FRONT ROYAL – Progress has been made on the Front Royal-Warren County Economic Development Authority’s fiscal year 2018 audit, which is about 11 months overdue, as the authority has received adjusted journal entries from its accountants.
EDA Board Chairman Ed Daley said the adjusted entries, which the authority received during a closed session, are not publicly available because they are part of the ongoing $21.3 million civil litigation in which the EDA alleges a series of financial improprieties within the authority were perpetuated by 14 individuals and companies. He added that the final audit, for which a completion date is unknown, is public record.
The adjustments - which EDA Board Member Greg Harold said "are basically entries that we feel, at this point in time, do not involve any fraudulent activities" - l soon will be turned over to the EDA’s auditing firm, Yount Hyde & Barbour.
EDA Board member Marjorie Martin said it is possible additional adjustments will be necessary in what “may be a never-ending process.”
“But it’s a start,” she added.
The board also discussed its current financial standing, with Martin noting that the EDA spends about $265,000 per month on debt service and operational expenses. Included in the debt service payments is about $22,000 per month for the new police headquarters. While the headquarters is a town project, the town has requested to pay what the interest would have been had it been a New Markets Tax Credit project.
Town officials have claimed they were told by the EDA that the project had qualified for the tax credit, which it never did.
“We have not been reimbursed or paid for the police department in any way shape or form, we have sent a bill,” Martin said.
Interim Town Manager Matt Tederick said the Town Council plans to discuss the most recent invoice next week.
According to the EDA’s bank account balances, the EDA has $1.2 million, which will last 4 1/2 months if the monthly $265,000 expenditures continue.
Along with interest on the police headquarters, the EDA’s other monthly debt payments include: $40,000 for the ITFederal project; $28,196 for a line of credit; $2,173 for the Stokes building; $17,830 for a loan; $22,450 for the warehouse at 426 Baugh Drive; $14,021 for the EDA's office complex; and $3,952 for Leach Run Parkway. The total balance on the EDA’s debts is $40.9 million.
The authority's bottom line may increase as the board voted in favor of posting an advertisement seeking an attorney to collect the debt owed to the EDA, a figure that Daley said is unknown. The EDA is also attempting to gain revenue by selling some of its properties.
Harold said as the EDA is “spot checking” large financial transaction, he would like more information on a 2016 mortgage that was taken out on the EDA’s office building.
He said at some point the EDA’s office building was mortgaged for about $970,000 and “I need to know what that amount was for.” Eventually, he said the mortgage loan “was transferred to permanent financing” in the form of a 30-year loan. Harold said the exact nature of the transaction is unknown but that it was handled by former EDA board members William Biggs and Councilman William Sealock.
“I’m not suggesting that anything’s wrong. I’m just checking the trails,” he said.
The EDA is also attempting to figure out how to remove the solar panels installed on its roof by Earth Right Energy, a company included in the authority’s civil lawsuit. In turn, Earth Right Energy has submitted a $20 million counterclaim against the EDA. Martin said that the panels will hopefully be removed by spring, with a minimal cost of $45,000. She added options for their free removal are being explored.
She said their removal is imperative so damages to the roof can be repaired and the EDA can rent out space in its office. EDA Executive Director Douglas Parsons noted the damages to the roof were not a result of the solar panels, which he said are not secured to the roof in any fashion other than being held down by cinder blocks.