The Front Royal-Warren County Economic Development Authority Board of Directors approved a motion last week asking the county to serve as the authority’s fiscal agent, a move that, if accepted by the county, would make it responsible for every for every EDA financial transaction, effective July 1.
County supervisors are aware of the motion but have not discussed the possibility of taking fiscal responsibility for the authority, which has filed a $17 million civil lawsuit against former EDA executive director Jennifer McDonald; Warren County Sheriff Daniel McEathron; ITFederal LLC; ITFederal developer Curt Tran; MoveOn8 LLC; DaBoyz LLC; Earth Right Energy Solar Commercial LLC; and principals in Earth Right Energy Solar Commercial LLC Donald Poe and Justin Appleton.
County Supervisor Tom Sayre said by phone Wednesday that there hasn’t been any discussion about the pros and cons of the county taking on the extra responsibility.
“I need to know how is it advantageous for the EDA,” Sayre said. “How is it advantageous for the county of Warren? And what are the cons?…As I understand it, there would be a lot of extra bookkeeping for us to do.”
Despite the extra work for the county, Sayre said he is leaning toward the county taking fiscal responsibility, though supervisors still need to discuss the matter, he said.
Right now, the EDA makes all of its own financial decisions. If the county were to take over fiscal responsibility of the EDA, county supervisors and the county treasurer would have to approve any financial transaction the EDA makes.
EDA board members released a statement on Tuesday, noting they were "shocked by the breadth" of allegations, including diversion of public funds away from the EDA for personal use, and that they did not approve or have knowledge of a number of financial transactions made over the course of at least two years.
“We, like many others,” the statement read, “were misled and unaware of the extent and magnitude of this scheme.”
The news release states that the board is working to regain the public’s trust, and a number of changes are being made under EDA Interim Executive Director John Anzivino.
Anzivino said that if the county served as the EDA’s fiscal agent, it would give supervisors more insight into how the EDA’s funds are being used, as well as help the EDA with its bookkeeping.
“The goal is to ensure that the EDA’s finances are managed as efficiently as they can be,” Anzivino said by phone Wednesday. “This is not an unusual arrangement between an authority and a local governing body.”
In addition to attempting to create a more transparent financial process, other new policies, according to the EDA’s statement, include screening employees and expense approvals, reinstating the loan committee and creating a budget committee, as well as increasing the oversight of the audit committee.
In a statement about the allegations, Board of Supervisors Chairman Dan Murray acknowledged the important role the EDA plays in the county, pointing to its role in creating more than 2,500 jobs and more than $500 million in investment since the mid-90s.
Despite the EDA’s positive track record in job creation and attracting investment, supervisors authorized a forensic auditor and legal counsel to investigate the EDA when the Town of Front Royal raised concerns about debt service payments.
“The reality is that the scope of the EDA’s operations have changed considerably in the past two decades, however, the processes and procedures for financial management did not,” Murray's statement notes. “This ultimately led to the ability for the misuse of funds to occur. The Board is committed to working with the consultants and the EDA Board to put safeguards and policies in place to ensure that something like this will never have a chance to occur again in the future in our community.”
Sayre suggested there needs to be state-level legislation passed to prevent EDAs from being allowed to operate in secrecy.
“They do so much in secrecy and they just say, ‘oh, well trust us. We know what we’re doing,’” Sayre said. “They didn’t know what they were doing. They were incompetent.”
Sayre said the public wants to see mistakes corrected and trust restored.
“I told my colleagues, numerous times, that the way to restore trust is to do what’s right,” Sayre said. "People want to see us cleaning it up and doing what’s right."