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EDA in Focus

EDA may owe Town of Front Royal nearly $300K

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The Royal Examiner has learned that the Town of Front Royal began examining its finances several months ago regarding the Front Royal-Warren County Economic Development Authority, and the amount the Town should have paid the EDA for various services the entity has provided the Town of Front Royal.

Emails obtained by Royal Examiner through a Freedom of Information Act (FOIA) request indicate that the EDA may owe the Town nearly $300,000.
In an email dated Sept 18, 2018, EDA Executive Director Jennifer McDonald wrote to Front Royal Director of Finance B.J. Wilson that, “According to the documentation and with help from our auditors and new accounting firm we believe the EDA owes the Town $291,278.64.”

B. J. Wilson, Director of Finance for Front Royal has been working with the Council to review all debt-servicing documents over the last several months.

Apparently, the Town had been charged incorrect amounts for debt-servicing since 2009, according to documents obtained by Royal Examiner. B. J. Wilson, Director of Finance for Front Royal has been working with the Council to review all debt-servicing documents over the last several months.
Mr. Wilson indicated in an email to Royal Examiner Tuesday that “the Town became aware of some potential inconsistencies between the amount the Town believes it should have paid the EDA for various services the EDA has provided the Town, and the amount the Town has paid the EDA. The Town and EDA are currently working to resolve these issues.”

Ms. McDonald did not respond to a Tuesday email from Royal Examiner.

The Town Council has apparently been discussing debt servicing issues since early spring, according to Mayor Hollis Tharpe, who said in an interview that “citizens have nothing to be concerned about.” When pressed as to why the public had not been told that the council was looking into the expenditure and possible misallocation of public funds, he exclaimed, “Public opinion will be public opinion!”

EDA in Focus

Experienced municipal manager appointed interim EDA executive director

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Arriving for Thursday morning’s EDA Special Meeting, John Anzivino, right, is greeted by recently-appointed EDA Board Treasurer Tom Pattison. Photos/Roger Bianchini

Three weeks after the resignation of Executive Director Jennifer McDonald the Economic Development Authority Board has appointed an interim replacement. Following a Thursday morning, January 10, special meeting closed session the EDA Board of Directors approved a contract with John Anzivino to become interim executive director.

According to the motion to authorize EDA Attorney Dan Whitten to draw up a contract to secure Anzivino’s services that contract will be for a 90-day period at a rate of $55 per hour. EDA Board Chairman Gray Blanton estimated the interim executive director will initially put in an average of about 30 hours per week.

Following the meeting adjournment Whitten said he hoped to have the contract written and signed by the end of the day. Leaving the meeting following its re-adjournment to open session Anzivino declined comment to the media, saying he preferred to defer comment until a contract was finalized and he had been officially hired.

“I hope it’s by the end of the day – I’m tired of doing all this,” Blanton said of certain day-to-day EDA operational responsibilities he as chairman has had thrust upon him in the wake of McDonald’s resignation on December 20. Related story: Oops, ‘Reply’ who? With staff out and procedures changed EDA board chair’s frustration levels rise

Attorney Whitten said a press release on Anzivino’s hiring, background and the interview process for an interim executive director would be out later in the day. An online search of Anzivino’s name indicates a person with extensive experience in municipal government management.

That experience includes 12 years as town manager of Warrenton; 12 years as county administrator of Caroline County; and six years as county administrator of Amelia County. Anzivino was also shown to have been appointed as interim town manager of Purceville in 2017. So it would appear that while semi-retired, Anzivino has experience jumping in to municipal situations in flux.

McDonald offered her resignation by e-mail on December 20, about 20 minutes prior to the start of a second EDA board closed session (the first was Dec. 14) scheduled to discuss her job performance in the wake of the Town of Front Royal Finance Department’s discovery of some accounting irregularities in its dealing with the EDA. That discovery was made while Finance Director B. J. Wilson was exploring the Town’s internal finances due to town council’s interest in funding some departmental purchases through interest-free internal loans. Related story: Resolution commends Town staff for uncovering overpayments to EDA

What Wilson discovered was about eight years of debt service overpayments by the Town of Front Royal totaling just over $291,000. A final number or whether there might be similar accounting errors on the County side of EDA business has not been determined pending the result of an ongoing audit of EDA debt service and accounting practices.

Along with the interim executive director contract, discussion of that EDA audit was also part of the closed session agenda the morning of January 10; as was a prospective business client’s location in the Happy Creek Technology Park. Anzivino, who arrived shortly before the start of the 10 a.m. special meeting, sat in through the entire one-hour-and-thirty-two-minute closed session.

The EDA board prepares for its closed meeting consideration of an interim executive director contract, among other items.

During the open portion of Thursday’s meeting the board also rescheduled its 8 a.m. monthly meeting to Wednesday, January 30, to accommodate board member schedules. The meeting, at which EDA Attorney Whitten said he hopes a final summary of the EDA audit will be available, was originally scheduled for Friday, January 25. Related Story: County will pay $90,000 to ‘outside consultant’ in audit of EDA finances; Related Story: County authorizes legal contract for EDA accounting and debt service work

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EDA in Focus

County continues cloak of secrecy on EDA, citing “attorney-client privilege”

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County (and EDA) Attorney Dan Whitten, conferring with board members at a late 2018 BOS meeting. / File photo

Citing “attorney-client privilege” Warren County Attorney Dan Whitten has denied in full a Freedom of Information Act (FOIA) request filed by Royal Examiner on Jan. 2, 2019 seeking the identity, resume and CV (curriculum vitae) of the consultant hired by the Warren County Supervisors on behalf of the Front Royal-Warren County Economic Development Authority to examine debt service issues in which the town and county were overcharged related to debt service.

“The identity of the consultant is exempt from disclosure under the Virginia Freedom of Information Act. The applicable exemption sections are Virginia Code Ann. § 2.2-3705.1(2) which includes “[w]ritten advice of legal counsel to state, regional or local public bodies or the officers or employees of such public bodies, and any other information protected by the attorney-client privilege” and Virginia Code Ann. § 2.2-3705.1(3) which includes “[l]egal memoranda and other work product compiled specifically for use in litigation or for use in an active administrative investigation concerning a matter that is properly the subject of a closed meeting under § 2.2-3711.” The consultant is an expert engaged to aid legal counsel, and the identity of the consultant is exempt from disclosure. Accordingly, the resume and CV of the consultant are also exempt under the same code sections of the Virginia Freedom of Information Act,“ Whitten wrote, in denying Royal Examiner’s request.

When asked if Virginia State Police investigators were involved in the EDA audit, Whitten replied, “Any possible involvement of State Police would fall under the exemptions in Virginia Code § 2.2-3705.1(2) and Virginia Code § 2.2-3705.1(3).”

The response to the FOIA request was emailed at 3:56 p.m. on Wednesday, Jan. 9, just hours after the Warren County Board of Supervisors unanimously agreed to hire the Sands Anderson law firm on behalf of the EDA to represent the EDA in “unspecified legal matters.”

Whitten said the contract has a $50,000 legal fees cap, and no money has yet been spent. The motion at Tuesday’s regular board meeting to approve the contract states that the law firm will “provide legal counsel on a specific matter.”

That decision came after the Board of Supervisors held a closed session for consultation with legal counsel regarding accounting and debt service.

Whitten, who represents both the County and the EDA, said the firm would represent the EDA on a “specific legal matter.” He said the firm already represents the county and EDA on bond counsel issues, but the matter for which the firm was hired was a different matter.

When asked if there was a conflict of interest, with Whitten representing both the County and the EDA, Whitten stated, “It is not a conflict if the County and EDA are not adverse parties to each other, and both political subdivisions agree to my representation of both bodies. If the County wanted to take action against the EDA for any reason, there would be a conflict, and I would recuse myself.”

Warren County, on Dec. 21 approved an expense of $90,000 payment to an unidentified financial consultant who has been looking into overpayments the town and county made to the EDA relating to debt service.

On Dec. 20, Jennifer McDonald, former EDA executive director, resigned from that position after the EDA board held a number of closed sessions regarding debt and accounting services. See related story: EDA Director McDonald submits a resignation by email prior to Thursday meeting

On Oct. 31 Royal Examiner broke the story that the EDA had overcharged the Town of Front Royal over $291,278.264. See related story: EDA may owe Town of Front Royal nearly $300K

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EDA in Focus

County authorizes legal contract for EDA accounting and debt service work

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Familiar ground: Sands Anderson attorney Dan Siegel, standing, presenting information on the Valley Health hospital construction bond issue to the EDA Board of Directors last May - Royal Examiner File Photos

Following a 45-minute closed session added to the Tuesday morning, January 8, meeting agenda of the Warren County Board of Supervisors, a motion authorizing an expenditure of “up to $50,000” to contract the law firm of Sands Anderson “to provide legal counsel on a specific matter” to the Front Royal-Warren County Economic Development Authority (EDA) was approved unanimously.

The closed session was called for “consultation with legal counsel on legal advice related to accounting and debt services”.

Queried later as to whether the contract for legal services to the EDA might indicate a potential conflict of interest between his roles as both County and EDA attorney, Dan Whitten indicated that rather, it simply reflected that he did not have the time to devote to the ongoing exploration of EDA finances.

Richmond-based Sands Anderson is the firm that Dan Siegel, who has acted as bond counsel for the EDA on projects including the recent Valley Health hospital construction loan, is employed by. Over the years Siegel has often appeared with another Richmond-based bond consultant, Ted Cole of Davenport & Company, before the supervisors. Davenport & Company has long served as a financial and bond consultant to the county government.

“We hope it doesn’t get to $50,000, but if it did they’d have to come back for approval of further funding,” Whitten said of the contract for legal services from Sands Anderson.

On December 21, the County Supervisors approved a contingency fund payment of $90,000 to an unnamed consultant for three months of work on EDA finances. See related story: Warren County will pay 90000 to outside consultant in audit of EDA finances

With the county government propping up some unexpected EDA operating expenses, Whitten did note that the County began this fiscal year on the plus side with the EDA, contributing half – $54,000 – of what it had given the EDA in operating expenses the previous year ($108,000).

Both the Town and County governments, as well as the EDA board have had a series of closed sessions in recent months regarding accounting and debt service issues in the wake of the discovery of accounting irregularities by Town Finance Director B. J. Wilson. As Royal Examiner’s Norma Jean Shaw first reported, the Town Finance Department discovered debt service overpayments totaling over $291,000 to the EDA over an eight-year period.

A final number on overpayments on the town side or whether there are similar issues on the county side is not expected until the final report of the current audit of EDA finances is concluded. Whitten said it is hoped the audit will be completed in time to be

presented to the EDA Board of Directors at its monthly meeting of January 25. However Whitten noted a final report could take longer, depending on what is discovered over the course of the exploration of EDA finances.

Siegel, center, gets signatures on approval of Valley Health construction bond issue from former EDA Executive Director Jennifer McDonald and then-EDA Board Chair Greg Drescher.

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EDA in Focus

EDA to consider interim director appointment, get audit update this week

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The EDA board comes out of closed session on Dec. 20 to accept the resignation of Executive Director Jennifer McDonald. Royal Examiner File Photo

The Front Royal-Warren County Economic Development Authority has announced a special meeting for Thursday, January 10, 2019. Barring last-minute agenda alterations, the 10 a.m. meeting will immediately adjourn to closed session to discuss three topics: 1/ appointment of an interim executive director; 2/ discussion with legal counsel regarding the ongoing audit and investigation of EDA debt and accounting services; and 3/ discussion of a prospective business or industry locating or expanding in the Happy Creek Area.

It is the first two items that are of the most interest in the wake of the resignation of Executive Director Jennifer McDonald by e-mail shortly before the EDA board’s last closed meeting of December 20. That special meeting also immediately went into closed session to discuss McDonald’s job performance and the ongoing audit of EDA debt and accounting service practices. Acceptance of her resignation letter was announced following the closed meeting.  See related story:   EDA Director McDonald submits resignation by email prior to Thursday meeting

As previously reported EDA finances have been under scrutiny by both the town and county in a series of closed sessions for several months following the town finance department’s discovery of about eight years of overpayments by the Town of Front Royal to the EDA. That overpayment was originally estimated at just over $291,000, though a final figure has yet to be determined. Neither has it been publicly announced whether any irregularities in the EDA’s finances with the county government have become apparent during the audit.

The day after the closed EDA meeting and McDonald’s resignation the Warren County Board of Supervisors had its own special meeting and closed session. Following that closed session the county supervisors voted unanimously to authorize a $90,000 expenditure to pay for three months of work by an outside consultant working on the audit of town-county Economic Development Authority.

That consultant, whose identity had not been revealed based on attorney-client privilege according to County and EDA Attorney Dan Whitten, is one of three financial entities now involved in exploring EDA finances. The others are the contracted auditor Yount, Hyde & Barbour and the EDA’s new accounting firm of Hottel & Willis.  See related story: Warren County will pay $90,000 to ‘outside consultant’ in audit of EDA finances.

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EDA in Focus

Warren County will pay $90,000 to ‘outside consultant’ in audit of EDA finances

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The board of supervisors reconvenes the open portion of its special meeting to authorize a $90,000 expenditure to pay a consultant to review the EDA audit. Photo/Roger Bianchini

After a one-hour closed meeting convened at 10 a.m. Friday morning, December 21, the Warren County Board of Supervisors voted unanimously to authorize a $90,000 expenditure to pay for three months of work by an outside consultant working on the audit of town-county Economic Development Authority.

The money will come from the County’s Contingency Fund in its current fiscal year budget. Board Vice-Chairman Dan Murray explained the EDA does not have adequate funds in its operating budget to cover the expense. Murray added that due to the county government’s larger annual budget ($107.8 million FY19) its contingency fund for unexpected expenditures is significantly larger than the EDA’s contingency fund.

A Contingency Fund of $136,299 was approved in the County’s FY 2019 budget.

Friday’s closed meeting was attended by the full board of supervisors, County Administrator Doug Stanley, County and EDA Attorney Dan Whitten and EDA Board Chairman Gray Blanton and Treasurer Tom Patteson.

The open session motion to approve the funding was made by Murray, seconded by Tom Sayre.

Following adjournment of the special meeting shortly after 11 a.m. the board of supervisors released a brief statement regarding the funding authorization:

“In order to proceed to complete the audit of the EDA, the outside consultant has requested to be paid for their services over the past three months. Due to the uncertainty still of the various EDA accounts and loans, the Board of Supervisors is stepping up to provide $90,000 at this time. We are hopeful that the consultant can wrap up the audit process in the next month which will include specifically what is owed to the Town and County.”

Following the meeting Attorney Whitten explained that the “outside consultant for financial services” is a separate entity from the auditor or the EDA’s new accounting firm. He also explained that the name of that outside consultant remains protected under attorney-client privilege until completion of the audit report.

“Basically it’s an outside eye coming in outside of your normal accountant and normal auditor … They do fact-finding, intrinsic review – that type of thing. It’s just basically they’re looking for indicia of any improper activities,” Whitten said.

Whitten also said he,  Board Chairman Blanton and Treasurer Patteson would participate in a closed meeting conference call with the new EDA accounting firm Hottel & Willis Friday afternoon to discuss the parameters of their work. Hottel & Willis was hired following the announced retirement of former EDA bookkeeper Josie Rickard earlier this year.

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EDA in Focus

EDA Director McDonald submits a resignation by email prior to Thursday meeting

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The EDA board comes out of closed session shortly after 11:30 a.m. Friday – it only business was unanimous acceptance of the resignation of its executive director of a decade-plus. Photos/Roger Bianchini

Following a 2-hour-and-20-minute closed session at a special meeting called for Thursday morning, December 20, the Front Royal-Warren County Economic Development Authority Board of Directors unanimously voted to accept the resignation of Executive Director Jennifer McDonald.

McDonald was not present for the meeting which immediately adjourned to closed session to discuss the executive director’s job performance and an ongoing audit of EDA debt and accounting service practices.

As first reported by Royal Examiner’s Norma Jean Shaw,  EDA finances have been under scrutiny since the Town of Front Royal’s Finance Director B. J. Wilson discovered eight years of overpayments by the Town to the EDA on debt service. An initial figure slightly over $291,000 was reported, though a final number and other related matters have yet to be presented by EDA auditors.

McDonald’s emailed resignation letter was received by EDA and County Attorney Dan Whitten at 9:37 a.m., 23 minutes prior to the 10 a.m. convening of Thursday’s special meeting. McDonald’s letter and a brief board statement in reaction to it were both brief and polite.

“Dear Mr. Dan Whitten, Please accept this as my official notice of resignation. Over the past 20 years I have enjoyed the work at the EDA and want to continue to see the County grow and prosper. I wish everyone the best and look forward to working with everyone in the future on other projects,” McDonald wrote.

“Jennifer McDonald, Executive Director for the Front Royal-Warren County Economic Development Authority, has tendered her resignation effective December 20, 2018. Mrs. McDonald has served as EDA Director since April 2008 and has worked diligently to bring new business, investments and jobs to the County of Warren and the Town of Front Royal. The EDA board members thank Mrs. McDonald for her service and wish her the best in her future endeavors,” said the EDA board statement read into the record, as was McDonald’s resignation letter, by Chairman Gray Blanton.

Contacted later by phone, McDonald said, “I was ready to move on with the next phase of my career. A lot was accomplished during my tenure as Director and I am proud of those accomplishments.”

McDonald was instrumental in pushing forward ITFederal as the first commercial client at the former Avtex Superfund site’s projected 147-acre Royal Phoenix Business Park, as well as the start of phase one of the West Main St. connector road through the site.

Several board members including Greg Drescher, Ed Daley and Vice-Chairman Bruce Drummond declined comment following the meeting’s adjournment. Drescher, who served as chairman in recent years and worked closely with McDonald on EDA business prior to his August 24 resignation from the chairmanship one day after he and McDonald sat down with Town officials to discuss the debt service situation, was especially tight-lipped, only nodding “no” in response to a request for a reaction to McDonald’s resignation. However, Board Chairman Gray Blanton did talk with media regarding the day’s developments.

Asked if McDonald’s resignation could have been made in anticipation she would be fired or asked to resign, Blanton replied, “I can’t really say yes or no to that.”

Further questioned on whether the board would have been divided on a vote to remove its executive director, Blanton said, “It was not divided in accepting that letter.”

As for receiving new or even final numbers on the accounting audit, the board chairman said, “We needed to get by this – and Dan has contact with that auditing firm and we will be getting those numbers.”

Asked if he anticipated that the next report from the auditors would be the final one, Blanton commented dryly, “These audit guys have charged a fortune to do what they’ve done. If they can’t come up with the numbers something’s wrong.”

EDA Board Chair Gray Blanton explains auditors are still working to get their arms around a full understanding of where mistakes have been made in EDA debt service and accounting records.

Back to the subject of the EDA executive director’s resignation after over a decade overseeing town and county economic recruitment and development, Blanton said, “In the one year I’ve been here she has been very efficient in her presentations to the board. She’s always answered our calls, she’s always given us all the explanations and we all like that. That was good and we thought that everything she was doing was okay. But we found out through the audit that there might be something that’s not okay.”

Asked if “not okay” indicated that repayment of Town debt service overpayments might not be a simple matter, Blanton replied, “It won’t be as simple as that – but we do have our financing, we have our bank accounts, we have rents that we receive, we have income, we have properties that we own that are for sale. The last time I asked her, she said ‘yes, we have the money.’ ” As to specifics, Blanton who has been on the job as board chairman for less than four months pointed reporters to EDA Attorney Whitten.

“We haven’t gotten any information regarding that as to whether any – we don’t have the evidence now that funds might be missing. We don’t have any hard numbers at this point that we can present to media or to the authorities. So we’re still getting final numbers from both our auditor and the accountant,” Whitten told the two reporters present.

Following adjournment EDA Attorney Dan Whitten and Greg Drescher, back to camera, oversee county staff locking remote access off to the former executive director’s office computer.

Whitten added that no conclusion had yet been reached on the County side of payments on EDA projects or debt service. “We haven’t gotten a final report yet, so we haven’t gotten any findings at this point – I thought we’d have them but we don’t,” the EDA and County attorney said.

Asked if he had a guesstimate on a timeframe for those final audit report figures, Whitten replied, “Hopefully soon.” He then pointed to a scheduled Friday meeting with the new EDA accountant Hottel and Willis. That meeting is scheduled for the afternoon of December 21, after a specially-called 10 a.m. closed meeting of the Warren County Board of Supervisors to discuss debt and accounting services.

Whitten was also asked if he thought McDonald’s resignation could have been pre-emptive, as in seeing board action seeking her resignation as imminent.

“She was in the closed session with us last Friday and she was met with the evidence … or documents that the auditors had found and felt she needed to resign.”

Old times, good times – one EDA office hallway display shows McDonald with late Board Chair Patty Wines above a 1997 article dating to the now-former executive director’s time as a college student EDA intern.

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