Auditors disagree with commissioners on reducing FY10 taxes
March 10, 2010
WEST STEWARTSTOWN — Discussion of the performance audit turned emotional at times for county delegation members during Saturday's lengthy discussion.
"Did you find fraud?" Rep. Bill Remick, a Republican of Lancaster, asked the two auditors on hand from Melanson, Heath, PC, of Nashua, with which the delegation signed a $40,000 contract.
"No," replied Kevin M. Bannon, who conducted most of the interviews.
He and John J. Sullivan, one of the firm's 10 shareholders who heads up its fraud investigation services, sat together to answer questions and highlight their lengthy report. Auditor Bannon explained, however, that although they had detected no fraud, they did find errors and reporting issues in the audited year-end financial statements of 2007 and 2008. These allegedly relate to what he described as receivables claimed by both county nursing homes that, in fact, would never be able to repaid.
The auditing firm's report "states that the absence of a competent finance manager for the county has left the county in need of significant fiscal repair," County Treasurer Fred King of Colebrook pointed out. This," he said, "is a false statement that borders on slander," especially since the report includes a disclaimer stating that the firm would not express an opinion on the county's financial statements.
Rep. Paul Ingersoll, a Democrat of Berlin, said that "finger pointing would not solve the problem," and everyone agreed that to move off the stalemate both accounting firms must sit down with the county delegation, the commissioners, and County Administrator (CA) Sue Collins to better understand these important differences of opinion and interpretation.
Since it is income tax preparation season, such a meeting will not likely take place before the delegation's 9 a.m. annual meeting on March 13 at the Berlin nursing home at which the delegation will vote on the county's FY10 budget.
Disagreement on receivables
As anticipated expenses are budgeted for both nursing homes in Coös County, the county only budgets for revenue for which there is a reasonable expectation that it will be received. Then, they raise the difference by the county tax, CA Collins explained. Nursing home deficits have been paid for through the appropriation process and not by loans from the county's General Fund.
She and Mr. King pointed out that the current system has worked for more than 20 years: bills have been paid without incurring overdrafts; surplus has been used every year to reduce taxes; and both the county's auditors and DRA have been satisfied.
Auditor Sullivan insisted that his firm had supplied accurate information on this important matter, and that these errors that the firm spotted were "exactly what had happened in Sullivan County" after the delegation contracted with an outside firm that apparently believed — erroneously — that its nursing home revenues would match its nursing home costs. After Sullivan County had fallen into a negative fund balance, Mr. Sullivan explained that his firm was hired to help it recover.
Mason & Rich, P.A. of Concord, the county's longtime auditors, were not on hand, but plan to prepare a detailed response to the allegation that improper presentations of both net assets and Unrestricted Deficits were made.
On behalf of that firm, John E. Lyford sent a brief letter, explaining that the county uses a portion of its county taxes to pay nursing home costs, without any intention that these subsidies represent "interfund loans" or are receivables.
Should the delegation decide at a later date that Melanson, Heath is correct and that there is a $1 million-plus deficit, then its members could still vote for a supplemental budget until August — before DRA sets the amount the county must raise from taxation.
The county commissioners have already recommended a budget to the delegation that provides for a 1.6 percent decrease in taxation, primarily because of the receipt of federal stimulus funds. If the delegation accepts Melanson, Heath's opinion that the county's FY09 financial statement should be recast, then the amount to be raised by taxes would increase.
The firm is also recommending that serious consideration be given to hiring a Chief Financial Officer (CFO), not only to provide relief to the county administrator but also to provide appropriate segregation of duties (SODs) and as part of beefing up internal controls. The firm also supports the commissioners' budget request that a full-time position of Superintendent of Corrections be reinstated, starting July 1. That would only call for a half-year salary in FY10, with a full-year salary in FY11.
As a result of an error in the report, the minutes of the delegation's Feb. 16 meeting reflect that the members "were surprised to hear that the county administrator was provided with a vehicle."
At Friday's meeting, CA Collins provided Mr. Bannon with both her vehicle's title and a bill of sale; she does not, in fact, drive a county car.
CA Collins also believes that the auditors did not compare "apples to apples" when looking at either the costs of operating the county's nursing homes or other in-state county nursing homes.
Management also noted there are numerous factual errors, large and small, that mar the audit.
The commissioners and CA Collins also disputed the auditors' account of exactly how it was that the county floated a bond to build a $1 million-plus addition and install a new boiler at the West Stewartstown facility.
"It appeared as if the project was presented, discussed, and approved as one of immediate need for the current residents," the audit states, and that "the idea for this project was born primarily from (CA Collins), and (that) she was the main driver for its construction."
"Both of these statements are false," CA Collins said unequivocally, noting that for many years as the nursing home's administrator she had recognized the need for a spacious resident activity room. Previous conditions were "shameful," she said.
CA Collins also defended recommending the use of the "design-build" model of contracting a project and the choice of Colebrook contractor Daniel Hebert.
When treasurer King backed up CA Collins' explanations, Rep. Eric Stohl, a Republican of Columbia, stood up and said heatedly that he was tired of being interrupted by the county treasurer and "would get out of here." Rep. Stohl, who had been one of two state representatives to vote against approving the project, left the meeting and did not to return.
Three elected county officials then commented on the report: Sheriff Gerry Marcou; Registrar Carole Lamirande; and county attorney Robert "Bob" Mekeel.
The sheriff said that auditor Bannon's interview had seemed to him to be more "like a witch hunt" than part of a performance audit.
Rep. Hatch assured him that it was "not a witch hunt" and that he wouldn't take the comment "as an affront."
After the sheriff corrected some of Rep. Ingersoll's comments on the Sheriff's Department, Rep. Ingersoll started to pack up his things.
"Can't you take the heat?" Sheriff Marcou asked.
Like Rep. Stohl, Rep. Ingersoll angrily packed up his briefcase and left the meeting.
Chairman Theberge apologized to the sheriff for the behavior of a delegation member. "He has a vendetta against me," Sheriff Marcou explained.
Registrar Lamirande and county attorney Mekeel also commented on some aspects of the report.
The county attorney said that the state Attorney General makes it that their job is "to prosecute cases and do justice."
In 2000, the county attorney said, the record shows that the two attorneys then in office prosecuted a total of 118 cases. The number rose to 429 in 2009.
"We're busy," Mr. Mekeel said. "Each of us handles 100 more cases than our predecessors did in 2000. The cases are more complex and more acrimonious."
By then both Rep. Herb Richardson, a Republican of Lancaster, and Rep. Larry Rappaport, a Republican of Colebrook had left for other obligations.
Before the meeting ended, chairman Judd repeated his request that all errors in the audit report be investigated and corrected to ensure that future boards of commissioners and future delegation members would have an accurate record of the county's first-ever performance audit. The county has already paid $22,500, and chairman Judd asked that the auditors' final bill not be paid until all mistakes and misstatements have been corrected.