Auditor Says $18.6 Million in ‘Committed’ Capital Work Has No Contract Behind It
Ahead of the November budget, a review of 61 projects found nine with no visible work and a definition of ‘encumbered’ that the finance office says the state told it to use.
City Auditor Beatrix Nnamdi told the council audit committee on Wednesday that $18.6 million of Port Meridian’s $94.3 million capital program is carried on the books as encumbered — money the city reports as committed and therefore unavailable — without a signed construction contract or purchase order behind it.
The finding lands eleven weeks before the council must adopt a budget, and it complicates the central claim both sides of the chamber have been making since spring: that the capital program is fully subscribed and that any new project requires either new revenue or a cancellation.
“If the number is $94.3 million committed, the answer to every request this autumn is no,” Nnamdi told the committee. “If the number is $75.7 million committed and $18.6 million intended, the answer is a conversation. I am not telling this body what to fund. I am telling it that it has been answering a question it never actually asked.”
The audit covered all 61 projects in the capital program with an appropriation above $250,000. For each, Nnamdi’s office requested the executed contract, the notice to proceed, and the most recent pay application. Forty-one produced all three. Eleven produced a contract with no recent draw. Nine produced no contract at all.
## What “encumbered” means, and who decided
Finance Director Emory Thal does not dispute the arithmetic. He disputes the framing, and his objection is not procedural cover.
Under the state’s municipal accounting manual — Section 4.2, unchanged since 2014 — a local government may encumber an appropriation upon “board authorization of a project and designation of a funding source,” which is a lower bar than contract execution. Port Meridian has used that definition through four finance directors and has been cited for it by exactly zero of its annual external audits.
“The auditor is applying a standard I would also prefer,” Thal told the committee. “It is not the standard the state wrote, and I do not have the authority to unilaterally adopt a stricter one and restate five years of statements. If this body wants the tighter definition, adopt it by ordinance and give my office two cycles to convert. What I cannot do is have the answer change depending on who is asking.”
Thal made a second argument that several committee members visibly took seriously. Under the city charter, an appropriation that is released back to fund balance cannot be re-encumbered without a new public review period of 60 days. Nine of the twenty projects Nnamdi flagged are in design or permitting, where the gap between authorization and contract routinely runs eighteen months. Releasing them, Thal said, would not free money so much as reset clocks.
“You would be telling the Ferrous Lane bridge deck to start over on process while the deck keeps doing what decks do,” he said.
Precision has a schedule cost and vagueness has a trust cost, and this room has been paying the second one quietly.
## Nine sites, no work
The portion of the audit that generated the most public reaction was not the accounting analysis. It was the appendix.
Over six weeks in June and July, Nnamdi and two staff auditors drove to all 61 project sites and photographed them. The appendix reproduces the photographs against the appropriation date and the amount encumbered. Nine sites showed no visible work of any kind.
The largest is the Cordage terminal berth improvement, appropriated at $4.2 million in 2023 and now deferred to 2028 following the ferry board’s decision last month to redirect reserve funds to engine-room noise abatement. That deferral is public and defensible; what the audit questions is why the appropriation continued to be reported as encumbered through two budget cycles after the work stopped being scheduled.
Others are harder to explain. A stormwater outfall replacement in the Basin district, appropriated at $2.9 million in 2022, has produced $61,000 in spending, all of it engineering. A neighborhood traffic-calming package appropriated at $1.1 million in 2023 has produced none.
Councilmember Rowan Devi, who chairs the audit committee, pressed Thal for a project-by-project accounting and got commitments on four. “I do not think anyone stole anything,” Devi said afterward. “I think we built a system where nothing is ever formally dead, and a system where nothing dies is a system that cannot prioritize.”
The committee sat for three hours and twenty minutes on Wednesday, the longest audit session since 2019.
## What happens before November
The committee voted 4-3 to forward two items to the full council.
The first is an ordinance adopting a contract-execution standard for encumbrance beginning with the fiscal year that starts in July, with a transition provision allowing design-phase projects to remain encumbered for up to 24 months from authorization before automatic release. That compromise language was drafted overnight by council staff and is closer to Thal’s position than to Nnamdi’s; the auditor called it “a real improvement that I would sign.”
The second is a proposed charter amendment establishing a public capital dashboard with per-project status, contract date, and last payment date, refreshed monthly. Because it amends the charter, it requires either a supermajority of the full council or referral to the ballot, and the filing deadline for the autumn ballot passed on August 3. The earliest it could go to voters is next spring.
The three no votes objected on timing rather than substance, arguing that rewriting encumbrance rules eleven weeks before adoption invites a chaotic budget. “Do it in January when nobody’s project is on the table,” said Councilmember Junot Ashworth, who nonetheless said he would vote for the dashboard.
The full council takes up both items on September 15, the same night it votes on the legacy business lease pilot.
Nnamdi’s appendix runs 61 pages, one per site, and she has said she intends to repeat the drive every year she holds the office. The photograph on page 44 is of the traffic-calming package: a residential corner, a utility pole, and a laminated project sign zip-tied to the pole at eye level.
The sign gives a completion date of autumn 2024. The lamination has gone milky at the edges, and the print has faded unevenly, so that the year is legible and the season is not.
Reporting for this story was prepared for The Harbor Ledger’s politics desk. Tips:newsroom@theharborledger.com