Trash District Audit Issues Bleak Report

Auditor Cites Regional Refuse District for Sloppy Bookkeeping,
Points to Opportunities for Abuse

By MANDY LOCKE

The long-awaited draft audit for the Martha's Vineyard
Regional Refuse and Resource Recovery district delivered stern warnings
for the trash district's leadership to clean house.

In a five-page management letter, auditor John J. O'Brien
detailed sloppy and incomplete bookkeeping and pointed to the potential
mishandling of cash at local drop-off centers.

"During the course of my audit, I noted a number of errors and
disorganization in the underlying accounting records," said Mr.
O'Brien.

Among errors the auditor noted:

* Unsupported vouchers.

* Deposit slips discarded.

* Invoices and canceled checks not logically filed.

* Pay rates not produced as requested.

"Either for internal needs or outside auditors, an audit trail
is vital to an efficient accounting system in any organization. The
district needs to significantly improve their efforts in this
area," the auditor wrote.

Controversy swirled around the refuse district last year when a
committee member discovered unpaid bills to the district's
Rochester-based waste handler SEMASS climbing beyond $250,000 along with
interest charges totaling $45,000. District management had rerouted
operational revenues budgeted for SEMASS into unanticipated capital
expenses. Ending the 2002 fiscal year, district leaders acknowledged
their operation was $350,000 in the red.

According to the audit, the hole is now about $225,000 deeper than
district management projected last May.

"You've been carrying deficits for a few years, and
you've all known it. That's not good, you know. The question
is, how do you turn it around?" Mr. O'Brien said to the
district committee yesterday afternoon during the audit exit interview.

District manager Charles Noonan depends on yearly audits to validate
financial statements and prepare the budget.

Mr. O'Brien made more than two dozen reclassifications -
some of which forced major line-item adjustments. Management did not
reconcile $1,534 in the checking account. A wheel loader was not listed
as a $118,000 asset. Payroll withholding mistakes caused more than
$30,000 in correction shortfalls.

"Bookkeeping left a lot to be desired. It's an area
that's going to have to be improved," Mr. O'Brien said
during Thursday's monthly district meeting.

The district is in dire need of professional accounting assistance,
Mr. O'Brien said. He also recommended that the district stop
handling cash at local drop-offs in Chilmark and West Tisbury -
curbing the potential for abuse. Mr. O'Brien also suggested
installing surveillance cameras at the Edgartown transfer station, where
cash transactions total a half-million dollars a year.

"You hate to stay that stealing is going on, but it happens.
You won't prevent it, but you could detect it," Mr.
O'Brien said.

Committee members decided during yesterday's meeting to
discuss the option of requiring coupon purchases from third-party
vendors to eliminate the handling of cash at the drop-off stations.

District debt mounted severely the previous fiscal year. The
district incurred $964,000 in capital costs - including nearly
$800,000 in transfer station construction costs. These costs are in
addition to debt service payments of $350,000 - a combination of
principal and interest for long-term bonds authorized by the member
towns.

Even though the district entered the 2001 fiscal year with a
$424,000 surplus, they swallowed that and fell in the hole an additional
$364,000.

In fiscal 2002, the district dropped an additional $214,000 into the
red, ending the year with a $578,000 deficit.

Seven months into the next fiscal year, the district - which
runs a $2.5 million operation - is still in financial straits. The
trash handler continues to carry last year's deficit of nearly
$600,000 while it awaits authorization from the legislature for a bond
which will absorb a $500,000 of the shortfall.

The district is behind on SEMASS bills again - a recurring
habit that caused the off-Island operation to withdraw the promise of a
price freeze this year. This month, the committee must decide whether to
pay SEMASS or a debt service payment on a long-term bond.

"How do we get to the point where you have to choose between
two things you must pay? How do you get to this spot?" asked
Chilmark representative Alex Preston.

The auditor blames the district's condition on a long history
of poor budget forecasts. The district has been enduring severe
fluctuations between projections and actuals for at least the last five
years.

While towns have authorized only $3 million in borrowing over the
last decade for capital projects including construction of the transfer
station and capping of both Edgartown and West Tisbury landfill, the
district paid well over $3.5 million for overages and unexpected
mandates from regulatory bodies including the state Department of
Environmental Protection and the Martha's Vineyard Commission.

Over the last five years, budget projections versus actual expenses
for line items such as wages or hauling costs fluctuated as much as 33
per cent. In nearly every instance, the district underestimated
expenses.

The personnel subcommittee will meet next week to discuss
restructuring administrative staff roles and hours to free up $19,000
for a part-time accountant in this new fiscal year.

"When an organization is flat-ass broke, it's not
unusual to reorganize the structure," said Edgartown
representative Bill Elbow.