NORWICH — An independent audit of town financial records last fiscal year identified a list of concerns with account management, including unreconciled discrepancies, incorrect account balances and town expenditures made without written consent of the Selectboard.

An audit conducted by Sullivan, Powers and Co., a Montpelier-based accounting firm, alerted Norwich officials to “material” and “significant” deficiencies in the town’s financial management during fiscal year 2022, which ran from July 1, 2021, to June 30, 2022.

The audit report released on Friday said the deficiencies resulted in accounting errors that were still unresolved at the fiscal year’s end and required “various adjustments” in revenues and expenses to correct the account balances.

Some errors were caused by expenses being posted in the wrong accounts, according to the audit, which recommended the town review the balances on a regular basis to reconcile any discrepancies.

The inaccurate account balances included capital assets, property taxes, prepaid or anticipated expenses and reportable assets.

To complicate matters, the two administrators who oversaw the finances during that period — former Town Manager Rod Francis and former Finance Director Fielding Essensa — are no longer employed by Norwich.

Without a town official to verify the accuracy and entirety of the records submitted for audit — in the form of a signed letter of representation — the auditors issued a “disclaimer of opinion,” which means the auditors lacked sufficient evidence to express an opinion on the town’s financial statements.

Town Treasurer Cheryl Lindberg, an elected official with 27 years of service, said the auditors had hoped she would sign the letter of representation on the town’s behalf, though Lindberg was not comfortable confirming records and activities of which she had limited knowledge.

“My concern is with my name representing something when I wasn’t allowed to be in the office or to assist, so I had been kept out of most of the procedures and routines,” Lindberg told the Selectboard at a meeting last week.

In a phone interview, Lindberg said the disclaimer audit report could have adverse consequences on a town.

The lack of a clean audit report could affect the town’s ability to borrow money from lenders and could cause townspeople to question the reliability of the town’s financial reporting, as well as Selectboard decisions based on those records, Lindberg explained.

Lindberg added that Norwich must still “clean up the mess,” which will include implementing new policies and procedures to prevent mistakes and correct inaccuracies in a timely manner.

Norwich has struggled in recent years to find and retain qualified and consistent leadership in its finance department. In 2019, the town parted ways with former Finance Director Donna Flies after she made multiple unauthorized payments in connection with an email scam, resulting in a loss of nearly $250,000 in municipal funds.

Following Flies’ departure, Norwich went over two years without a permanent finance director, according to Lindberg.

Essensa, hired in 2021, held the position for only 13 months before departing in October, the same month the Selectboard announced its separation with Francis.

Some deficiencies identified in the audit were partly attributable to changes in town operations due to the coronavirus pandemic.

For example, the closing of town offices led the transfer station to be the primary seller of coupon books for transfer station services, which the auditors thought could open the possibility of misappropriated funds.

“The town does not have adequate internal controls in place,” the audit stated. “Therefore it cannot be sure that all of the cash collected is being handed over to them by the transfer station employees.”

In another situation, several payments last fiscal year requiring Selectboard approval did not have a signed warrant from board members.

In a written response to the auditors, town officials said there was difficulty acquiring board signatures because the board was only meeting remotely.

“Now that the Selectboard meetings are in-person, the warrants are to be signed at the meetings and then returned the next day to the Finance Department for filing,” the letter states.

The town response includes a summarized plan to prevent or reconcile future discrepancies in a timely manner, including monthly reviews and creation of a tracking system for transfer station ticket transactions.

Attempts to reach Interim Town Manager Brennan Duffy and Interim Finance Director Joyce Hasbrouck by email were unsuccessful.

The Selectboard plans to schedule a presentation and discussion with the auditors in March, sometime after the Town Meeting on Mar. 7, where officials hope to receive a more detailed understanding about the audit and its meaning for the town.

Vermont statute requires municipalities to conduct an annual audit of the previous fiscal year prior to its Town Meeting to approve the next fiscal year budget.

Vermont towns are encouraged to publish the audit report with its annual town report to help inform voters, though this is not a legal requirement, according to the Vermont League of Cities and Towns.

Patrick Adrian may be reached at padrian@vnews.com or at 603-727-3216.

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