‘I Don’t Think We Should Be Blackmailed Into Submission’: Selectmen Sound Off On Audit Committee


The volunteer group appointed to help the town with financial reporting has created anxiety needlessly, issued empty ultimatums, overstepped its charge and demanded changes that either already are in place or run against New Canaan’s governing document, officials said Wednesday.

Though members of the Audit Committee deserve thanks for their time and effort, they’ve paid far too much attention to a “self-proclaimed whistleblower” who has cost the town hundreds of thousands of dollars in legal fees, the newly re-elected Board of Selectmen said during a regular meeting.

Though he stopped short of calling out town resident Michael Nowacki by name, Selectman Nick Williams called the “whistleblower” in question “a cancer on this town.”

“For the Audit Committee to take their cues from this individual, I don’t get it,” Williams said during the meeting, held at Town Hall.

He added: “Why does the Audit Committee talk to this individual? They shouldn’t. This is an individual who has been personally abusive—forget the lawsuits—personally abusive to you [First Selectman Rob Mallozzi], me, to members of the Town Council, to members of the Board of Education, to administrators in this town. Let’s call it like it is. They [members of the Audit Committee] have absolutely—they lost me at ‘hello’ when they started talking to this so-called ‘whistleblower.’ I told them that and said repeatedly, ‘Please don’t do this. Rethink this. You are not thinking this through.’ ”

The comments come two days after the Audit Committee detailed what it described as needed changes for New Canaan to rise to a level of internal controls that would support an annual financial review by independent auditors. Two weeks ago, the Audit Committee surprised many by announcing it would “suspend activities” unless steps were taken by the town and schools.

Yet what the Audit Committee has proposed—such as giving itself a final say on spending and the hiring of an internal auditor—would violate the Town Charter and in any case mark an unusually exacting approach among the volunteer boards and commissions that help run New Canaan, Mallozzi said.

The first selectman noted that groups such as the Fire Commission do not simply “stand down” because they’re “unhappy that a new fire engine that they so badly wanted for public safety, was not brought forward immediately and was not bought and provided to the Fire Department.”

“And not only stand down, but we are going to call the insurance agencies and say that the Board of Selectmen and the Town Council and the Board of Finance don’t believe in public safety to the degree that we do,” Mallozzi said. “It kind of falls pretty flat to me. I have got a Utilities Commission—there have been no cell towers built in four years, there are no gas pipes running under the road—and those folks have not threatened to leave or quit or suspend activity.”

Tapping a hard copy of the New Canaan Town Charter, Mallozzi said: “This is our Constitution. I know it is not the real world. But we have a list of nine demands—demands, must-haves—and I like the [people] on [the Audit Committee], but to be presented with must-haves? … I want us to take a deep breath, don’t overreact. We must work within the Charter, statutes, to achieve mutual goals. I think the message it sends to other volunteer folks we put on committees is a wrong one. And you know what? I don’t think we should be blackmailed into submission.”

Much of the meeting was spent in an open conversation with Tax Collector Rosanna DiPanni, whose department was cited by the Audit Committee as an area of concern that required additional controls. (Members of the Audit Committee have reiterated that they have no reason to believe there are any misappropriations in the tax collection department, though they say that because so much of a municipality’s revenue comes in through local taxes, problems often arise there if anywhere.)

Not only has no member of the Audit Committee ever come to the tax collector’s office or spoken directly to its staff, DiPanni said, but the changes the Audit Committee appears to be recommending fly in the face of well-established best practices and checks-and-balances that are designed to ensure no misappropriations occur.

Selectman Beth Jones said she was “flabbergasted” by the demands that the Audit Committee had made by way of threatening to resign.

Jones noted that she herself had served on the Lakeview Avenue Bridge Committee that many years ago first recommended the formation of an Audit Committee “because we were worried that there had been payments made [that] hadn’t been allocated, so we thought that we needed an internal control on this.”

But the Audit Committee’s demands—such as saying the Town Council needs its approval prior to signing off on the budget—fly against the Town Charter itself.

Jones noted that other towns do not have an Audit Committee and said: “I think this is kind of a failed experiment.”

The selectmen had appointed the group—its members include Ed Kangas, Bill Parrett, Charles Jacobson, George Maranis and Janet Lanaway—in July 2014 following several months of development. The committee was charged with helping municipal departments with financial reporting, such as in an annual independent audit, as well as compliance with legal and regulatory requirements.

Mallozzi noted that one rather plain-speaking, if not outspoken Audit Committee member’s term was due to expire soon and that he could not imagine reappointing someone “who says at every meeting ‘I am going to resign’ or ‘This committee is going to resign.’ ”

“I just do not like being held hostage,” Mallozzi said. “I don’t think it is right for town.” (The Audit Committee—which had said it was suspending activities as of Nov. 1 but subsequently held a meeting Nov. 2—has indicated that the town has until next month to meet its requirements, or it will not support the annual audit.)

Though they agreed with some points made by the Audit Committee, the selectmen poked holes in other parts of the group’s past statements and “demands”—such as that the town treasurer had not been granted adequate accesses to financial records. In fact, Finance Director Dawn Norton said at the meeting, the treasurer has not once logged into the newly introduced MUNIS system installed in municipal government.

With respect to open government and “whistleblowing,” New Canaan also already developed a system and policy of following up on tips and requests for records—all of which are forwarded and addressed by town counsel, officials said.

Jones said ‘whistleblower’ was the wrong term to apply to the person identified by the Audit Committee as such, because that would refer to someone inside an organization seeking protection against being fired from his or her job.

Mallozzi described this “whistleblower” as “a diagnosed man with some mental issues.”

The first selectman also described Superintendent of Schools Dr. Bryan Luizzi as a strong communicator and partner, and noted that significant improvements have been made on the financial side since he (Mallozzi) and his administration took office.

Four years ago, “this place was a mess,” Mallozzi said. “I’m sorry. It was a mess. It would look like bragging if I went through the list of things we corrected. But guess what? We were signing those [Letters of Representation] then,” he said.

The town went from 33 material issues flagged by the auditors to zero in the most recent audit, Mallozzi said.

“It’s a little bit of a professional issue for me too,” he said. “I think we have done a wonderful job. Maybe the standards for controls are not what they are in other places, but they’re in pretty good shape, according to me.”

5 thoughts on “‘I Don’t Think We Should Be Blackmailed Into Submission’: Selectmen Sound Off On Audit Committee

  1. I agree with the author that the action of the Audit Committee was unjustified and unworthy. There is nothing wrong with the books in New Canaan, but even if there were, that would provide no rationale for the Audit Committee to “stand down”. They need to all be removed and a group of more responsible citizens put in their place.

  2. These comments and response to the findings of the Audit Committee, made up of a former Big four Managing partner and regional managing partner is incredulous. The town was cited by its independent auditors two years ago for numerous material weaknesses in internal control, material weaknesses in segregation of duties and improper accounting procedures. Correction of these weaknesses is mandated by Generally Accepted Accounting Principles, Generally Accepted Auditing Standards and Statements on Auditing Standards (SOS) and Statements on Auditing Procedures (SOPs). Apparently the Town inclusive of the BOE has not addressed nor corrected all the material weaknesses cited by the Town’s independent auditors two years ago. To have the Executive branch of government respond in the manner in which they have is concerning. You just cannot walk away from weaknesses cited by an outside audit firm and a audit committee. It is mandatory to answer and correct. From the start some of these same officials were adamant in their opposition to setting up an audit committee. As far as the whistleblower. The IRS utilizes Form 3949 for whistleblower information. If perhaps the Town was more forthcoming in its disclosures of operations the necessity of a whistleblower would be negated. Using the Town Charter which is comparable to an antediluvian is ridiculous. The Town Charter needs to be fixed to be in step with modern operations. Finally the BOS does not have one elected official who is versed in auditing and accounting. They may be excellent in their field of endeavor but Accounting and Auditing is not one. The professionals on the Audit Committee deserve our praise and to have town officials treat them as they do any other citizen who does not agree with the status quo is unacceptable.

    Roy A Abramowitz CPA
    Member Firm PCAOB

  3. I’m not a commenter (ever), but this story really got my attention. Thank you, New Canaanite, for providing the pubic with a fuller picture of what is going on with the audit committee allegations as they are serious and have negative implications for elected leaders and certain town employees. That the so-called “whistleblower” is not, in fact, an insider, as implied by the term, but an outside serial critic of everything those public servants do is a material fact that the public should have known from the start. It was disingenuous not to make this fact well-known so the public could make its own judgment as to the credibility of the source. Though town volunteers should be commended for their time and effort, it seems like the committee could have handled the task in a more constructive manner, and not cast aspersions on town leaders working in good faith to fix matters with the tools they have, including, like it or not, the town charter.

  4. I would be satisfied when the independent auditors are willing to sign off on the fact that the internal control issues they raised in December of 2013 have been taken care off. I’ve not seen anything to the affect that that has taken place.

  5. I support the audit committee. These individuals on the committee are the best of the best. I feel Rob selected very qualified individuals and he needs to let them do their job. It is unfortunate that he and some of the others are taking this personally. I am not worried that the auditors on the committee are going to be influenced by the whistle blower. That is just a tactic often used by lawyers to divert the attention away from the real issues. If we let them do their job, our town will be in much better financial shape.

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