NORTH ANDOVER — A contractor buying equipment from North Andover walked into Town Hall last year with a check written out to then-Purchasing Director Joseph Lydick — instead of the town — and delivered it in view of other employees.
That is among the findings in a 10-page report released by the North Andover Audit Committee. The report details an investigation into a scheme in which Lydick sold town equipment and pocketed the money, North Andover officials said.
Lydick is scheduled to plead guilty Aug. 24 to three counts of embezzlement by a municipal or county official. He is accused of pocketing $20,800 from selling town surplus equipment. He peddled the goods on the auction website eBay and through "word of mouth and casual discussions," according to the report.
Selectman Richard Nardella, chairman of the committee, discussed the report at Monday night's selectmen's meeting. He said the example of the contractor openly handing Lydick a check shows how "bold" Lydick was. The town has fired Lydick.
The report concluded that Town Manager Mark Rees lacked policies and procedures for selling town equipment.
"I think that most municipalities may suffer from a dearth of staff to perform these functions," Nardella said.
Nardella said Rees has worked to fix problems, "but this was an area that got by us."
Rees wrote a letter in response to the report.
"With certain minor exceptions, which do not negate the overall findings of your report, I agree with the analysis, conclusions and recommendations contained in the report," Rees' letter said. "As I said to the Board of Selectmen when this matter first came to light, as town manager, I take full responsibility for what occurred."
The eBay account told buyers to send money to Lydick, not the town.
Rees said the development of internal controls is "an ongoing, never-ending process."
Around May or June 2009, town accountant Lyne Savage asked Lydick to provide an expected accounting of the money that would be received from equipment sales. According to the report, Lydick gave an estimate of $2,000. Rees signed "several" titles and bills of sale between March and November 2009, and Lydick himself signed at least one bill of sale, the report said. However, the town accountant didn't know about the sales and therefore wasn't expecting the town to receive the money, according to the report.
Lydick submitted an expense voucher in October 2009 to be reimbursed for about $900 in eBay fees accumulated by selling town equipment on the website, the report said.
"The expense submission was timed to occur on a day when the (town accountant) was not in the office," the report said.
Lydick had public works Director Bruce Thibodeau sign the voucher and then submitted it to the accounts payable clerk, saying he needed the money "right away," the report said.
"If the town manager had signed the expense report, it may have prompted questions as to why the fees were so high — $900 — and led to a realization that fraudulent activities were occurring," the report said.
The Audit Committee implicated only Lydick. "Mr. Lydick did this all on his own," Nardella said.
Rees discovered Lydick's scheme after a contractor asked Assistant Town Manager Ray Santilli about buying surplus equipment, saying he heard other contractors were negotiating with Lydick to buy equipment without bidding. Santilli and Rees contacted North Andover police, who investigated and arrested Lydick.
Lydick admitted to the fraud and partially reimbursed the town, and the town moved to attach his retirement account, the report said.
The Audit Committee report said there was no policy in place for selling town equipment, and that Rees assumed sufficient controls existed for recording transactions.
"The town manager's communication with staff was insufficient to determine status and efficacy of the surplus equipment sale effort," the report said. "The town manager signed titles and bills of sale without performing due diligence as to assuring receipt of monies prior to legal transfer."
The report said there were "inadequate segregation of duty controls" to ensure those holding equipment titles, who had the ability to prepare bills of sale, could not also accept money.
The report recommends policies for properly buying and selling assets and maintaining oversight. Rees said he looks forward to implementing the recommendations and working with the committee to strengthen internal control procedures.
Rees said financial controls don't make dishonest people honest, but "it does keep an honest person honest."
