Guest Opinion | An open letter on EWUA management

||| FROM ROBERT AUSTIN, FRED KLEIN, and MICHAEL RIORDAN |||  

The three of us have recently watched with growing concern and dismay the unfolding management chaos at the Eastsound Water Users Association. From our combined perspective, there are two groups of EWUA Board members and former Board members who have been presenting conflicting accounts of what has been happening there since at least 2022. We have therefore launched an independent fact-finding mission of our own to try to ascertain the truth about the dispute — in hopes of determining its root causes and recommending solutions, and of sharing those recommendations with the EWUA Board, staff members and membership.

We bring considerable financial and management expertise to this challenging task. One of us is a former EWUA Board member and the other two have served as Treasurer of five different non-profit organizations. All of us have been principal officers of our own companies — a niche marketer of personal electronics, an architectural firm, and a small book-publishing company.

Over the past few weeks, we have interviewed, emailed and telephoned several current and former EWUA Board members and its General Manager Dan Burke in an attempt to learn and understand their personal perspectives on the disputed matters, which are both financial and cultural. We have also asked them for relevant financial and other documents to support their claims; they have generally complied with our requests. In addition, we have talked with others not directly involved in the dispute. Here are our current conclusions, which are subject to change if further evidence comes to light.

The financial dispute began in January 2023 when Tenar Hall took over as the EWUA Secretary/Treasurer from Joe Cohen. Finding irregularities in the limited financial records to which she then had access, she requested “full access” to all EWUA financial and membership records from Board President Clyde Duke, which she had been denied by General Manager Burke. She repeated this request, increasingly stridently, in emails to Board members at least six times in February and early March, citing EWUA Bylaws and state laws governing non-profits.

We find nothing improper in Hall’s requests and are baffled by Burke’s withholding of deeper financial information. A treasurer cannot fulfill her obligations without such access, and withholding full access naturally raises suspicions about his motivations. According to current EWUA Bylaws, the Secretary/Treasurer must “supervise the General Manager’s maintenance and safe custody of all funds, records, properties and membership records of the Association.”  The fact that other Board members apparently did not help facilitate her requests and require Burke to provide full access inevitably raises questions about their rationale for not so doing.

In early February, at a time that is difficult for us to pinpoint, Hall identified a list of 11 questionable payments made by EWUA in 2022 and early 2023, including two payroll checks made out to and signed by Burke in November and December 2022 for a total of $13,653.54. Subsequent analysis of these 11 payments emailed to the Board on February 16 by Duke and Board member Jim Nelson identified the two checks to Burke as being written for “accrued vacation pay disbursements.” Challenging the validity of the two payments, which the current Employee Handbook does not allow, Hall emailed the Board on 4 March 2023 requesting “all documentation” regarding EWUA policies on vacation pay, earned days off, and paid time off, by which she meant any official Board actions that could have superseded the handbook policies in force. She repeated this request the next day, stating, “I need documentation that supports the legitimacy of ‘Vacation Pay’ in general,” specifically the two Burke payroll checks. On March 13 she sent still another email to the Board stating that “vacation pay” did not exist under the previous General Manager (Paul Kamin) and that at least four Board members should be aware of any Board-approved policy changes regarding vacation pay. Later that day, Cohen replied to Hall largely in agreement, stating “Dan as a salaried EE [exempt employee] cannot be paid cash for overtime,” but he suggested that “perhaps there was a board policy” that superseded the Employee Handbook on payouts to the General Manager for unused vacation time.

Lacking concrete evidence for such a policy change, however, we reluctantly conclude that the vacation payout checks to Burke were unwarranted and improper, based on EWUA employment policies in force at the time. As cited by Tiffany R. Couch of Acuity Forensics in a 19 June 2023 report to the Board, the employee handbook explicitly disallowed cash payments for unused vacation time: “Compensation will be awarded as time off, with no additional moneys being paid to the employee.” And in her summary letter, she stated that “Mr. Burke’s cash out of PTO [paid time off] appeared to be noncompliant with the employee handbook.” We concur with the Acuity Forensic analysis.

Another aspect of the two Burke payout checks is the fact that they represented wages for 200 hours of “unused PTO” when he could not have accumulated more than the maximum possible 144 hours (18 days x 8 hours/day) allowed in 2022. And Hall claims in an Open Letter to EWUA Members to have “evidence that showed that the GM [General Manager] had paid himself $11,317.61 more than was authorized in 2021.” If so, that is more than 10 percent of his Board-approved salary of $110,833 for that year. Our own analysis (based on the EWUA 2021 IRS Form 990) indicates that Burke was paid an additional $7,454 more than his approved salary, or $118,287 (plus additional compensation of about $23,000, mostly for benefits). The existence of the extra 2021 salary payment(s) suggests that an unofficial policy of paying the General Manager for his unused vacation time may date back to 2021. (In a phone call with one of us, Cohen said that there was no documentation of Board approval of such a policy.) But without explicit Board approval documented in the monthly meeting minutes, the EWUA Employee Handbook should prevail on such questions, so vacation payouts would be disallowed.

In the final analysis, it seems clear that the majority of the EWUA Board acquiesced in granting Burke additional payouts totaling as much as $24,971 for purportedly unused vacation time, despite the prohibition of such payments in the Employee Handbook. Only Hall and one other Board member have questioned or opposed these payments. We can guess that a major rationale for overlooking them is Board approval of his work expanding EWUA services to water systems in Doe Bay, Olga and Rosario, plus managing the construction of a new storage tank on Double Hill and the drilling of a new well. But that should have been fully compensated by the growth of his regular annual salary by over 30 percent in only two years — from a starting salary of $100,000 to $130,752 in 2022. (With far more water-system experience, the previous General Manager never earned more than $100,000 until his final year, 2020.) And at least two vacation payout checks were written to and signed by Burke, apparently without Secretary/Treasurer Cohen’s prior approval, despite at least one of them being for over Burke’s $5,000 signing limit.

It is therefore difficult to see these payments and conclude that the EWUA Board has been adequately fulfilling its fiduciary responsibilities for financial and management oversight of the organization. To put it more succinctly, the Board’s management oversight leaves much to be desired.

On cultural matters, we are deeply concerned by the resignations of three female EWUA staff members and a female Board member over the past two years. We recognize that whereas financial problems can be better quantified, cultural issues are inherently more subjective. But the departures of these four women strongly suggest an unduly male-oriented EWUA culture insensitive to female needs and perspectives. Indeed, a committee consisting of Hall and then Vice President Scott Lancaster examined this possibility in late 2022 as part of their research into reasons why the three staff members resigned. In a detailed report delivered to the Board on 8 November 2022 titled “EWUA Employee Retention Issues,” they prominently mentioned staff problems working under Burke and improper interactions of a Board member with them, among a list of 24 common complaints. We hear that the Board subsequently encouraged Burke to enroll in a sensitivity training program, which is commendable, but we are unaware of what (if any) impact that may have had. We also understand that two women now working at EWUA are enthusiastic about their jobs and have no similar issues with their work environment.

The seemingly apathetic response of other Board members to Hall after she discovered the unwarranted Burke vacation payments is another instance of this male-oriented culture. While she may have become unnecessarily strident in her subsequent requests and demands for full access to EWUA financial records, her behavior can be understood in the absence of a sufficient response to what seems to us an obvious problem. What eventually resulted was the unfortunate retention of attorneys by Cohen and Burke at least in partial reaction to Hall, which drove a wedge between the warring factions and probably led to her March 20 resignation.

This brandishing of attorneys and the subsequent hiring of Acuity Forensics to examine EWUA financial records have led to over $100,000 of added expenses this year, according to our interview with Burke. We think that the bulk of these legal and accounting expenses could have been avoided had the majority of other Board members (all men) been more receptive to Hall’s observations, claims, and requests for additional records. In our opinion, therefore, the cultural problems at EWUA are directly tied to the financial problems that have been encountered. We believe that most of the men on the Board were insufficiently critical of the General Manager and insufficiently receptive to Hall, most of whose contentions were ultimately borne out by the Acuity Forensics analysis.

To be fair, Burke has shouldered heavy responsibilities in the two-plus years he has been serving as General Manager, and he appears (to us) to be doing so successfully. Not only has the EWUA extended water-management services to three other systems, but it has also embarked on at least two major new facilities for obtaining and storing water. EWUA gross revenues have increased by roughly 30 percent to the point where they are approximately $2 million annually. That certainly justifies the growth in his Board-approved salary level by the same percentage — but not the almost 44 percent increase if his 2022 vacation payouts are included.

In the final analysis, we are forced by abundant evidence to conclude reluctantly that the EWUA Board of Directors has not been doing the job it was elected (or appointed) to do. The Board ultimately bears the fiduciary responsibility to represent the interests of the EWUA Members to the best of its abilities. But it appears to us that it has been insufficiently critical of the General Manager’s performance on cultural and financial matters, resulting in excessive costs to the organization. This unfortunate result has occurred in part due to the prevalence of an unduly male-oriented culture at EWUA, led by a group of businessmen who may be unable to fault one of their own. But we recognize that the Board members have been putting in long hours without compensation and could thus be hesitant to acknowledge serious problems requiring appropriate actions that would increase their already burdensome workload.

We do not however support the efforts of one Board faction to recall members of the other one, especially this late in the year, as that would only worsen the EWUA management chaos we have identified. We think that the appropriate route to a solution exists through the regular elections process — and by well-chosen appointments of women, in an attempt to achieve some semblance of gender balance on the Board. Toward that goal, currently unelected Board members could resign and run for election in November if they wish to rejoin it. That would free up slots for appointments of women. After that, the new Board should take up the question of the General Manager’s performance over his first three years, including whether his vacation payouts were justified and if he is to refund them. In addition, the new Board should  initiate measures to increase its accountability and openness, by making the EWUA financial statements and monthly Board meeting minutes available to members on its website. We are encouraged that these and other reforms are being contemplated by the current Board.