Editor’s note: This commentary is by Don Keelan, a certified public accountant and resident of Arlington. The piece first appeared in the Bennington Banner.
[I] have written extensively about how embezzlement as well as nonprofit and municipal board negligence has caused the loss of millions of dollars, and based upon recent news reports, losses still continue.
In a May 26 publication of VTDigger, it was reported that the town of Coventry, Vermont will collect $500,000 from the League of Cities and Towns insurance carrier. According to the town’s external audit firm, the amount of town funds that cannot be accounted for is $1.4 million. There is a cap on just how much the League’s insurance firm will cover losses, due to embezzlement.
Digger went on to note, “Cynthia Diaz, the Coventry town clerk and treasurer, has been accused by local officials of mishandling a total of $1.4 million in tax monies. Diaz continues to hold office, despite federal and state investigations and suspicions that she has embezzled funds.” She was forced out of office by the Selectboard June 9 for failing to obtain fidelity insurance.
While the drama in Coventry is the most recent (it has been going on for years), it underscores the rash of mismanagement and lack of board and government oversight that has been present throughout Vermont.
For example, would it have been possible for the owner of the Northeast Kingdom East Burke Resort to have allegedly misused or stolen hundreds of millions of dollars if the Vermont Agency of Commerce and Community Development had been carrying out its role?
The same charge can be leveled at the former board of trustees of Burlington College. If the college’s board had done its job of fiscal overseers, it might very well have prevented the college from having to close its doors in 2016. Did the board not want to get involved with the fiscal side of its responsibilities? Whatever the then-college president (Jane O’Meara Sanders) wanted was okay with them.
The attorney general’s office has the statutory responsibility to oversee the operations of the nonprofits that operate within the state as well as municipal governments.
And the issue of board negligence is not limited to northern Vermont. It is widespread throughout the state. How was it possible for the Ira town treasurer, each month for 10 years, to write to himself a check drawn on town funds for $3,100 and no one on the select board knew about it?
The recent misappropriations and or mismanagement at Cabot Creamery, Hunger Free Vermont, Maple Tree Rehab Center, Manchester and the Mountains Chamber of Commerce and Southern Vermont College are not isolated incidents.
The unfortunate patterns that have existed among all of these can be traced back to a lack of oversight by management and the boards but also from a consistent “hands-off” attitude by the state’s attorney general’s office.
Does it not raise suspicion – a red flag – when it is public knowledge (as reported in Digger) that the Coventry town treasurer maintained an offshore account in the Bahamas and wire transfers of thousands of dollars from Panama were made? How many Vermont town treasurers operate in a similar fashion? I would hope not any.
Many of the losses noted were, in fact, covered by insurance, but the fact that insurance can cover part of a large loss is not a substitute for effective internal controls, strong management and due diligence by all board members.
What is needed in Vermont is more hands-on involvement by the state attorney general and his staff. The attorney general’s office has the statutory responsibility to oversee the operations of the nonprofits that operate within the state as well as municipal governments. Up to now it has been quite infrequent. Not a surprise when there is only one assistant attorney general who works maybe part-time overseeing the compliance of Vermont law by nonprofits.
Donors and taxpayers, when they transfer their dollars to nonprofits and municipal entities, are making an investment. They should have some assurance that their investment is secured. To receive an insurance check covering fiscal fraud is not exactly a success, but a false sense of security.
