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Charlestown, we have a (budget) problem

Most of us of a certain age remember the phrase, “Houston, we have a problem,” when our country almost lost Apollo 13 and three astronauts on their way to the moon. Now it is important for Charlestown’s taxpayers to know that we also have a problem. Though less catastrophic or life-threatening than Apollo 13, hearing the town’s auditors report that somehow the town has $3 million less in cash available to spend than we thought we had the day before is very sobering indeed, a sum equal to around 10% of our total budget.

Our first impulse is to ask, “Who was responsible?” There must be someone who was responsible. The Budget Commission raised this question in its January 14 meeting where they had summoned the town’s outside auditors to explain how this happened.

The auditors said they had failed to properly record the town’s use of $3 million of its Unassigned Fund Balance (surplus) in the Town’s FY 2020 financial statements. This admission of serious error led one Budget Commissioner at their Jan. 18 meeting to say that, if it were up to him, they would be fired, not just because they made a mistake, but because they should have caught it.

The auditors were eager to share the blame, however. They told the commission that town staff failed to provide accurate and complete financial statements to them for audit as required.

If this is true, the auditors are correct, because the auditors are forbidden from preparing the town’s financial statements and then auditing them.

That would be a conflict of interest.

However, it does not relieve the auditors from not discovering the $3 million error using other auditing techniques such as looking at the back-up, Town Council minutes and other factors that go into making budget decisions.

It does, however, demonstrate that there is a lot more to understand about what happened, how it happened, and how we can keep it from happening again, than simply stating case closed and moving on. This is a learning opportunity that Charlestown can literally not afford to lose.

This $3 million was missing for two years. The Office of the Treasurer, the town administrator, and the Budget Commission were all unaware of it for two years. They all should have known about it a year ago, and I say this as both a former municipal finance director and a CPA. How did these town employees and officials all miss this?

At the January 18 meeting, the Budget Commission directed Town Administrator Mark Stankiewicz to come up with a plan to look back over the past five years to see if there were other mistakes and audit failures. So, the BC has now directed the town to investigate the auditor’s performance over the past five years for other possible instances of audit failures. Why isn’t the Commission proposing an outside, independent review, rather than have the town staff investigate issues where they may be part of the problem?

Budget Commissioner Richard Sartor was clear at both meetings that he didn’t want this $3 million surprise to spoil Charlestown’s reputation.

But ultimately Charlestown taxpayers need and deserve the truth more than the platitudes.

Stephen Hoff, Charlestown

This article appeared as a Letter to the Editor in The Westerly Sun on January 21.

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