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By Lisa Loomis and Rachel Goff
Duxbury will surrender the title to its 2014 tandem truck and its 2013 pickup truck to Merchants Bank to satisfy an unpaid balance of $228,000 from the line of credit the town took out to pay to repair $1,752,000 in damages due to flooding in April and August of 2011.
The town received Federal Emergency Management Agency (FEMA) and state reimbursements of $1,732,000, according to Duxbury Select Board chair Dick Charland. Despite the $20,000 difference between damages and reimbursement, the town currently has an outstanding balance of $228,000.
That line of credit came due at the end of October and while the town has now negotiated for it to be extended until the end of next June, Merchants Bank wanted something to use as collateral for the debt. Charland said that the town can't use its existing funds as those are needed for town expenses and he said that a member of the select board suggested using two of the town's trucks to satisfy the bank.
The two trucks include the 2014 tandem truck that the town purchased last July and the town's 2013 Ford pickup truck, purchased in September 2012.
"After Irene hit at the end of August, we realized we would need a source of funds to cover repairs in the interim," Charland said, explaining the reason the town took out the line of credit. "With no experience with disaster reimbursement(s) we thought we would borrow the money make the repairs, do the paperwork and move on. We borrowed $1.5 million in a line of credit from Merchants Bank and paid back the short-term note. We made all of our repairs for both storms and these were complete by the end of November 2011. It was then we started the process of trying to recoup the moneys due so we could pay off the loan," Charland said via email this week.
The fact that there would be a shortfall in the town's ability to pay off the line of credit was known to the select board and former town treasurer Ken Scott and was discussed several times during select board meetings throughout 2013.
In January 2013, the select board minutes show that board member Maureen Harvey provided an updated FEMA report. "Maureen has finished the numbers for 1995 [the event number of one of the town's two FEMA claims] and needs some reports to complete project close-out. Event 4022 has one more project worksheet to try to recoup some funds for debris."
The select board minutes from February 4 note that the town had storm damages of $971,000 and expected $605,000 from FEMA. "We will be contacting the state to arrange the expected funds that would reduce our payment to approximately $45,000," the minutes state.
In April 2013, the select board discussed its final FEMA payment of $600,000 and the fact that it would not cover the balance due on the line of credit. At that time, Charland stated that the town would seek help from the state to cover the balance rather than raise the municipal tax rate to cover the shortfall, which at that time was estimated to be $350,000.
June 10 select board minutes read: "FEMA report, Maureen is trying to figure out discrepancies regarding bank statement and repayments to the bank. Dick spoke with the auditor and things seem not to be matching up. Dick is setting up a meeting with the auditor, town treasurer, himself and Maureen at the town clerk's office to figure all out and understand."
At a select board meeting and via email this week, Charland suggested Scott and the town's former auditor, Bill Yacavoni, were responsible for Duxbury's failure to know exactly how and why the town fell short in paying of the line of credit.
"In all of the discussions, I made everyone aware of an outstanding balance," Charland said. "Unfortunately, we had no indication of the final amount and the treasurer apparently was not keeping track. During all of this uncertainty, we were asking for answers to the question of whether everything would be paid off. The treasurer's response was he did not know and we would have to speak with the auditor. The auditor told us on two occasions that once we received all of our reimbursements everything would be fine."
Yacavoni is no longer working for the town. When asked why, Charland said, "Given our inability to get answers to our questions, we felt a change was in order."
When Scott resigned, effective December 2, 2013, the town initiated an audit of 2013, which is required by state statute. According to the minutes of the November 19 meeting at which Scott resigned, the select board voted to spend no more than $3,000 to have the audit done.
Asked why he resigned, Scott said, "Because I was becoming increasingly frustrated with the lack of assistance to the treasurer by the select board. Board member Maureen (Harvey) would raise issues about reconciling the budget and I'd ask her to come in and go over her issues with me and she wouldn't show up."
"With the severe flooding and the necessity for the town to learn to 'speak FEMA' I found that the workload of the treasurer was more than I had the background or skill set to handle," Scott said.
A review of the 2013 select board minutes affirm that Harvey on several occasions asked Scott why numbers did not match up and Scott asked her to come in to address the issue. The minutes also show that two select board members, Charland and Harvey, were handling the FEMA work and were telling Scott how to code certain expenses and which general ledger accounts should be tagged to which expenses.
Charland said that originally the town's former road foreman Steve Manosh served as the FEMA contact person along with Charland. Then Charland added Harvey as a FEMA contact and later the new road foreman Adam McGee.
"We had four individuals at different points of the process. All project worksheets were submitted, reviewed and approved for funding. Then we waited for reimbursement," Charland explained.
Although the FEMA work involved four different people at various points during the process, Charland said it was Scott who "apparently was not keeping track."
As early as August 2012, the select board minutes show that the town recognized that the process of managing FEMA applications and funds was complicated. The August 13, 2012, minutes read:
"FEMA meeting today was a tutorial on finishing project worksheets and only to do with Irene; not how meeting was described in advance. Dick contacted someone at Vermont Emergency Management about $150K that was not allocated to project worksheets (Maureen found this in reviewing documentation). We have to match up these expenditures with project worksheets for review by the state and then by FEMA. It's possible that we will recoup more FEMA money. The critical thing will be the future FEMA audit. Everything that was provided for documentation now has to be duplicated and submitted for review. The board will discuss prepping for something like this again by having forms and by designating/hiring one person to manage all of the documentation and paperwork."
After Scott resigned, the select board voted to spend $36,000 versus $3,000 on an audit, not just of 2013 but also 2011 and 2012 to try to reconcile the books. At this week's select board meeting, Charland read an interim report from Bonnie Batchelder of Batchelder Associates regarding the FEMA expenses, the line of credit and general operations.
In a letter to the select board dated February 8, Bonnie Batchelder noted: "In a comparison between the 2011 figures presented by the treasurer for audit and the final audited figures, there was a $2,068,090 difference in the figures. This difference is explained and not meant to be alarming to the town, as it is a result of [Federal Emergency Management Agency] (FEMA) activity," Batchelder said, "however, it is apparent that the knowledge needed to present meaningful figures to the board and town as an information and decision-making tool was not available.
During 2013 in Duxbury, transactions were incorrectly posted, health insurance was not properly withheld from employees' paychecks and property and delinquent taxes were not properly presented in the town's financial statements, "which led to a $177,307 understatement of taxes and delinquent receivables," Batchelder writes.
In the firm's review of Duxbury's 2011 financial activity, "We found many of the same issues," she said, although "more apparent was the lack of knowledge on the presentation of financial information to the board by the treasurer."
Charland read Batchelder's letter aloud to the members of the public present at the board's meeting on Monday, February 10. "Things that we suspected appear to be true," he said. although the board clarified that some of the financial inaccuracies could be attributed to past town auditors in addition to the town treasurer.
When asked by one resident why the board was not aware of the town treasurer's activity prior to the interim report—specifically the inequitable withholding of health insurance from town employees' paychecks—Charland responded, "We don't go in and double-check anything."
When setting the budget, "We don't see the paychecks," Charland said, defending the board's oversight. "We only see the final line item."
While Batchelder P.C. is still working on the audit and has not issued a final assessment of the financial inaccuracies, "This is going to cost us," Charland said.