Financial review finds no Beachcomber fraud, but Waldport will give documents to state, deny grant

 

By GARRET JAROS/YachatsNews

WALDPORT – When Waldport Beachcomber Days volunteers and supporters showed up at the city council meeting Thursday with a clean bill of health from an independent financial review it seemed the dust might finally settle in a months-long fight.

It was a fleeting feeling that quickly gave way to yet another dust up – with expletives flying, warnings of removals from council chambers and accusations against one Beachcomber board member that left the room in silence.

The city announced in early October it was suspending Beachcomber activities within the city after becoming aware of certain “financial irregularities” in its bookkeeping and Internal Revenue Service filings. The review of the group’s finances was triggered after it solicited a city grant in August to support the nonprofit organization.

The city posted an explanation of the issue on its website and notified the Beachcomber board of the steps it would need to take to address the matter,  including an outside financial review.

Waldport Beachcomber Days is a popular and longstanding volunteer community organization that is the largest and most visible civic group in town. It is responsible for an annual celebration in June, a Halloween Trunk-or-Treat event and a variety of Christmas activities each December. It also stepped in several years ago to manage the Waldport Wednesday Market.

The path forward

After the financial review was submitted to the city Thursday and after the public meeting, which included testimony from two accountants, the council went into executive (closed) session before opening into another public session to announce its decision on a path forward.

Councilor Greg Dunn, who is serving as acting mayor, read the four-part decision to an empty chamber, the public having left after the initial meeting. Dunn announced the city will:

• Turn over all information and correspondences it received about Beachcombers to the Lincoln County district attorney’s office and the Oregon Department of Justice;
• Deny this year’s funding to the organization;
• Not renew Beachcomber’s contract to run the Waldport Wednesday Market; and
• Lift the city’s suspension of Beachcomber activities, permits and use of public property.

Dunn later told YachatsNews that the city will turn over all its information to the district attorney and state to see if there is something they want to pursue.

“And that way it’s out of our hands because we don’t investigate anybody ourself as a city,” he said. “That’s up to them to do.”

Funding for this year is being denied because “with everything going on and with all the questionable financial stuff … and stuff that we received from other agencies, we can’t be 100 percent positive that the money is going to go to where it’s supposed to go,” Dunn said. “So, it was a decision that we made just to deny funding so that we’re not in a position to have taxpayer money dispersed to an organization that may not be using it properly.”

The Wednesday Market will continue but under different management. The city received several complaints regarding how the market was handled, Dunn said, including allegations of favoritism and possibly harassment.

“So with all that, we decided it was best that we just pull that away and go a different direction so that it is one less thing we have to worry about and so we can move forward without any other issues,” he said.

Despite those decisions, the council decided to lift the suspension of the group’s activities, permits and use of city property.

“Beachcombers has been a huge part of the city for decades,” Dunn said. “And we want that to continue. Whether we have these issues or not, we don’t want the citizens and the community to suffer.”

Dunn said the organization will just need to adhere to the rules set for all organizations that operate in the city, which includes proof of insurance and filling out the necessary applications and paperwork.

Dunn said in the limited time he’s had to look over the accountant’s review, it did find some issues with the tax filing — the same issues city manager Dann Cutter discovered in October.

“So, there was a few issues and it could have been easily a mistake,” Dunn said. “But issues were found. In a way, I feel personally they should be thanking us because this independent review actually found a lot of things that they could be doing differently and better to make their organization stronger.”

The meeting

Prior to Thursday’s council meeting, Beachcomber president Tamara Abele posted a letter on social media which said the financial review conducted by Lisa McGrath of Newport-based Grimstad & Associates found no findings of wrongdoing and that it “reflects the integrity and dedication of everyone involved” in the organization.

The review was submitted to the city two hours before the meeting.

During the first of two comment periods Thursday, Beachcomber supporter Ashley Catalfamo again criticized Cutter for his “lack of respect” and that communication was the real issue.

“I sincerely hope with three attempts now to address these issues you finally understand our concerns,” Catalfamo said. “The mishandling of the Beachcomber situation left good people hurt, defamed and insulted. It caused them to walk away from something that benefited our community and our youth and our economy.

“If this behavior from city leadership continues what will be left of our beautiful city? How do we make this right? After what I just read online, the Beachcombers are cleared of what you accused them of doing. What apologies will then be issued? What consequences will be imposed within this office? As I said before, we all deserve better.”

Wednesday Market customer Kristal Kearney also criticized Cutter and praised Beachcomber secretary TiAnne Rios for her kindness but then quickly descended into yelling and cussing. That drew a removal warning from Dunn and she eventually left on her own after another outburst.

John Westhafer read a letter from Shannon Mann, a financial consultant who works for Oregon Coast Community College who was initially brought in by Beachcombers to assist in navigating the issues with the city.

Mann clarified a concern brought by the city that the child of a Beachcomber board member may have been ineligible to receive a scholarship from the organization.

“Under the IRS regulations board members of public charities are considered disqualifying individuals but family members of board members are not,” Mann wrote. “…Having viewed the financial records of the past few years, I can confirm that Beachcomber Days has not violated the IRS rules regarding disqualifying individuals as it applies to public charities.”

Mann went on to conclude “Based on my review, I believe Waldport Beachcomber Days has a solid foundation of accurate and thorough accounting .”

 

Beachcomber vice president Amy Skirvin then read a letter from Abele and one from Grimstad that accompanied its financial review. Abele’s letter said the review of the group’s finances “explained repeatedly, there were mistakes made in numbers given to the city in our request for sponsorship but there are no errors in managing the money…”

“We are managing our funds appropriately and this is simply a mistake,” Abele’s letter added.

After Skirvin finished, Dunn addressed the group.

“It appears that a lot of you think that the city is attacking Beachcombers for no reason,” he said. “I think most of us if not all of us have been a part of Beachcombers at some point in our life. And we enjoy and love Beachcombers. It is a huge part of this community … a great program. We have nothing to say negative about the things they do for this community.

“We asked for clarification on some documents that we got that were not correct or were different,” Dunn continued. “That’s what this was about. It’s our job and you guys should be happy that we are holding everyone accountable for this. …We represent every person in this community, every taxpayer in this community. So it’s our job if we see something wrong or we think could be potentially wrong, that we bring it to the attention of the organization and ask for clarification.”

Catalfamo then yelled out “And the newspaper.” Beachcomber supporters have repeatedly said they are upset about the issue being released to the media instead of being handled behind closed doors.

Jeff Skirvin, who helps lead the timber show during Beachcomber Days, then interrupted Dunn to say “I think we made it clear the stance that we’ve taken on this issue isn’t the fact that you asked for the books.”

“Let me speak,” Dunn said.

“That’s not the issue,” continued Jeff Skirvin. “That was never the issue …”

“Mr. Skirvin, if you keep up we will adjourn the meeting. OK?” Dunn said. “Come on, you know the rules.”

Dunn went on to say that councilors had not yet had a chance to review the accountant’s report, but that Cutter may have looked it over briefly. He then asked Cutter if he wanted to say anything.

Pin drop moment

“Absolutely,” Cutter began.

The city manager thanked Beachcombers for providing the review and said it made clear there were a few errors in its 2023 IRS filing.

“So, our initial findings were absolutely correct and we asked for clarification,” Cutter said. “We then received two budgets from Beachcombers that provided differing numbers, specifically claiming $16,000 worth of scholarships” … while the review found scholarships listed at $7,849.

“It’s important to note, and this is where we need to have a firm understanding, when an application to the city is provided and it has falsified documents, falsified numbers, that is a crime in the state of Oregon,” Cutter said. “It is a crime under the Oregon false claim act. It is punishable to each board member and to the individual who filed it of up to $10,000. It can also include criminal charges. We did not file criminal charges. We did not file a claim under the Oregon false claim act. We asked for clarification and the review, which is what we got.”

Cutter said the city mentioned no individual in its Oct. 3 notice on Beachcomber’s permits being cancelled. But seven days later when an article appeared in YachatsNews, the city began receiving calls from people.

“These citizens, under the whistleblower protection act, started to provide information about one specific board member,” Cutter said. “This is a letter right here from Oregon State University with privacy information redacted. It specifically calls out this one board member, who posted not long after that about her long and lustrous career with 4-H.

“The quote is ‘Your violations of OSU 4-H procedure are grounds for immediate removal as a volunteer,’ Cutter said. “She was fired, and OSU has grounds for theft. We also got that call from Girl Scouts. We got that call from a number of other organizations who have for the past two months come to us and said that there is a problem. And that we need to look further.

“So I understand your passions. I understand your concern. And I understand your anger. But, as a city, when we are reported that we have someone committing theft from Girl Scouts, committing theft from 4-H, committing theft from these organizations that we hold so closely, and that has committed a crime in soliciting funds falsely from the city, we have a legal obligation to act …”

Cutter went on to say the city was not bullying or throwing its weight around. But he said the accountant’s review shows that information Beachcombers gave to the city was fraudulent.

“We want Beachcombers to be strong and robust,” Cutter added. “But if we are seeing activity that threatens the longevity of that organization … we do have to take the appropriate measures to ensure that these activities within our city are operating lawfully.”

When Cutter finished, the room grew so silent you could have heard a pin drop.

Final public session

After finishing its regular meeting, the council opened a second public comment period.

McGrath was the first to speak, followed by a deluge including a back-and-forth between Cutter and Rios – who at the last meeting accused Cutter of going after her because of racism and sexism.

McGrath said the word “fraud” bothered her.

“I wanted to say that fraud is not the proper word to use because fraud involves intent to deceive for some kind of personal gain,” she said. “What happened as I understand it, the letter initiated by the city saw some numbers that didn’t match in the (tax filing). That (the) 2022-23 (filing) did have errors. The funny thing is, the accounting didn’t. The accounting system had the right numbers.”

McGrath encouraged people to look at the review.

“But I didn’t want you to have this thought process of any fraud going on because that’s not actually what I found,” she said. “But everything is in there.”

Cutter responded in part by saying that the Department of Justice said the documents submitted by Beachcombers when the city requested additional documents “effectively meet the standard for a false claim to try to solicit money.”

Catalfamo then called out Cutter for his use of the words “fraud” and “false” and said the group is not upset about the financial reports, but the language used by Cutter.

Robin Morris, the city’s office manager, spoke up to say for the last two years she has seen Beachcombers’ paperwork come into the office and that Cutter holds their hand in walking them through it, to help them get it right, while they ask the same questions each time.

They call back to say they still do not know what to do, Morris said, and Cutter walks them through it again.

“This year, all he got back was ‘I can’t do it. I must be dumb. I just can’t do it’,” Morris said. “And this has gone on for years. He’s worked so hard with them.

She also pointed out that the Wednesday Market is not historically a Beachcomber’s event. “The city has allowed them to do it as a fundraiser,” Morris said. “We have done nothing but work with them.

“And let me tell you, the phone has been ringing constantly of people having information for us,” she continued. “He is not exaggerating that. I answer the phone. He’s trying to make this go through. And we’ve all been part of Beachcombers. We’ve all done our volunteer time. We were volunteers too …”

Eventually Rios, who had originally applied for the money and submitted the original documentation to the city, stood up to address the council and Cutter.

“Look, I feel absolutely horrible, horrible over all of this,” Rios said.

She said she felt like she was just speaking with Cutter as a friend to provide whatever was necessary and that she gave incorrect numbers by mistake.

“It was a silly mistake,” she said.

But the interpretation was there was some sort of deceit instead of an honest mistake. She said sending a notice to Beachcombers about suspending it while notifying the press at the same time is no way to handle a nonprofit organization.

“It’s not,” Rios said. “And it’s awful because I feel like I’m being hung out to dry because I made some honest mistakes. Where is it that we roll this back and we realize that we’re all in the same community …Where is it that we roll this back? We have to roll this back, some sort of way.”

Beachcomber volunteers have good hearts and good intentions, she continued. And they are not there to rip off the city.

“You know who I am,” Rios said. “I’m not a person who’s here to rip off kids. I would never do so. Ever. It’s not who I am.”

She said if people are calling to complain or provide information about alleged wrongdoing, then she should have been notified so she could answer to it.

Cutter told Rios the complaints he is getting about her are not minor.

“I’m getting complaints that you’re breaking the law,” Cutter said. “I’ve got a letter here from 4-H that specifically says that they terminated you for breaking the law.”

“Well, they asked me not to return, yes, because of four entries,” Rios said. “I get it. But what one organization does with mistakes is different than another organization.”

Cutter said he received the same complaint from Girl Scouts, which Rios denied. And he said it is not his job to call Rios to inform her of the complaints being lodged against her.

Dunn finished off the meeting by saying how stressful the issue has been for the council and city staff.

“I thought it was going to be a very simple, look at these documents, fix them and it was going to be done and over with,” Dunn said. “Unfortunately, it opened up to be more with people calling in, people sending information. I didn’t expect that. I don’t think any of us expected that. So, that kind of threw us. And the accusations that are being thrown around, it’s hurtful …

“We don’t want to do this. …,” he continued. “We’re hoping, I’m hoping, that we can resolve this very quickly and put this behind us so that Beachcombers can get on, our community members can get on. It’s very sad that this had to happen.”

And he assured the public that council and staff will discuss how the situation could have been handled differently.

• Garret Jaros is YachatsNews’ full-time reporter and can be reached at GJaros@YachatsNews.com

 

Highlights of the Beachcomber Days financial review

While not a true audit that traces individual payments and receipts, Beachcombers had Grimstad & Associate, a longtime Newport accounting firm, do a financial review of the past year. In an 18-page report that detailed income, expenses, operations, IRS filings and bylaws, the firm said it found no evidence of fraud or misuse of money.

“Since I had full access to the accounting software and documentation supporting transactions and I went through all if it, I can state that I saw no indications of fraud or abuse or misuse of funds for the year ended June 30, 2024,” Lisa McGrath of Grimstad & Associate wrote in the report signed off by the firm’s owner, Signe Grimstad.

But there were lots of observations and recommendations, including:

• Beachcombers has $18,800 in cash but lost $7,337 on its events this year and needs to raise its fees in order to sustain itself;
• Board officers are not paid for their services although a few volunteers “were paid a minor amount.” Because of the many volunteers involved, the review valued their in-kind contributions at $212,000 in 2024;
• Awarded $7,849 in scholarships this year to students selected by a “Royalty Committee” which is independent of the board. The report said occasionally the committee makes awards to the child of a board member, but that did not happen this year;
• But the review said the organization should end its “risky” practice of sending money directly to students because there is no control over how or where it is spent. Instead, the report suggested using the Lincoln County Foundation or the Oregon Community Foundation, which send scholarships directly to the student’s education institution;
• There were issues with the organization’s required IRS 990 form in 2023, and the firm suggested either further training for its treasurer or having a professional fill out and file the form;
• Prepare, use and maintain an accounting policies and procedures manual for transactions and maintaining support documents. “The manual should include detailed documentation of job duties, responsibilities, chain of oversight” and procedures for recording all transactions.
• Establish internal controls to segregate duties, “meaning the person who records cash transactions should not have control over cash, including signing checks,” the report said. “For your cash receipts function, consider segregating duties by having other officers or volunteers collect and count cash, prepare the bank deposits, take the deposits to the bank, and provide documentation for cash receipts to the bookkeeper to record the transactions in the accounting system.”