||| FROM EASTSOUND WATER USERS ASSOCIATION |||
You may have received an email from a former EWUA Board Director, Mr. Steve Smith, dated August 20, 2023. Mr. Smith has also posted a communication in The Orcasonian and perhaps other social media networks. The letter contains numerous false and misleading accusations about the EWUA Board and staff.
The EWUA Board is bound by its fiduciary duty to maintain the confidentiality of certain Board actions and meetings from Executive sessions. Mr. Smith and Ms. Hall are similarly obligated to maintain that confidentiality, even after Board service – but have evidently elected to ignore those protocols. Accordingly, your EWUA Board will not engage in a public debate on Mr. Smith’s false and extremely misleading narrative of events during the past year, as it is neither productive nor beneficial to the community we serve.
However, because Mr. Smith’s allegations relate to the financial integrity of this Association, we have deemed it necessary to respond to a few crucial points to Mr. Smith’s letter:
• On March 16, 2023, the Board received a letter from legal counsel representing General Manager Dan Burke. The letter asserted professional mistreatment by Mr. Smith and Ms. Hall specifically, which could have led to costly litigation against the Association, Mr. Smith and/or Ms. Hall.
• The Board immediately activated existing EWUA legal counsel to address this letter from Mr. Burke’s attorney.
• Legal counsel for the parties negotiated a settlement agreement with certain conditions – including Mr. Smith’s removal from the board either voluntarily or by Board action.
• The Board requested Mr. Smith to voluntarily resign, both in response to the threatened litigation and in light of his mishandling of his duties that unnecessarily dragged the Association into an expensive and time-consuming legal dispute. He steadfastly declined to do so.
An independent forensic accounting firm was engaged to examine EWUA finances and search for the wrongdoing Ms. Hall and Mr. Smith had alleged, and to make recommendations on financial protocols to improve the Board’s financial oversight. No financial malfeasance or misappropriation of member funds was found.
Rather, the investigator found that Mr. Burke’s cash out of PTO appeared to be noncompliant with the employee handbook, which may have resulted in a small overpayment of the mangers own earned PTO. Any possible violation appeared to be potentially inadvertent, and the Association had no legal basis to reclaim any paid wages. The investigator then provided a list of financial recommendations to resolve this and other issues, and the Board adopted implementing them unanimously. Solutions have been implemented for all recommendations provided by the accounting firm.
Despite the fact that the Board vigorously investigated the alleged malfeasance, they found no evidence of misappropriated funds and unanimously adopted all the investigator’s recommendations to improve its financial oversight functions, Mr. Smith has continued his campaign to undermine the Association and spread misleading information about its operations. It is our collective belief as your existing Board that Mr. Smith’s motivation in posting such misinformation is to seek personal vindication after the Board voted to remove Mr. Smith from the EWUA Board on June 21, 2023.
Should you have any questions or concerns about the Association’s processes and adopted policies to improve the visibility and integrity of its bookkeeping practices, we encourage you to reach out to the Board, and we would be happy to address any concerns.
Clyde Duke, Board President James Nelson, Board VP
Scott Lancaster, Treasurer Joseph Cohen, Secretary
Michael Cleveland, Director
SEE ALSO: https://theorcasonian.com/financial-cover-up-at-eastsound-water-users-association/
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Dear Board Members,
You just showed you don’t understand the basics of your responsibilities. The first sentence of your second paragraph shows that you don’t get it. Fiduciary duty is not about holding executive sessions and keeping secrets. Fiduciary duty is defined as acting in total trust, good faith, and honesty. As a fiduciary you must act in a way that will benefit someone else financially. As a non-profit board member, this should be your guiding light. You are a fiduciary to the member-owners of the EWUA. You have not been paying attention regarding reckless spending, lack of controls, and poor management. This is the reason for the recall effort.
To the members of EWUA: You paid for the audit, it’s yours, read it. It doesn’t matter if you don’t like the former board members or don’t care for how the information got out there. This professional auditor is an uninterested third-party. Read the rest of the recallwater.com website if you want details on why the board is not paying attention and how it got this far. It’s detailed and clear – the former board members did not post anything that they could not defend in a court of law because they have been threatened with lawsuits throughout the whole process.
Being on a non-profit board must be taken seriously. Board members are liable for the mismanagement of funds. They can make the too-late corrections to policy and procedures, but the money isn’t coming back. If they won’t remove the GM, the new board will.
I am not a member of EWUA, but I am a former employee. The lack of attention to the mission of EWUA was too much for me. I went to graduate school for non-profit management. I have 16 years of experience in water system management. The disappointment was more than I could stand.
Running a not for profit company has it’s own set of legal rules set up by the State of Washington. I would suggest that the organization as a whole read these regulations to make sure the Charter and the By-laws reflect the current state requirements. Any changes should be reviewed and voted on by the membership.
Along with this I would hope that the new board reviews the procedures for accounting and responsibility of the General Manager and the Treasurer and the Accountant are clearly defined. It is clear that the General Manager should not have total control of the accounting records. This should be spelled out in the By/laws and then flow down in more detail in the daily procedures. A General Manager should not have full reign of the accounting system. There is a built in conflict of interest. The accounting books should not be kept secret from the Treasurer or the accountant.
I hope that all the members take a hard look at how our organization is being run and make the proper changes so it runs in a fiscally responsible manner.
Thank you!
Carol Ann Anderson
I agree with what Laura Rensberry presents in her comment.
I have closely followed the Orcas Island Hospital District and its commission since its inception a few years ago. While I don’t always agree with some of the Commission decisions and have made this known in meetings I can’t fault the accounting and auditing controls they have implemented. They are thorough and transparent. The Commission is very careful in following the applicable laws governing non profits.
Each public monthly meeting involves a “Board Packet” which lists the items to be discussed at the meeting:
https://www.orcashealth.org/board-packets-751d0bc
Each public monthly meeting the Commission reviews and approves the “Claims Payment Request” which itemizes office expenditures and has been signed by the Superintendent and Commission Auditor:
https://www.orcashealth.org/files/28201dd11/02.+2023_07_25+AP+Voucher_Signed.pdf
Each public monthly meeting the Commission reviews the “Detail of Expenses” which shows the budget and how costs are tracking:
https://www.orcashealth.org/files/00263b154/03.+2023+OIHCD+Monthly+Budget+July-+08172023.pdf
With the present EWUA controversy and that of OFIR how many other Orcas and SJC non profits are mismanaged, waste taxpayer’s money and then request more?
I’m appalled by how the Orcas Water Dept. X- Board members (who were asked to leave the board) have taken on wreckless mischief making to make some kind of power play (to install people that have more in common with their own agendas) in the water Dept of all places! Don’t we have enough of this going on in the news with Republicans… jeez!