Scott Report: 'There are no villains here'
Toolbox
By SUSAN ALLEN TIMES ARGUS STAFF - Published: January 16, 2010
MONTPELIER – Two reports released Friday examining Montpelier's handling of the Scott Construction overpayment in 2004 essentially cleared the city staff and the city council of any intentional wrongdoing, but made suggestions for improving financial systems and ensuring residents are more informed about issues in the future.
"Other than Scott Construction, there are no villains here," read one report, an 11-page document completed by the Montpelier Citizens Financial Review Committee, which examined the non-financial issues linked to the Scott case, including whether the City Council inappropriately met in executive session to discuss the situation.
"The Committee believes that well-intentioned people made mistakes and difficult choices, but they did so believing their actions were in best interest of the taxpayers," the report read.
"I think that really sums it up. There's no question they made some mistakes and some errors of judgment. But the documents and the discussions with them made it clear the things they did they thought were in the best interest of the community," said resident Nick Marro, the chief author of the report. "Hindsight is always 20-20."
A second report, completed by Williston firm Cota CPA, PC, found problems with the city's financial systems at the time of the error and urged specific changes to ensure similar problems do not occur.
"We believe the Internal Controls in place, at the time, failed," the Cota report read. "There appeared to be a disconnection between the procurement of goods and services for the purpose of providing the best services to the citizens of Montpelier, Vermont, and the accountability/payment function of these goods and services."
The Cota report closely examined how the error first occurred, resulting in a $462,000 overpayment to Scott Construction in 2004 from the city's water fund. That overpayment was listed as a receivable and the mistake was not discovered until 2006. The error was not fully disclosed by the city until October 2009 while efforts to collect the money from Scott were undertaken.
The money, plus interest, was recovered through the city's insurance policy.
City Manager William Fraser said Friday he was still "digesting" both reports, and he had specific areas of disagreement with some suggestions. However, he said the overall assessment confirmed what the city has been saying since October.
"We've said all along that we were telling the whole truth about the matter," Fraser said. "I think that's what both reports basically said, that what we put out was the truth. We did what we did for the reasons we did, and we can explain it all."
The Cota report noted that some of the problems that led to the 2004 error have been remedied by the city. For a tighter financial system, the firm recommended:
* A more detailed review of invoices and check payments, including assuring that people signing off on payments are fully aware of the details of the payment and have reviewed background material; previous payments on projects are carefully and properly noted and accounted; large acquisitions of $25,000 or more require additional review and sign-off from others with knowledge of the project, including the City Manager (already under way); and people who provide additional sign-off must re-review the project or acquisition thoroughly.
* Department heads must provide additional oversight, particularly on large acquisitions; project engineers should not have sole control over tracking the financial status of a project (this, too, is already under way).
* Before accepting a bid, the city should do due diligence to ensure the firm can perform the work and is financially stable.
* The city should: Add more specific information to project write-ups to ensure everyone knows what his/her role is from beginning to end; create a more formal procedure for approving and tracking changes; department heads consult with business manager on payments and change orders; and an Internal Audit Committee be established to review the city's procedures at least annually and report to the City Council; and require the Treasurer to review documentation before signing checks.
"We believe that if the City of Montpelier, Vermont, places added emphasis and diligence to certain control areas and activities … the city's internal controls over vendor disbursements will be improved," the report stated.
The citizen panel urged the City Council to adopt all of the Cota suggestions and "report back to the taxpayers by including details of the implementation of the Cota Report's recommendations in the City's 2011 annual report."
And while the citizen's panel absolved city officials and the council by saying there were no villains, the report did levy some criticism for the handling of the matter.
"Hopefully, City officials and the City Council gained from this unfortunate experience because without question there are lessons to be learned. First and foremost, in the opinion of the Committee, is that public officials ought to learn/know that nothing done behind closed doors is worth the price you pay when the issue becomes public," the committee wrote. "When the story broke in The Times Argus on October 10, 2009 — nearly three years to the day the overpayment was first discovered by City officials — many residents of the community were outraged, not by the fact a mistake had been made, but by the perception that City officials tried to cover it up.
"The City Manager, Mayor and City Council acted in what they considered the best interests of those they serve," the report stated. "Hindsight does show some decisions were perhaps not the best choice, but these mistakes will allow the City to learn and improve their processes."
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