WOONSOCKET, R.I. (WPRI) -- The accounting firm that audits Woonsocket's city finances abruptly quit this week, informing municipal officials that they have "lost confidence in the integrity of city management."

Hague, Sahady & Co., a certified public accounting company, took the highly unusual move of ending its contract with the municipality midway through an audit. In a letter explaining the decision, company leaders laid out a series of problems they have faced trying to complete their work.

"We have reached this decision reluctantly and after substantial deliberation," Mary Sahady, a principal at the firm, wrote in the letter dated Tuesday.

Sahady said the city has been consistently late in providing financial information and still hasn't handed over more than 50% of accounts that need to be reviewed. She also highlighted accusations city councilors leveled against her firm earlier this month.

"You should take steps to retain a new auditing firm as there are a number of accounting matters that require immediate attention," Sahady added, citing the city's still-pending annual audit for the fiscal year that ended nearly a year ago, as well as corrective actions that are needed to address issues raised in past audits.

The sudden resignation has taken local officials by surprise. The city is already months late submitting its annual audit to the state, which is designed to inform state officials about the health of the city's finances. The reports -- typically due by Dec. 31 -- also help local leaders better understand their financial position when devising annual budgets.

City councilors are currently in the process of vetting Woonsocket's next budget for the fiscal year beginning July 1, and some say they don't have a good handle on the city's underlying finances.

"I don't know how I'm voting on a budget when I have no idea if there are deficiencies somewhere," Councilman Brian Thompson said during a meeting with the auditors last week. "How do we get here?"

Councilors also accused the former mayor, Lisa Baldelli-Hunt, of influencing the results of past audits. The annual reports are meant to be done completely independently, and the auditors took issue with the claims, saying Baldelli-Hunt was never involved in their reporting.

The auditors also said Woonsocket doesn't have enough financial staff to adequately keep track of all the money that flows throughout City Hall. In her letter, Sahady specifically highlighted different federal programs, including the Community Development Block Grant, the HOME program and COVID relief funds.

Baldelli-Hunt last year steered $1.1 million in HOME program funds into a highly controversial land deal between the city and her former business associate. After Target 12 first reported about the deal in November, city attorneys quickly moved to reverse the transaction. Within weeks, Baldelli-Hunt resigned after a decade as mayor, citing health reasons.

The staffing shortage is nothing new, however.

R.I. Auditor General David Bergantino cited a lack of staff as a concern in letters he sent to Woonsocket leaders last year, and the city has since tapped former Cranston Mayor Allan Fung to help sort through regulatory issues. (Fung is now an attorney in private practice.)

“The continued late submission of audited financial statements is still a great concern to me,” Bergantino wrote in a letter to the new mayor, Christopher Beauchamp, on April 3. “As previously suggested, I highly recommend the consideration of retaining additional resources to support the new city finance director with day-to-day accounting functions and the fiscal year-end closing process.”

City officials now have to figure out how to move forward without outside auditors in place, and Bergantino told Target 12 on Wednesday that the development puts the city in a "tough bind."

"I'm in a holding pattern to see what the two parties can work out," he said.