OLD ORCHARD BEACH – An auditor who has “grave concerns” about the town’s finances says the problems are not the fault of Town Manager Mark Pearson.
An ongoing audit has revealed problems dating back more than a year that require immediate fixes, auditor Ron Smith told town councilors this week.
The finding that the problems began before Pearson started his job in February has not stopped a group of councilors from trying to oust him. That effort failed Wednesday night when a large crowd of angry residents showed up at Town Hall to defend Pearson.
The meeting about the future of the town manager ended without a vote, but publicly revealed new details about town finances that were uncovered in an annual audit.
Smith has given councilors only a preliminary report, saying he has “grave concerns” but still “has a lot to understand.” The audit so far has revealed checking accounts that were not reconciled, tax issues and a lack of financial controls, according to Smith.
The town’s primary checking account has not been reconciled in more than a year and may be out of balance by as much as $88,000, his preliminary report says.
Those findings were noted frequently during Wednesday’s meeting and appear to be driving the effort by some councilors to fire Pearson after less than a year on the job.
Council Chairwoman Sharri MacDonald asked Pearson to resign last week, but did not initially disclose a reason. She said Wednesday that part of her concern is the preliminary audit findings, which were presented to councilors in a closed meeting Nov. 21. The draft from the auditor was not released to the public before Wednesday.
MacDonald scheduled an executive session with the town attorney Wednesday to discuss the council’s legal rights and responsibilities regarding Pearson’s contract, but that closed-door session wasn’t held.
Instead, councilors and residents spent more than three hours talking about Pearson, the audit and whether it was appropriate for MacDonald to ask the town manager to resign without first speaking with the entire council.
The meeting got unruly at times, with audience members shouting at councilors, demanding to speak and asking MacDonald to resign.
It was the first time that several councilors spoke publicly about their issues with Pearson, though none elaborated beyond citing the audit, merit-based raises for town employees and an undisclosed complaint against Pearson by an employee.
Pearson said he is unaware of any complaint and was never told by MacDonald why she wanted him to resign.
Tension over town finances and the town manager is nothing new in Old Orchard Beach.
The town, which has a municipal and school budget of about $26 million, has had four managers in five years and five finance directors in the past 13 months, including some who served on an interim basis.
Earlier this year, residents were shocked to learn that the town library’s late bookkeeper, Linda Jenkins, had embezzled $140,000 over a six-year period. Investigators blamed a lack of oversight.
A draft letter to MacDonald from RHR Smith & Co., the Buxton firm that is doing the town’s annual audit, noted “significant issues we believe require immediate attention,” said senior accountant Bruce Nadeau.
The audit showed that journal entries for cash revenue were adjusted to force agreement with the bank’s numbers, according to the draft letter. It also showed:
n Tax and lien receivables had not been reconciled during the year.
n Unreconciled liability and payable accounts.
n Errors in calculating the fiscal 2012 tax commitment that went undetected by the town staff.
Smith, managing partner of RHR Smith & Co., said he still has “a lot to understand in Old Orchard Beach” and will look at the previous year’s finances as part of the review.
He said the audit has shown no wrongdoing by Pearson, who “has been nothing but forthcoming.”
“We believe the management is part of the solution,” Smith told town councilors. “I think a lot of the practices didn’t happen overnight.”
Pearson, Old Orchard Beach’s fourth town manager since 2003, said he has implemented financial controls since February and will continue to do so.
He said he has found that department heads with different revenue sources didn’t always turn in paperwork monthly. And an envelope containing a check and cash, apparently lost for much of a year, was found recently, he said Wednesday.
Pearson took steps to review the fiscal 2012-13 tax commitment for accuracy, in response to auditors’ concerns.
He did not return phone calls Thursday seeking additional comment about financial controls he has implemented.
Town Councilor Robin Dayton, who supports Pearson and frequently pushes for additional financial oversight, criticized councilors for judging Pearson before the audit is complete.
Dayton and Smith said the council must give the auditors time to finish their review.
“You want to get rid of this man who put the controls in place?” Dayton asked the council. “We need to move forward, not backward.”
Staff Writer Gillian Graham can be contacted at 791-6315 or at: