Portsmouth defends bookkeeping on ’Heidi Drive’ payout — again

‘We have done nothing to bring shame to Portsmouth,’ manager says

EastBayRI.com ·

PORTSMOUTH — Hoping to finally put to rest any lingering questions about the $800,000 “Heidi Drive settlement,” Town Administrator Richard Rainer Jr. explained in greater detail Monday night how the town accounted for the payout in its budget.

The bottom line, Mr. Rainer reiterated to the Town Council, was that the town followed protocol and shouldn’t be held under a cloud of suspicion.

“We have done nothing to bring shame to Portsmouth. Everything we have done has been in accordance with Rhode Island state law,” the administrator said.

Finance Director John Menke, who was hired after the Heidi Drive settlement was made, agreed. Mr. Menke said he contacted the office of the state auditor general, who assured him the town’s financial reporting is in compliance with the law.

“For accounting purposes, the Town of Portsmouth did no wrong,” he said.

Questions regarding the accounting methods the town used to pay Rhode Island Nurseries the settlement, which followed litigation over a paper road a previous council voted to abandon in 2011, were first raised at the March 27 meeting by Larry Fitzmorris of Portsmouth Concerned Citizens.

He accused the town of running a deficit of nearly $700,000 for fiscal year 2015-2016 without reporting it publicly or to the state, as required by law. Mr. Fitzmorris said he first learned of the shortfall when he read the town audit prepared by Marcus, LLP that was presented to the council Jan. 23.

Town officials countered there never was any budget deficit to disclose. In fact, the town finished the fiscal year with $178,400 surplus in its operational budget, according to Mr. Rainer and Council President Keith Hamilton.

Mr. Rainer explained that the $800,000 settlement was reached on Oct. 13, 2016, after two mediation sessions with Rhode Island Nurseries. The settlement had to be paid within 30 days, which took officials by surprise since they were hoping to make the payout in increments over time, said Mr. Rainer. The money was paid via wire transfer, he added.

Calendar year vs. fiscal year

The fiscal year ended June 30, 2016, but under accounting regulations Marcus, LLP had to take into account all transactions through Dec. 31, the end of the calendar year. That’s why $699,863 shows up in the audit as a “subsequent event” and not as a deficit, Mr. Rainer said.

James Wilkinson of Marcus LLP acknowledged that the bookkeeping procedure can appear confusing, but that it follows proper rules of accounting.

As for where the money for the settlement came from, $200,000 had already been set aside in anticipated legal fees and the remaining $600,000 was taken from a bond for the construction of a new police station, he said. The bond resolution was presented to the council in open session by Interim Finance Director David Faucher on Nov. 28. The resolution made it clear that a $600,000 appropriation from the bond would be used for the settlement, Mr. Rainer said.

Despite Mr. Rainer’s explanation, Mr. Fitzmorris said there were still “outstanding issues” regarding the town’s bookkeeping.

“Moving a charge backward in time to another fiscal year is unusual,” he said.

Mr. Hamilton, however, said the discussion had run its course. 

“There was, A) no hanky-panky; and B) the people were paid,” he said. “I think we’ve killed this horse.”

Council member Linda Ujifusa said since Mr. Fitzmorris wasn’t alleging that any harm was done to the town’s citizens, then the council should move on. The decision in 2011 to abandon the Heidi Drive extension, which cost the town $800,000, is what should anger residents, she said.

Council member Elizabeth Pedro took issue with those remarks. “I do not appreciate Ms. Ujifusa’s comments, which are political grandstanding,” she said.

“It’s a statement of fact,” Ms. Ujifusa replied.

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