Thursday, October 01, 2009

The Awful Audit

------ In the judgment of auditors from the State Comptroller’s office, the Village of Catskill still is not being governed in a sound business-like way. Its Trustees and President “have not provided effective oversight” of the Village’s $6million operations. “Significant weaknesses” in “budgeting, accounting, reporting, cash management, and claims adjustment,” identified in an audit five years ago, have not been remedied. “Poor planning,” “unrealistic budgeting” and other “inadequate management practices” have depleted the Village’s operating funds” and its “ability to operate effectively” for its 4400 residents.

------Those words appear in a report—2009M-53,“Fiscal Oversight and Internal Controls Over Selected Financial Activities”--compiled by the Albany office of State Comptroller’s Division of Local Government and School Accounting. They come on the heels of an equally stinging report (2004M-11,Village of Catskill) that was issued in 2005. (See

======Among the auditors’ assessments:

-- *Lax supervision. The Board “failed to ensure that the Clerk-Treasurer fulfilled her accounting and reporting duties.” The Village’s independent accountant needed to make “millions of dollars” in “additions and subtractions” to achieve an accurate2006-07 financial report. Clerk-Treasurer Carolyn Pardy did not properly record all transactions, so that the figures in Village bank accounts did not match figures in the Village ledgers. And the Trustees failed to perform their required yearly audit of the Clerk-Treasurer’s records.

--- *Tardiness. “The Clerk-Treasurer has not filed the Village’s annual financial reports with the State Comptroller in a timely manner. As of May 18, 2009, the Village had not yet filed its…report for the fiscal year ending May 31, 2008…. Similarly, for the previous three fiscal years, the Village did not file its annual financial reports until eight to 18 months past the end of the fiscal year.” The Trustees also were slow to apply for a $460,000 bond anticipation fund related to a special project. They did not apply until the project was “substantially completed,” so they were obliged to draw on operating funds, which were dangerously depleted. Meanwhile, about half the moneys that come in to the Village do not get deposited within the prescribed ten days.

--- *Raiding. The Trustees have regularly spent more out of general funds than they anticipate or receive from property tax revenues. To meet the shortfall they borrow from the water and sewer fund accounts, whose revenue comes from user fees. Such borrowings should be repaid within a year, with interest. Instead, the Trustees have just cancelled the debts. That practice, say the State auditors, raises questions of equity, because the water and sewer funds are supposed to be used for water and sewerage. .

--- *Poor control over receipts and outlays. More than half of payments made from Village funds have been made in the absence of “proper approvals, required bids or quotes, and/or supporting documentation. These control deficiencies place the Village at a significant risk of the mismanagement, loss, or theft of Village moneys.”

--- *Inertia. “Although the Board and other Village officials received monthly reports from the Clerk-Treasurer that compared budget amounts to actual revenues and expenditures, the Board did not effectively use these reports to monitor the budget, limit expenditures to available appropriations, or modify the budget when the need arose. The Village’s repeated over-expending of appropriations violates Village Law and, together with the unrealistic budgeting practices, has placed the Village at an ongoing risk of deteriorating fund balances and fiscal stress.”

--- *Insecurity. “Weaknesses in the Village’s controls over server room access, disaster recovery planning, and data backup procedures” pose a “risk of unauthorized access and/or modification to Village data as well as potentially costly disruptions to Village operations.”

----- Before issuing their report, the State auditors observed the custom of inviting their targets to review and respond to a draft. Village President Vincent Seeley declared, in a letter appended to the report, that some of the cited defects have been corrected, others are being corrected, and some (especially the warnings about technical vulnerability and about inter-fund transfers) are over-stated or spurious. Most specific of the changes mentioned by Mr Seeley was a decision to obtain monthly, rather than just yearly, monitoring by the Village’s independent accountant.

Mr Seeley recently gave a talk at the Senior Center about the audit report. As reported in The Daily Mail (9//23), he said that while some Village purchases were not properly documented, all were legitimate. Moreover, the State’s outside auditors lack “understanding” of “what it really takes to run a growing municipality.” He also contended that the cited failures of the Clerk-Treasurer and the Trustees to meet their responsibilities fortify his case for hiring a Village Manager.

Mr Seeley also responded to a draft of this account of the audit report. As additions to his previously reported comments, he said that “we have a low debt ratio”; that “we are investing in the future and spending money to upgrade our infrastructure”; that “every municipality is experiencing double digit percent increase in expenses with no additional revenue”; that “we have outgrown our current corporate structure and there is no easy way to repair it”; and that, since “you can’t rely on a part time board to run a 5 million dollar business,” “a Village manager or comptroller would be the additional resource needed,”

Another way of looking at the problem, and of seeing possible solutions, needs to be aired. It consists of pondering the possibility that the Village of Catskll is too small financially to sustain professional business management. That hunch gains a measure of plausibility from the observation that the Village evidently has been ill-managed for several years running even though its part-time Trustees have been diligent and generous with their time. It gains further plausibility from recent State Controller audits of other small municipalities: the Villages of Tannersville, Coxsackie and Tivoli, and the Town of Cairo. Each of those audits depicts glaring managerial deficiencies.

------Such findings may serve to fortify the case for consolidation. If the present Village and Town were one municipality, then, while its governors still would be part-timers, its operating budget might be big enough (around $11 million per year) to sustain, as well as to need, professional stanards of business management.

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