BLANDFORD, Mass. (The Westfield News) – At Monday’s Board of Selectmen meeting, certified public accountant Josephine Sarnelli, a Westfield resident, reported on the status of the FY2016 closing for the town. Sarnelli said the numbers had stayed the same for three months, and that she was waiting on the completion of Schedule A before signing off and submitting the reports to the state.
Board chair Adam Dolby asked if that was the last step of the closing. Sarnelli said the state would then have to accept the reports.
“My goal is to get the numbers in so we can start reconciling this year. If we’re doing what we should be doing, we should be closing out each month,” Sarnelli said.
Dolby asked if the town would be in the position following the closing to get financial statements on a monthly basis.
Sarnelli said until these reports were done, there was nothing to be reconciled to. She said they have minimized the number of accounts, but still have problems linking accounts through the software, a project she is working on. She said she didn’t begin the process until late September when she was rehired by the town.
“If we start the process now, I think we’ll have it done this year, but it has to be with the cooperation of the whole team,” Sarnelli said.
Sarnelli, a CPA specializing in forensic accounting, was a key figure in uncovering the alleged theft of more than $150,000 from the town and its taxpayers by former tax collector LeeAnne Thompson, who held the position from 2003 to 2011.
Sarnelli first noticed irregularities in the financial statements in 2011, when she was hired to do a turnover audit at the request of new tax collector June Massee following Thompson’s departure. At the time, Sarnelli made a series of recommendations to the town, including converting the positions of treasurer and tax collector to appointed rather than elected positions, and also hiring a town administrator. Angeline Ellison was hired as town administrator in August of last year.
Following a series of turnovers in treasurers, Sarnelli was hired back in 2015 to assist in the FY2015 closing for the town. At that time, she and the town’s financial team uncovered the fraud, and turned over all of the evidence to the Attorney General. In December, Thompson was indicted by a Hampden County Superior Court on charges of Embezzlement by a Public Office, Larceny over $250, and Use of an Official Position to Secure an Unwarranted Privilege.
On Monday, Dolby asked about Sarnelli’s contract with the town going forward. She said she currently has 5.5 hours per week for warrants to be prepared. She also needs to have a block of time for data entry once a year, and a block of time for closing once a year.
“My intention is to come up here once a month. Right now, I’d like to get everything reconciled. Secondly, fix these problems going forward. Third, let’s write out procedures and policies for the financial department. If you’re going to have an audit, which I hope to do, you have to have monthly statements,” Sarnelli said.
Selectman William Levakis said he didn’t want to spend the money on an audit if it wouldn’t be useful.
Sarnelli said the town isn’t ready yet for an audit. She said they still need to implement a policies and procedures manual, there are no monthly financials, and no separation of duties on the financial team. She said at this point they would get a negative rating.
She said if the town gets current in its financials by June 30, and closes (FY2017) by August, and has policies and procedures ready at the same time, they would be more ready.
“That’s exactly what we said a year ago,” said selectman Andy Montanaro.
“That’s before we knew how bad the problem was,” Dolby said.
“We pay you for your expertise, and I value your expertise,” Dolby said to Sarnelli. He said he hated the idea of postponing the audit further.
Levakis said he was told that the town had put aside $13,000 for an audit. Then he heard that it could go as high as $20,000 to $30,000, or higher. Montanaro said they had also discussed doing a partial, six-month audit.
Sarnelli said if everything has been channeled in from secondary ledgers then it should be fairly easy. She said one of the issues is that there are balances inside old excise taxes. She said when the first six months is in, a preliminary audit could perhaps be done at that time.
Dolby asked how they would know if they were in that kind of shape.
Sarnelli said linkages between accounts weren’t set up correctly until September, which leaves three months to review. She said the financial team has isolated three problems as to why July didn’t reconcile properly, and in one, software linkage was the reason. Sarnelli is working with the software company to correct the problem.
Sarnelli said she would like the financial team members to sign off on each account they’re responsible for on a monthly basis when it is reconciled to the general ledger. She said if that were done, the selectmen could have actuals to look at each month.
Sarnelli said they should reasonably expect an audit in FY2018. She said she would contact the company and ask for an amount to be included in the budget.
“It would be nice to have a realistic concrete number,” said Finance Committee member Eric McVey.
Dolby thanked Sarnelli for her work on uncovering fraud in the town.
“It was very much a team effort,” Sarnelli said.
“That’s been a big line item for the last couple of years,” Dolby said. He asked whether Sarnelli anticipated the same amount of time and cost in court for the town.
“My invoice will depend on whether they go to trial,” she said, adding if they settle, she won’t have court time.
Montanaro said it would be helpful to know. He also said he’s been asked when the town would be getting some reimbursement from the bonding company. Sarnelli said any reimbursement would be to cover receivables that are on the books to make taxpayers whole. She said that is all the town would be able to do.
“We have people who didn’t get credit for taxes they paid, and also those who overpaid, who didn’t get credit,” said tax collector June Massee. She suggested asking the software company to isolate balances on the books that happened before 2011.