December 14, 2012

Auditor: Finances troubled before Old Orchard manager hired

Details of improper bookkeeping emerge at a meeting to discuss Mark Pearson's job performance.

By Gillian Graham ggraham@pressherald.com
Staff Writer

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.

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The council chambers were jammed with people for Wednesday night's special meeting where the council was voting on whether to enter executive session to review town manager Mark Pearson's contract.

Gregory Rec / Staff Photographer

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Mark Pearson

Gregory Rec / Staff Photographer

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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.

(Continued on page 2)

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Council Chairwoman Sharri MacDonald

Gregory Rec / Staff Photographer

  


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