An independent auditor called out elected officials of a tiny Maine municipality for violating the public trust by not following proper procedures for handling taxpayer money.
An accountant who performed The Forks Plantation’s annual audit for 2021 stopped short of saying its leadership was committing fraud, but described several unusual practices in a letter filed with a report to the state.
The most questionable action was the second assessor, who is also the tax collector, issuing a check to herself without board approval, and then shortly thereafter paying her back taxes that were a similar amount, according to Keel J. Hood, a certified public accountant based in Fairfield. Town officials made deposits without documenting them and recorded payments that never happened, Hood said in his report.
The July 14 document — called a disclaimer of opinion — represents a rare rebuke of elected officials in this remote plantation of 48 people in central Somerset County, and caught the attention of the state auditor’s office.
“Disclaimers of opinion are vanishingly rare,” Maine State Auditor Matthew Dunlap said. “We’re not alleging any illegal activity. Neither is the auditor, but he suggests that there could be possibilities of it based on the lack of controls.”
The plantation differs from cities and towns in that it is governed by a Board of Assessors, which has three elected members. Municipalities in Maine have been required since 1937 to perform annual audits, which are snapshots of public finances to ensure officials are responsibly managing money and to safeguard against fraud.
Hood declined to comment and directed questions to assessors, who didn’t respond to messages. But in an Aug. 11 letter responding to the audit, they argued with several of Hood’s key points, in some cases denying any wrongdoing.
During the fiscal year ending June 30, 2021, the plantation’s second assessor and treasurer processed and cashed payments to themselves without approval from assessors, a practice that continued even after he informed the board of the proper procedure, he said in the letter.
The second assessor and tax collector — who is listed as Judith Hutchinson on The Forks website, though not named in Hood’s report except by title — cashed a $2,254.92 check, written in September 2020, that was not approved by assessors before or after it was issued, he said. She had unpaid 2019 and 2020 property taxes totaling $2,237.91, which were paid in October 2020, according to the letter.
“Fraud is difficult to detect, nearly impossibly so in the case Management colludes to conceal it,” he said. “The Board of Assessors’ failure to appropriately scrutinize these transactions is an indication that fraud could go undetected.”
Hutchinson failed to place a lien on her own property for the 2019 tax year, Hood said, which is the responsibility of a tax collector. Then collection of the delinquent property taxes, interest and fees are supposed to be turned over to the treasurer.
Meeting minutes did not show that the assessors had given their approval to not place liens on Hutchinson’s property, he said. Assessors, in a response to Hood on Aug. 11, argued they were aware of and approved not to record the tax lien, but in a later exchange admitted they never formally voted.
Hutchinson paid back $15,742 to the plantation for prior years’ overpayments to her, plus the $2,254.92, circumventing the penalty fees and costs associated with liens, Hood said.
“The only bank statement page missing from the [The Forks’] 12 months’ bank statements was the page containing the photocopy of this check,” he said, noting the plantation, by phone, had to request a copy from the bank to show to whom it was made out, and there was no record indicating the payment’s purpose.
Hood recommended that the treasurer not sign checks without board approval, in accordance with state law. He suggested that the plantation require its tax collector to file liens for all unpaid taxes, and there should be no exception for officers.
Assessors agreed with the two recommendations in their Aug. 11 letter.
It has been the board’s practice to place checks on a warrant and approve them, assessors said, but they acknowledged the incorrect sequence and said they have ended that practice. When the plantation’s newly elected treasurer started in October 2021, assessors implemented new control policies that they believe address the deficiencies noted in Hood’s letter, they said.
Hood’s letter also detailed how management tried to control his access to people he needed to do his audit. Management insisted that Hood only work with the prior treasurer and that an assessor be present at all times, he said. Hutchinson wrote that communications should go through her and the first assessor, he said.
The assessors, in their Aug. 11 letter, denied that they limited Hood’s inquiry to meeting only with the former treasurer and encouraged him to interview the past treasurer because that is who served during the fiscal year. Hood refused, they said, which they viewed as inconsistent with his obligation to the plantation.
“At two points, [Hood’s] letter refers to ‘fraud’ with respect to the issuance of checks before placing them on a warrant,” assessors said. “The board rejects any implication of wrongdoing.”
What unfolds next in The Forks will be between the town’s elected officials and residents, Dunlap said, and his office doesn’t have the authority to do anything more than request information.
“For me, it would certainly raise urgent questions if I was a citizen of that town,” he said.
In a letter dated Oct. 13, Melissa Perkins, acting state auditor at the time, wrote to the plantation’s lawyer seeking a review of The Forks’ accounting procedures, description of financial controls and any plans for corrective action adopted during the fiscal year.
Timothy Woodcock of Eaton Peabody in Bangor, who represents The Forks Plantation, responded on Oct. 17 that assessors would hire another accountant — RHR Smith & Company — for a professional evaluation. Assessors made the decision after Hood failed to give the plantation the clarification they sought, he said Thursday.
The accounting firm will review the June 30, 2021, audit and provide feedback to assessors, which should be completed by Jan. 31, 2023. Assessors will have to accept the findings and establish controls if RHR finds that there are issues. RHR also will do the 2022 audit.
Dunlap, who was reappointed as state auditor in November, wrote back to Woodcock on Nov. 22, highlighting that Hood’s inconclusive audit is highly unusual.
Dunlap said his office was not requesting another audit or professional outside review, nor was it concerned with a disagreement between the plantation and auditor. He has not heard back from the plantation or its lawyer since that last exchange, he said this week.
