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City commits to accounting firm switch

June 23, 2013

WOONSOCKET – By all accounts, the firm Braver PC of Providence had done a praiseworthy job auditing the city’s books for the last six years.

So why did the Budget Commission cut Braver loose, awarding the city’s auditing contract to a higher bidder from New London, Conn.?

Officials say their hands were tied by a City Council ordinance designed to prevent auditing firms from getting too cozy with the city. The ordinance prohibits the city from doing business with one accounting firm for more than six years in a row.

The catalyst for the ordinance was the discovery that a partner in the firm that was auditing the books before Braver came aboard had made a series of campaign contributions to the former mayor.

“We felt it to be a conflict of interest,” said Mayor Leo T. Fontaine, who was president of the council when the ordinance took effect.

Fontaine and other members of the Budget Commission didn’t seem eager about switching auditing firms while the city finances are so fragile and complex. Commissioner Peder Schaefer also said he was also concerned about the legal ramifications of passing over the low bidder.

“I’m just worried they’re going to contest the fact they’ve we’re going to award the contract to a higher bidder,” he said.

The commission awarded the three-year contract to CohnReznick LLP for $285,000, or $95,000 a year for fiscal years 2014 through 2016.

Braver would have done the same work for $272,150, or $89,500 for fiscal year 2014, $90,750 for 2015 and $91,900 for 2016.

Finance Director Thomas Bruce told commissioners he was confident the city could make a smooth transition to a new accounting firm, but he said it would take finance personnel some extra time to bring the company up to speed. Earlier this year, the budget commission said the city was on track to rack up a deficit of roughly $105 million by 2017, including benefits to retirees and pensioners.

The panel has adopted a five-year plan to get the ledgers back in the black, but major components of the plan are still in limbo as the fiscal year slides into its final week. They include concessions on health care benefits from active employees and a $2.5 million supplemental tax bill for 2013 that’s stalled in the General Assembly. Another bill designed to allow the city to refinance the unfunded liability of the police and firefighters pension system – a debt of about $60 million – has also gone nowhere in the legislature, despite the commission’s request for the measure some two months ago, according to Fontaine.

Citing the city’s short term cash-flow problems, Moody’s Investor Service downgraded the city’s already-junk bond rating of B2 to B3 two weeks ago, and warned the city that it is on review for a further downgrade, depending on what happens in the next couple of weeks to alter the city’s outlook.

The commission voted 4-0 to hire CohnReznik on June 14, thanking Braver for its services but severing ties with the company nonetheless.

“They’ve been very beneficial to the community in identifying some of the weaknesses we had going forward,” the mayor said.

After the meeting, Fontaine said that despite Braver’s solid record, he still thinks it’s good policy to set a ceiling on how long one auditing firm can do business with the city.

When Braver came on board, it discovered a number of questionable practices that had somehow been overlooked by the prior firm. Fontaine said he championed the legislation to set a cap on the length of consecutive time one auditing firm may work for the city after it was discovered that a principal of the firm had made a series of $1,000 contributions to the campaign of former Mayor Susan D. Menard.

“An auditor needs to be impartial,” he said. “We need to keep a rotation going where we know we have a fresh set of eyes going through the books.”

Follow Russ Olivo on Twitter @russolivo

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