UPDATE: EDA resolves to pay back soaring audit expenses as completion looms

The EDA Board and its Interim Executive Director John Anzivino, third from left, prepare to go into closed session for additional information on what is now a 5-month, quarter-million-dollar audit of its finances, loan programs and accounting services. Photo/Roger Bianchini. Video/Mark Williams.

FRONT ROYAL – At a specially-called Friday morning, February 8 meeting the Front Royal-Warren County Economic Development Authority Board of Directors again resolved to pay back funds forwarded by the county government to cover invoice billings from the confidential accounting consultant contracted to oversee this year’s audit process.

The $60,000 approved for transfer to the EDA by the Warren County Board of Supervisors on February 5 is the second such transfer. The first made on December 21, was for $90,000 for what is believed to have been an invoice for three months of completed work. The audit began in mid-September.

The Friday-morning motion to accept and utilize the most recent allotment from the County to pay the consultant’s latest invoice was made by Mark Baker and approved by a 6-0 vote, Ron Llewellyn absent.

The motion included a promise “to make every effort possible” to pay the money back as soon as the finances were in place to do so. Most EDA assets outside its operating budget or loans for specific capital improvement projects are tied up in real estate, as opposed to readily available cash. A similar intent-to-pay-back resolution was made upon acceptance of the first $90,000 forwarded to the EDA by the county supervisors to meet the consultant’s earlier invoice.

As reported upon the board of supervisor’s authorization of moving the $60,000 to EDA control on February 5, coupled with raising the allotment for audit-related legal services from the Richmond law firm of Sands-Anderson from $50,000 to “up to $100,000”, the county government has spent or authorized expenditure of a quarter million dollars ($250,000) in addition to the base auditor’s fee of $17,500 on this year’s EDA audit.

Financial alarm bells were raised when the Town of Front Royal notified then EDA Board Chairman Greg Drescher, former Executive Director Jennifer McDonald and EDA/County Attorney Dan Whitten on August 23, 2018, that its finance director had uncovered an eight-year history of Town bond issue over-payments to the EDA totaling over $291,000.

Friday’s closed session of 48 minutes was limited to matters requiring legal advice regarding discussion of “EDA loan programs and accounting services.” EDA Board Chairman Gray Blanton read the same statement explaining the closed session exclusion of all but EDA board, certain staff and auditing participants as he did on January 30.

That statement indicated the board would be hearing information from its consultant providing “a direction of how we will need to proceed as a Board as we work toward better understanding the actions of our former Director in operating the Authority” and that at this point the EDA board felt it best that it and designated staff – counsel and interim executive director – alone would be receiving that information.

Consequently, Front Royal Mayor Hollis Tharpe and Town Manager Joe Waltz, present without offering input or being asked any questions Friday, were ushered out of the meeting room with the media prior to the 8:20 a.m. start of the closed session. Both soon left the premise.

Discussion following the closed session indicated a belief the audit could be completed by February 19, leading to another special EDA board meeting being called to accept the auditor’s report. Some urgency was expressed in completing the audit process so that the county government can include the EDA report in preparing its own audit as the coming fiscal year budget process progresses.

In a related matter, a press release from the county administrator’s office issued shortly after 10 a.m. Friday morning (Feb. 8) announced the hiring of Winchester-based attorney Robert T. Mitchell to represent the County in EDA-related matters where Dan Whitten, the county attorney who also serves as EDA attorney, could have a conflict of interest regarding information revealed by the audit.

Mitchell hiring press release

Stanley’s statement on Mitchell’s hiring states, ”We have retained Mr. Mitchell’s services to provide legal counsel to represent the Board of Supervisors on the accounting and debt service issues regarding the EDA. Mr. Mitchell has decades of experience in local government law including representing Clarke County and we value his knowledge and experience. Time will tell how much his services will be needed on this matter.”

With a possible completion date for the now quarter-million-dollar EDA audit cited just 12 days away it would seem that “time” to realize how much Mitchell’s services might be required by the County, will be soon at hand.

Perhaps ironically, though dated February 7 the press release from County Administrator Doug Stanley’s office announcing Mitchell’s retention was distributed just 26 minutes (10:16 a.m.) after Royal Examiner Editor Norma Jean Shaw sent an email (9:50 a.m.) to EDA board members, Whitten and Stanley Friday morning questioning potential attorney conflicts of interest for Whitten in the audit process.

Shaw Letter to EDA Board

Shaw previously questioned Whitten on the potential of such a legal dilemma in his dual County-EDA attorneys’ roles in a January 9 e-mail.

The Royal Examiner’s camera was there to capture the special meeting: