Progress on the “Outside Review” of the Town’s Participation in the 1033 Program

The outside review by TGM of the town’s “procedures” related to the Military Surplus program is supposedly near done.

But, the “Agreed Upon Procedures Review (AUPR)” is not an audit. As this review by the firm TGM has continued, DCA just received last week the engagement letter between TGM and Dewey with the scope of the work, and it indicates it will far fall short of what is needed to figure out what is going on with the money in the “reserve accounts” (aka the slush fund).  Combined with the prior documented interference by Commissioner Bauer, who prior to the contract called the Audit Committee Chair purporting to act on behalf of the town to relay concerns about a lawsuit if an audit focused on the Police Department. The email back from the Audit Committee Chair stated it would be modifying the scope of the contract “now be more in the form of an internal review.”

Based on the items below and the terms of the engagement letter, DCA last week expressed its concerns in the letter to the Council below and the Media that this review will clearly fall short of providing the residents of Dewey an accountable report on where monies did or did not go.


From: "Jeffrey C. Smith"
Subject: Serious Concerns about AUPR Process
Date: February 9, 2018 at 1:56:33 PM EST
To: Town Council 
Cc: Dewey Audit Committee
Dewey Citizens for Accountablity DCA



February 9, 2018

Dear Mr. Mayor, Members of the Dewey Beach Town Council, and Audit Committee:

RE Grave Concerns Regarding the Agreed Upon Procedures Review

We just received and have reviewed the attached engagement letter between the Town of Dewey Beach and TGM in relation to the Agreed Upon Procedures Review. For whatever reason, this engagement letter had not been released or disclosed to the public prior to now, but it is clear it should have been disclosed, in the name of promised transparency, especially because it was a no-bid contract.

We have analyzed this engagement letter (which serves as a contract) and found that it has serious flaws that will not likely lead to the transparency sought by Council or residents regarding the DBPD’s extensive participation in the Military Surplus Program (1033 program).

1) The development of this engagement letter with TGM followed a problematic event where a town Commissioner who has no relation to the TGM review and has no oversight role of the Audit Committee interfered with the Committee Chair to change the scope of the engagement letter. On December 6, 2017 we wrote the Mayor (Attachment B) documenting Mr Bauer’s interference with the Committee and the contract with the auditing firm TGM. We produced an email from the Audit Committee Chair Lawrence G. Silver documenting interference through a call from Mr. Bauer to change the scope of the project and to change the engagement letter, relaying threats or concerns about lawsuits if certain Departments were focused on. Mr Silver wrote to the Audit Committee:

”the letter is being revised…(third version)... as it currently focuses on the financial reporting of three departments...I have been informed by ‘the town’ due to the lawsuit...I discussed this with Roy at TGM and now the AUP will be more in the form of an internal review.” (Attachment C)

It is not disputed that Mr. Bauer, a commissioner who was elected to his first term on Council less than 90 days prior, was the one who called Mr. Silver on behalf of “the town.” And it is not disputed that Mr. Bauer had no authority to speak on behalf of “the town.” Mr. Bauer’s efforts are documented above as having influenced the scope of the TGM work to be different than approved by the Town Council, as demonstrated in the Audit Committee chair’s quote.

The Mayor failed to take any action on our December 6, 2017 letter containing evidence of Mr. Bauer’s interference based on the Silver email. Instead, once the engagement with TGM began for an “agreed-upon procedures review” (not an audit or “focus on financial reporting” as Mr. Sliver reported were the prior parameters) Mr. Bauer made a presentation on January 13, 2018 before council in defense of all aspects of the Police Department’s participation in the military surplus program. DCA has released the rebuttal to Mr. Bauer’s factually-inaccurate presentation, and DCA’s report presented the facts to rebut each and every one of Mr. Bauer’s false claims, footnoted each of the actual facts with 46 footnotes and it is available here. Mr. Bauer’s presentation was placed on the Town website, where it remains today, and has not been corrected even though its claims have been documented as false. It was the only information offered by the DBPD or the Town Council right at the time TGM began interviewing the town officials in its limited review.

2) The TGM letter (attached) defines the limit of the contract in such a manner as to minimize the chance or obligation for any accountability as follows:

“we make no representation regarding the sufficiency of the Phase 1 procedures either for the purpose for which the agreed upon procedures report has been requested or for any other purpose."

“agreed upon procedures do not constitute an examination or review, we do not express an opinion on the subject matter.”

“ an agreed upon procedures engagement is not designed to detect instances of fraud or non- compliant with laws or regulations.”

3. The TCM engagement letter contract identifies the wrong federal program, it refers to the "Federal Surplus Property Program (FSPP)" which is completely separate and distinct from the Military Surplus Program (1033), the latter of which is the program which Dewey Participates in to obtain the military equipment that has been discussed in the Walton report and since. To wit:

The Federal Surplus Property Program (FSPP)


The Military Surplus Program (1033):

They are entirely different programs, nothing to do with each other, with different rules, and the recipients are distinct. It is worrisome if an auditor starts with such a mixup and that a $12,000 contract was signed identifying the wrong program; it would clearly not be enforceable or hold the parties to its other provisions should there be a dispute.

4. This TGM engagement clearly is not any type of audit, despite repeated claims by some Council members, and all discretion of reviewing even basic documents is up to the firm (TGM) that has audited Dewey for many years without finding out or accounting for the off-budget accounts that triggered the Council’s motion of November 11, 2017 requesting an audit. Finding an objective independent audit firm which has not been involved before with Dewey Beach would be the necessary and obvious choice.

5. There are no affidavits being required, no sworn statements, nor any method indicated (such as signatures) to seek or determine accuracy of any statements made to TGM. That in itself will provide ripe opportunity for an inaccurate report. Many of those interviewed were identified by the Walton Report as having made false statements even under their signatures, including the Chief of Police, the Lifeguard Captain, and the Building inspector. The veracity of these individuals is not only in question; the individuals were identified by an outside attorney, Mr. Walton, as having made statements under their signature that conflicted with testimony of others and had no demonstrable basis other than being done for retaliatory purposes.

6. The letter provides no contractual responsibility to review some key documents. The engagement letter states [emphasis added] “ (4) as deemed necessary under the circumstances, a) compliance requirements…under the FSPP [SIC] b) ownership proof…under the FSPP [SIC] c) Insurance considerations…under the FSPP [SIC] d) off balance bank statements… e) cash received from assets sold… f) who assumed the repairs and storage cost.

7. TGM’s involvement is problematic or worse. It must be noted that the contractor TGM is one and the same which “missed” the fact of the Dewey Police Department’s off-budget account, termed a “slush fund” by the Police Department for at least three years, or longer. There are four of these off budget accounts that they missed! It was only identified by the Walton Report that came out September 2017. The need for a separate audit firm is discussed in point #4 above.

In conclusion, the engagement letter does not create a contractual responsibility for TGM to produce a review of the serious matters that arose out of the Walton report and were addressed in a November 11, 2017 Council resolution. That is likely due to interference by Commissioner Bauer at the commencement of this effort. For now we will assume that the contractor will review the correct federal program (LESO 1033 not FSPP). TGM has prior issues due to having entirely missed the accounts and facts that the Mayor now says everybody knew or should have known. The interference with the TGM engagement by Mr. Bauer is a matter of record, as I notified the Mayor prior to this engagement and he did not respond. Such interference is wrong and the resulting work product has been impacted by Mr. Bauer’s ex-parte communication and report to Council with demonstrably false information about the 1033 program.

We urge the TGM engagement letter be revisited for the above reasons, and for it to be rewritten and executed with the proper program names, parameters, and scope of work prior to (and excluding) Mr. Bauer’s interference, and then rebid to find an alternative audit firm which can objectively execute its role for the town residents. Should TGM wish to present a preliminary report we do not oppose it, but it should be stated as preliminary on the document and indicate that the effort to obtain a comprehensive audit is required (not at the discretion of its findings or TGM) to be pursued by the Town commissioners. If this does not happen and TGM issues a incomplete report, that is of no value to the town or the residents other than to delay and minimize the need for accountability.

We urge the Council to take these matters of accountability seriously, and make the necessary changes.



Jeffrey C. Smith
Volunteer Coalition Director, Dewey Citizens for Accountability


Attachment A - TGM Group Letter of Engagement - December 19, 2017
Attachment B - Jeffrey C. Smith Email to TJ Redefer - December 6, 2017
Attachment C- Larry Silver Email Re: AUP Letter - December 3, 2017