Trash District Audit Issues Bleak Report

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


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.