Biddeford is facing ‘significant’ financial difficulties

During the March 4 Biddeford City Council meeting, acting city manager Brian Phinney provided the council with some concerning and significant updates regarding the finance department.

According to Phinney’s regular report to the council, the city could be facing:

• Potential penalties of $790,000 from the Internal Revenue Service;

• Penalties of roughly $350,000 from the federal Housing and Urban Development (HUD) regarding a 2019 grant for lead abatement.

According to Phinney, the city is also nearly three years behind on its regular audits. He said the FY 2023 audit should be completed this month.

Last year, the city council authorized spending up to $300,000 for an independent, forensic analysis of problems in the finance department. That report, Phinney said, is expected later this month.

Phinney praised the work of Gerry Matherne who was hired just a few weeks ago as the city’s finance director. “She is doing a fantastic job,” he said. “But we don’t have capacity down there.”

Phinney alluded to financial complications by telling the council: “You all know the conditions of the books.”

Phinney was appointed acting city manager on February 20, when the public learned that former City Manager James Bennett had been placed on administrative leave.

The city has gone through six finance directors in the last five years.

Below is the text of an email we sent to Brian Phinney today, seeking answers and clarifications regarding these issues. We have shared these questions with every media outlet that covers City Hall.

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Dear Mr. Phinney,

I recently watched the Biddeford City Council’s March 4, 2025 meeting, and I have a few questions regarding your update as acting city manager to the council.

I know this is an extremely busy time for you and city managers all across the country as you begin putting together the FY 2026 budget.

Further complicating matters are two vacancies in the Finance Department and a rather abrupt transition in leadership.

Considering all that, I thought (and Mayor Grohman agreed) that it may be helpful to put my questions regarding your recent report in writing.

Make no mistake, if you would prefer, I am more than happy to meet face-to-face and anticipate the interview would take less than 15 minutes.

Here are my questions:

Three-year delay on audit: According to your comments at Tuesday’s meeting, the city is nearly three years behind on its annual audit obligations, going back to FY 2023. How did we get so far behind?

Given that we have not gone through an audit, how can we possibly put together a budget of more than $40 million with any degree of confidence?

Why was this delay with conducting an audit not addressed sooner?

Can this situation adversely impact the city’s bond rating?

IRS Exposure: You also told the city council that the city may have “a considerable exposure” of $790,000 in penalties from the IRS. You said you are “negotiating with the IRS” but the city (combined with school department) could still face a $233,000 liability. Can you provide specific details about how this happened?

HUD funding for Lead abatement: You told the council that the city may be facing a $350,000 penalty for our failure to properly “close out” the 2019 grant. What does this mean, and how did it happen?

BerryDunn report: Last year, the council approved a measure to spend up to $300,000 for an investigation and report concerning irregularities in the finance department. You said you anticipate that report later this month. How much did we end up paying for those services, which are above and beyond the annual audit, which is typically performed by Runyon, Kersteen & Ouellette?

Misc. You told the council “you all know the conditions of our books.” Can you please elaborate and provide some details about that statement?

You indicated that there are now two vacancies in the city’s finance department, saying “there’s no capacity down there, but also praised the new Finance Director for her professionalism and accomplishments in just the last few weeks.

You said that you had an applicant interested in one of the vacancies but they decided not to accept the city’s offer. Can you shed any light on why the applicant declined the offer?

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