we can cut back!”

The entire council agreed to a motion to continue till January 15th at 6:00 p.m. at which time Council plans to have a work session to fully explore all options for cut-backs and re-evaluate the proposal to raise water and sewer, use and connection fees.

  Linda Farneth

   

One out of three ain't bad

One of Mayor Rummage's campaign promises slated to come to fruition this summer; Santa Maria will be paved. That was his bright moment in last week's Town Council session.
Despite the Mayor’s failed attempts to approve a resolution that would assist RAP (Related Apartment Preservation) in procuring a $4,200,000.00 bond from the Harrisonburg Redevelopment and Housing Authority last month and Thursday's failed attempt to start the ball rolling towards collecting a 25 cent fee for entrance to Riverboat if they acquire slots, the Mayor's victory in the approval of Resolution #03-09 to match funds for the paving of Santa Maria Avenue gave him a one out of three victory for the meeting.
Larry Roberson, Westmoreland Board of Supervisors member announced, “The State sold all of its bonds for their big improvement and we now have the $100.000 for paving Santa Maria. The county has given $50,000 plus and your coming up to vote for your $50.000.00,”  said Roberson, makes the project viable.
The resolution received a unanimous vote to pass.
For his losses, Mayor Rummage faced opposition from Council on his attempt to set in motion at the state level, a bill that would eventually result in an entrance fee of .25 cents per patron entering any establishment where gaming is held just in case Riverboat eventually is permitted to have slot machines. He took a public brow beating from Council member Steve Kennedy for his letter in the January 7 issue of the Westmoreland News regarding Council's position on the RAP proposal.
Kennedy stood at the public podium saying, “I like to face the people I’m talking to.”
Kennedy continued, “After reading your letter to the editor in this week's Westmoreland News, I was both amazed and disgusted! Amazed that you had the audacity to write such a scathing piece, and disgusted by the false impression it left. To imply that this Council did anything less than honorable without consideration to the citizens of this town, was both erroneous and without merit.
"This council works hard to serve the citizens of this town. And for you to imply otherwise leaves a bitter taste in my mouth. I hope the citizens of this town know that we make hard decisions… that are sometimes not popular but are always thought out and with the town’s best interest at heart. For you to attempt to chastise this Council in a public forum because they did not agree with you… this person [referring to the Mayor] was both unprofessional and a discredit to the members of this Council. Thank you Sir!”
To which Rummage replied, “I didn’t insinuate anything. I stated facts. Thank you.”
Paving on Santa Maria Avenue is slated to be finished this summer. This is one of Mayor Rummage's campaign promises.

Linda Farneth

    

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