Information was missing from a 2009 audit report that Westbrook officials rejected, the city said Tuesday.

The city considered legal action against its former auditing firm for failing to report deficiencies in its bookkeeping, but further analysis of the audit showed that it was complete. The city administrator and City Council simply never got the full report, the city said in a prepared statement.

The statement came as the city released a third-party assessment of the auditing services provided by Runyon Kersteen Ouellette of South Portland.

That assessment had been kept confidential as the city evaluated its legal options, but the city has “concluded that there was no legal or factual basis to any claim” against the firm, the statement said.

City Administrator Jerre Bryant would not say why the audit report received by city officials was incomplete.

The state of the city’s finances came into question when Colleen Hilton became mayor in January 2010, said the city’s statement.

At her inauguration, Hilton did not reappoint three department heads, including the city’s finance director of 32 years, Susan Rossignol, whose position was replaced with a chief financial officer for the city and the school department, which previously had its own business manager.

When she was hired, Chief Financial Officer Dawn Ouellette was directed to evaluate the financial operations.

The city’s statement Tuesday said she found problems with accounting practices, recordkeeping, and financial management policies and procedures.

The city then hired a third-party accounting firm, Graham & Graham of Laconia, N.H., to evaluate the city’s financial practices and audits.

A preliminary report by Graham & Graham, made public Tuesday, was submitted to the city in March 2011.

Graham & Graham found, among other issues, that the 2009 audit gave a misleading picture of the city’s financial position and that Runyon Kersteen Ouellette’s work “was adversely impacted by the long-term relationship” with Rossignol, the city’s finance director.

The report concluded that the city was “entitled to be reimbursed” $200,000 for several years of audits by Runyon Kersteen Ouellette, which did not meet “professional standards of the audit profession.”

But further analysis, in cooperation with the South Portland firm, concluded that the preliminary report by Graham & Graham, which cost the city $115,000, was “based on incomplete information.”

The city’s statement Tuesday said “extensive analysis by both sides” revealed that Runyon Kersteen Ouellette had made suggestions about internal financial controls that were never conveyed to the city administrator or City Council.

Rossignol, who requested a copy of the Graham & Graham report, declined to comment Tuesday, saying she had not yet read it. Gregory Chabot, a principal with Runyon Kersteen Ouellette, did not return a call seeking comment.

Along with the Graham & Graham report and the city’s statement, the city on Tuesday released an analysis by Moors & Cabot Investments on the financial impact of the city’s inability to refinance its bonds for seven months because it did not have a 2009 audit report.

The analysis concluded that the delay could cost the city about $1 million.

Bryant did not say whether the city plans to use any other means to recoup its losses.

Ouellette, who is not affiliated with the accounting firm, resigned as chief financial officer effective in February, when she planned to start maternity leave.

The city and schools’ finance department is now managed by the city comptroller. The city’s auditor is Roberts & Greene of Concord, N.H.

 

Staff Writer Leslie Bridgers can be contacted at 791-6364 or at:

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