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Thursday, March 10, 2022

Secrets From Charlestown’s Own Accounting Archives - Part 1

Piercing the veil of secrecy

By Stephen Hoff, CPA

It is time to pull the curtain back on how Charlestown manages the thousands of dollars you pay in taxes each year and the transparency level that they allow us to see.  It all starts at the top with a majority control of the Town Council and runs directly downhill through the Town Administrator Mark Stankiewicz who owes his $150,000 a year job to that same majority, as do non-taxpayer third parties who are paid for their institutional support.  

It is classic old style politics where to the victors go the spoils.   However, it can be changed by us bi-annually if we can no longer support the status quo and have individuals willing to serve that share our beliefs.   

This article and other future articles will highlight some of my personal forays into the Town’s accounting and financial practices that I have examined over the past couple of years.  

It is based on 26 separate open records (APRA) requests, several Attorney General appeals, and a letter to the Auditor General of RI regarding the Town’s management’s capabilities and accounting practices that I, as well as our outside auditors, have found to be lacking in multiple ways.   

I began digging in deeper and deeper with each passing month, because it was clear there were serious problems and issues, as well as a fierce resistance by the Town staff to answer reasonable questions freely or to charge reasonable prices for what have been heavily redacted copies of documents if they haven’t been simply denied outright. 

In effect, I have become an unauthorized and unpaid “internal auditor” – and probably an unwelcome one at that - poking around very fertile ground in the hopes of determining what has been going on in Town Hall. 

I do this by simply asking questions and seeking documents and “looking under the hood”.  

However, my access to information is much more restricted than a  “internal auditor” would have. They wouldn’t have had to pay out of pocket for information that is heavily redacted, making my job all the harder as well as more expensive. 

In fact, I think that this is the Town’s motto, “Make it Hard and Expensive and They Will Just Go Away.”  Just so you know, I don’t plan to go away.   

It’s reasonable for you to ask why you should believe what I share with you.  My candid response is that I am not a feeder at the town trough.  I get no payments from the town, am not seeking a job with the town paid or unpaid, and must personally pay for information that I request.  

It also takes hours of my free time and I am only able to scratch the surface because of very limited access to the documents that I attempt to obtain.  

I ask you to trust me as a CPA, a former municipal Finance Director for 15 years, and a former auditor of municipal governments. I hold an MBA in Finance and I believe Charlestown can do better than we have been doing.  And if you have read this far, I bet you think that we can do better as well.   

Treasurer Cover Up - True or False?  The Town employed 2 full time Treasurers at the same time for 5 months during Fiscal Year 2020, both being paid over $100,000 each in base salaries in addition to all their accrued benefits.   Yet, the Town was still unable to get audited financial statements issued that did not overstate UFB by $3 million in Fiscal Year 2020!   True!
 You didn’t know this because the Town Council choreographed a magnificent charade on August 13, 2019 for public consumption that announced that Pat Anderson, the Town’s Treasurer, was retiring.  They even gave her a Certificate of Appreciation on her retirement.  See it for yourself on Town video at their 7 PM meeting.  

Her replacement had already been previously approved by the Town Council.  Little did anyone know at the time that Ms. Anderson continued to be a full time employee of the Town through the end of January 2020 apparently accruing additional full benefits. 

Now that this precedent has been set I have no doubt that future employees leaving town employment with severance benefits due to them will be demanding the same additional severance benefits accorded to Ms. Anderson even if they are not specifically allowed in her union contract.  This was pure and unadulterated deception by the Town Council and the Town Administrator!    

Then, there was the accounting cover up!  The Town had only budgeted for one Treasurer in the budget approved at referendum.  So, how could the Town hide the fact that we still had 2 Treasurers?  Someone came up with the bright idea of charging her 5 months of salary ($43,769.33) to an account outside the General Fund that is used to account for Severance Benefits once an employee has left Town employment. 

Unfortunately, the Town wasn’t savvy enough to realize that she hadn’t actually left Town employment and was still an active full time employee, or they simply ignored the fact.   

Therefore, the Town just charged her salary to this other Fund anyway, which begs the question of who decided to do this and on whose authority?  The Town Administrator perhaps, who oversees the Office of the Treasurer?  

It had to be someone who knew how Town budgets were structured and what alternatives could obscure the truth from being revealed.  There are undoubtedly fingerprints on the documents somewhere in Town Hall that relate to this decision.   

Unfortunately, there was a glitch to the Town’s “creative” accounting, because it was not allowed by Generally Accepted Accounting Principles since Pat Anderson had remained a full time employee during this time.  

Apparently, the auditors forced the Town to reverse where the Town had charged the $43,769.33, and moved the expense back to the Treasurer’s salary line in the General Fund just before the audit was completed in December 2020.     

Unfortunately most people didn’t notice.  However, the accounting looked strange and an open records request revealed what the Town had worked so hard to hide from the taxpayers. Now we all have a much better understanding of the depth of the deception that the Town used to deceive taxpayers and cover up their accounting manipulations.  

 I subsequently obtained a redacted email Letter of Resignation that Pat Anderson apparently submitted on January 21, 2020 resigning effective January 28, 2020 with an electronic signature. 

 When I requested other documents relating to her resignation I was told they would cost me $363.30 to receive.  Doesn’t this sound a bit like a high stakes poker game where for a hefty price I could see what the Town’s hole card was in what I can be assured would be a highly redacted document. 

 I ultimately decided not to pay the ransom of $363.30 just so I could more easily prove that the Town had been lying to taxpayers all along, now that I already knew that they had been.  

 Think about this.  The Town orchestrated an elaborate charade that our old Treasurer had retired with a Town Council ceremony and a Proclamation of her meritorious service, then doubled down on the deception by utilizing improper accounting which might have worked if the auditors hadn’t made them correct it.  

Then, once confronted about it, they kept what actually occurred from becoming public by placing a high enough cost on the details that kept the documents private as of now.  

That is not behavior we want to reward  And if  the Town Administrator played no part in it and was oblivious, then who is in charge and is being ignorant of the deception a defense of the leadership and knowledge that he is paid to provide? 

With all the shenanigans going on with this charade and deception I attempted at a minimum to at least verify that the accounting for Pat Anderson’s severance liability was accurate.  Since the Town is required to maintain a detailed severance schedule for each employee, I requested a copy of the severance schedule to review the calculations for her severance benefit. 

Initially I was given a price of $847.50 for a schedule that had already been prepared and provided to the auditors with no ability to know how much of it would be redacted.  I currently have an appeal pending with the Attorney General challenging the Town’s claimed cost of $390 for providing only a single electronic file (Excel Spreadsheet) of the Severance liability for fiscal year 2020.   

If you think I am the only one trying to get this schedule you would be wrong.  Even our Town Council President Deb Carney can’t get it and she is the top Elected Official in Town.  In an effort to keep this schedule from being provided to her, the three CCA members went so far as to vote to even deny her the right to see these documents. So much for their claim of providing transparency to Charlestown’s taxpayers.  

So, if I can’t get the document and the Town Council President can’t get this same document, then who can?  Something is wrong with the system when only Town employees can see this schedule that documents Charlestown’s $1.3 million liability, all of whom are themselves beneficiaries of the generous severance benefits provided by taxpayers, and that includes the Town Administrator.  

Some may think these are small matters in the global scheme of things. To an extent, they are right. But I am reminded of 1984 author George Orwells view that:

"Threats to freedom of speech, writing, and action, though often trivial in isolation, are cumulative in their effect, and unless checked, lead to a general disrespect for the rights of the citizen.”