Audits find Ellsworth made accounting mistakes in recent years

Financial audits of the city of Ellsworth from 2022 and 2023 show that poor accounting practices led to inaccurate records of the community’s bank balances.

Turnover among top staff in the city’s finance department contributed to the weaknesses and deficiencies in its reporting during the financial years ending in 2022 and 2023, according to officials. The city’s financial year runs annually from July 1 through June 30.

The city’s audits for those years, conducted by Buxton accounting firm RHR Smith & Co, did not find any indication that money went missing or could not be accounted for. The second of those audits, for 2023, was just completed last week.

The audit findings come as the city is trying to recover from turmoil and instability in its ranks, including the recent firing of former police chief Glenn Moshier — who had also served in the dual role of city manager — and high rates of turnover in multiple departments.

Since 2020, Ellsworth has also seen the departure of three finance directors, an earlier city manager , two city clerks , one city planner , a fire chief, and two deputy fire chiefs, one of whom died from cancer in 2021.

There also has been complete turnover of the seven-member elected City Council since 2020.

According to the accounting firm, the city’s records for some bank accounts in the audited years did not match the actual balances because staff had not reconciled accounts properly and had left some transactions unrecorded.

“During the audit, we determined that monthly reconciliations were performed for the pooled cash system but the reconciliations were out of balance, sometimes by significant amounts,” the accounting firm wrote in both audits for 2022 and 2023. “As the city had not reconciled these cash accounts correctly and had unrecorded transactions, the city was unaware of the actual balances in these accounts. The importance is that significant errors or misappropriations of funds could have gone undetected for several months.”

Turnover among the city’s financial staff also contributed to delays in getting the audits completed. The 2023 audit was only wrapped up last week. The 2022 audit was completed in September 2023, more than a year after the end of that fiscal year. The city is reviewing its records for the 2024 fiscal year, which ended on June 30, in preparation for having that year audited as well, according to city officials.

Nathaniel Moore, the new municipal finance director , said Thursday that the city has been taking steps to address the audit findings. Moore, who was appointed to the post in June, is the sixth person to hold the job either on an interim or long-term basis since 2018.

Moore said he did not have examples in dollar amounts of how big some of the accounting disparities between bank and city records may have been.

“Most of the time the auditor found transactions that took place correctly but may have either been recorded in the wrong account or were entered incorrectly, “ Moore said. “Unfortunately, since the current finance staff was not here for [the 2022-23 fiscal year], we had to take time to go through paper files as well as old software to determine the cause of the issues.”

Among the changes the city is making to improve its accounting practices are updating its policies to clearly specify personnel responsibilities and tasks such as account reconciliations that are to be completed each month, the audits noted. The city will further outline all tasks to be completed after the end of each fiscal year, in preparation for annual audits, and will change some of its accounting systems to be more timely and precise.

The city also says it is implementing new software to keep better track of debt service payments and proceeds.

Moore said he and City Manager Charlie Pearce, who started his job in April , have prioritized staffing and performance improvements in the finance department to ensure better bookkeeping going forward.

“With the [2024-2025] budget now passed by the City Council, the finance department has solidified its structure and is committed to not only producing financial reports but also ensuring transparency for both the City Council and the citizens of Ellsworth,” Moore said.