WESTBROOK – An independent audit of Westbrook’s finances for the previous fiscal year has uncovered many key deficiencies that officials say left the door open for malfeasance.

Audit problems also caused a delay in the city’s ability to borrow for several high-profile capital projects, including the Walker Memorial Library and community center repairs.

The audit indicates the city must implement checks and balances over the finance department that were not in place. Accounts existed that no one could explain; balances did not match up to supporting documents; and some supporting documents were completely absent.

An audit is like a report card of the city’s financial and accounting management. City Administrator Jerre Bryant said, “It’s not a good report card.”

The firm of Roberts, Green and Drolet of Barnstead, N.H., recently reported its findings to the city. According to the report, the city’s financial statements “do not present fairly” the financial position of the city as of June 30, 2010. The firm found many practices were in place that went against generally accepted accounting principles.

The 46-page audit concludes with 21?2 pages of recommended actions. Bryant said the city agrees with the findings. Dawn Ouellette, chief financial officer, had identified many of the same problems within a couple of months of joining the city back in May, he said.

Ouellette said the city was failing at basic accounting practices and she noticed things were awry at a meeting with staff before she even started the job. She said department heads told her the finance department was not giving them timely answers or regular reports. She said it appeared that information stayed inside the finance department and was not shared with others.

“That’s always a red flag,” she said.

Ouellette is the first chief financial officer hired to handle both city and school finances. It was one of the significant changes Mayor Colleen Hilton imposed following her inauguration, where she announced she would not be reappointing former finance director Sue Rossignol.

Bryant said the results of the audit underscore the wisdom of consolidating those positions and the value of inserting a highly qualified candidate to oversee and manage the increasingly complex financial affairs of the city.

Hilton said she, too, saw significant problems with the city’s finances and that past audits did not match up to what she saw. She said the finance department had a “great deal of autonomy” and that Ouellette shared her lack of confidence in past audits.

Cities rely on independent audits to review financial practices. Westbrook did not accept its 2009 audit from the firm Runyon Kersteen Ouellette Certified Public Accountants of South Portland. Bryant said the firm did not raise any red flags in its audits, for which the city paid between $30,000 and $35,000 annually over the past decade.

“We’re in dispute resolution mode,” Bryant said.

A call placed to Runyon Kersteen Ouellette seeking comment was not returned.

Since the city did not accept its 2009 audit, it had to wait until Feb. 2, the day the 2010 audit came in, before going out to the bond market to fund bonded capital improvement projects, Bryant said.

“Literally, our bond sale is scheduled for March 1,” he said, adding it would normally have occurred between August and October. “This delayed our ability to finance some of these projects.”

The projects include Walker Memorial Library, community center and William Clarke Drive repairs, as well as paving and sewer work and equipment purchases, according to city documents.

According to the new audit, there was a multitude of problems with the city’s financial practices. Capital improvement projects were not tracked individually and beginning balances varied greatly from previously reported audited amounts. The city was unable to provide supporting documentation for sewer charges, collections or outstanding receivable balances. There were no city policies for deposit and investment risk.

The audit states that balances on the accounting system were not easily reconciled to supporting documents. Beginning balances were not reconciled to previous audited figures, and while some differences were identifiable, many were not, “including $192,919 of unidentifiable debits” in the general fund.

“Although the activity could be audited, we were not able to verify many of the ending balances when we could not be certain that the beginning balances were correct,” the audit states.

While nothing in the audit suggests wrongdoing – there is no money missing, for example – Bryant said the failure to comply with accepted accounting practices has left the city open to misappropriation of city funds.

“This isn’t a smoking gun,” he said, explaining that the audit reveals the city needs to implement a set of checks and balances so that too much financial authority is not invested in one person. For instance, the ability to open and close various accounts was placed in the hands of one person, Bryant said, and there were accounts no one else knew about.

Bryant was careful not to place blame on Rossignol, the former city finance director of 32 years. He simply said, “The city had outgrown the previous structure we had in place.”

He said it is demanding to manage an organization of the size and complexity of Westbrook, a $55 million a year business. Having Ouellette in place now is “a huge luxury,” Bryant said, adding that, “I have total confidence that a year from now the whole thing will be turned around.”

Before coming to Westbrook, Ouellette was a senior municipal auditor at Plodzik & Sanderson, an accounting firm in Concord, N.H. She has served as finance director for the New Hampshire towns of Bow and Pembroke and the city of Franklin. A certified public accountant, Ouellette holds a master’s degree in public administration from the University of New Hampshire.

Ouellette said basic practices, such as requiring the signatures of the mayor and city administrator to make account transfers, are now in place.

“That happened right away,” she said, explaining that more eyes watching the city’s money is always a good thing.

Officials are in the process of developing policies and procedures based on the recommendations of the auditors.

“It’s extremely important for people to understand we’ve gone to great lengths to be accurate and we take fiscal management extremely seriously,” Hilton said.

Rossignol said this week she could not comment on the results of the audit because she had not seen it, explaining she had asked for a copy of the audit and last year’s audit but never received them.

She said she was unaware the city did not accept the 2009 audit.

Rossignol denied any wrongdoing in her 32 years with the city. She said she implemented any suggestions past auditors made. She admitted that things changed drastically over the years, saying it went from being a “city family” to a business.

The City Council and School Committee were slated to hold a joint budget workshop Wednesday night, after the American Journal deadline. Part of the meeting was expected to focus on the audit.