FRONT ROYAL – Front Royal-Warren County Economic Development Authority Executive Director Douglas Parsons during a Tuesday joint meeting between the EDA, Board of Supervisors and Town Council said that the authority can make the required payments on its debt service obligations and operational expenses.
This comes about five months after the authority filed a $17.6 million civil embezzlement and misappropriation lawsuit against former Executive Director Jennifer McDonald and nine others. So far, five individuals including McDonald have been indicted on felony charges stemming from the alleged embezzlement perpetrated within the EDA.
Parsons said the EDA had $1,871,452 in its cash accounts as of Thursday and that its total debt is about $40 million. He added that “right now we’re able to meet our obligations.”
Parsons said that the EDA will have to sell properties and receive settlement funds from its civil suit to “extend the period of time that we are going to be solvent.”
“There will come a point in time, however, when we may run into a wall and we may not be able to meet our principal and interest obligations on debt service,” he said.
He said the EDA’s finance committee will take an “in-depth” look to see “what needs to happen for us to remain solvent over the long-term.”
“But in the short term, we’re OK. Long term, we’re going to need some things to happen,” Parsons said.
Ed Daley, EDA chairman, noted that “the problem at the EDA is that the funding was in a variety of pots.” He said the EDA has spent the last nine months working “to have that all separated and detailed.” On Sept. 10, he said the authority believes it will be able to present needed journal entry adjustments to complete its overdue 2018 audit.
EDA board member Greg Harold said “unraveling these accounts has been an absolute chore,” as many of the questionable accounts are intertwined and years old.
“They can’t be turned around in just a matter of months...You have to understand the logic behind the transaction,” he said.
Harold added there is a necessary process that must be taken to ensure that the authority is “untangling the money so we understand exactly where it is.”
EDA board member Jeffrey Browne said the Tuesday meeting was being held due to “a catastrophic failure” and “rampant mismanagement” that resulted in “criminal embezzlement.” He said this was due to “failed procedures” and “failed oversight.”
“None of us ever want to see that happen again,” he said.
Browne said “in chaos, there is opportunity” and the EDA board has adopted policies to increase accountability and oversight.
“The EDA did its own accounting, wrote its own checks and has been involved in multiple bank accounts worth millions. Never again,” he said.
Parsons noted that the county recently became the EDA’s fiscal agent, which means all of the authority’s transactions must go through multiple layers of oversight before any money is spent.
Parsons noted that there are ways to ensure that debacles such as the ITFederal and workforce housing deals never again happen. Regarding ITFederal, he noted that there are many ways to check whether a company can live up to its promises but someone has to take the time and perform due diligence.
Despite the controversy, Daley said the EDA is needed for business recruitment, job production and to provide local governments with financing.