03 Oct Jon Cartu Announces Palermo’s financial practices criticized in state audit; re…
PALERMO — The town was recently cited by state Comptroller Thomas DiNapoli for not filing their annual financial reports, bureaucratically known as annual update documents (AUDs), in a timely manner in 2016, 2017, 2018 and for the town’s 2018 and 2019 books only being completed after a state audit began looking into these oddities in January 2020.
According to Tania Lopez of the Office of the State Comptroller, “While many local governments occasionally file an AUD untimely, it is not common for any group of municipalities, including small towns, to consistently file AUDs as late as the town of Palermo has done.”
Again, according to Lopez, DiNapoli found no indication of any misappropriation of funds, and no further investigation is planned, but certainly the town Supervisor Patricia Redhead and the town’s four-member board came in for some serious condemnation from the state’s top financial watchdog in his August report, and changes in the town’s financial procedures will be required.
Here are some highlights from DiNapoli’s report and the town’s official response to DiNapoli. Numerous requests made to the town clerk for interviews with the town supervisor or members of the board resulted in no word from any of them.
According to DiNapoli’s report:
The supervisor is responsible for maintaining the town’s financial records, should maintain an accurate and complete account of all funds received and disbursed, and deposit town funds within 10 days after receipt.
The supervisor is also responsible for providing monthly reports to the board summarizing financial activities. These reports should include a detailed statement of all money received and disbursed during the month.
Complete, accurate and timely financial information is essential for a board to make sound financial decisions.
New York State Town Law requires the supervisor to submit an annual accounting to the board on or before Jan. 20 for all money received and disbursed during the preceding year, unless an independent public accountant has been hired to audit the supervisor’s records within 60 days after the close of the fiscal year. As part of the annual accounting, the supervisor should provide the board with all supporting books, records, receipts, warrants, vouchers and cancelled checks or check images.
Furthermore, New York State General Municipal Law (GML) requires the supervisor to file an annual update document (AUD), which is the annual financial report, with the New York Office of the State Comptroller (OSC) within 60 days of the end of the town’s fiscal year (Dec. 31), unless an extension is granted.
When we first contacted the supervisor in December 2019, she told us her records were not current because of personal matters and that she intended to bring them up-to-date before our audit.
We began our audit on Jan. 7, 2020. At that time, the supervisor provided us with access to some records for 2018 and 2019 (e.g., payrolls, claims, check registers and bank statements), but the records did not include revenue spreadsheets or the general and subsidiary ledgers. The supervisor told us she finished the fiscal year 2018 ledgers, but needed to retain them to carry balances forward to complete 2019.
She gave us the 2018 general and subsidiary ledgers on Jan. 14, 2020, the 2019 general and subsidiary ledgers on Jan. 21, 2020 and the revenue spreadsheet for 2018 shortly thereafter.
We did not receive the 2019 revenue spreadsheet until Feb. 26, 2020. Once we were provided with all of the 2019 accounting records, we reviewed them and found they were up-to-date. We verified that the adjusted bank balances agreed with the general ledger cash balances. We also examined a sample of source documents for receipts and disbursements and found they were all entered in the ledgers.
During our review of the 2019 accounting records, we noticed that cash receipts were not always deposited within 10 days after receipt or recorded in a timely manner. We reviewed the town clerk’s and town justices’ monthly reports for 2019, traced them to the supervisor’s bank deposits and accounting records and found the supervisor typically made deposits about 35 days after receipt, on average.
Also, the September cash receipts totaling $4,487 were not deposited until Dec. (three months later). When funds are not deposited in a timely manner, it increases the risk that the funds could be lost, stolen or misappropriated. The supervisor typically recorded revenues at the end of each month. However, November receipts totaling $3,936 were not recorded until Dec. 31, 2019. When transactions are not entered into the accounting records in a timely fashion, the supervisor cannot report accurate financial information to the board, and the board will not have reliable information on which to base management decisions We also traced total 2019 disbursements from bank statements to the supervisor’s records and did not find any discrepancies. The supervisor did not routinely provide the board with reports showing cash receipts and disbursements each month or cash balances for each fund. The supervisor was unable to prepare these reports because she did not maintain timely accounting records.
We compared the December 2019 budget-to-actual report for expenditures to the general ledger and found that most (98%), but not all expenditures, were included on the reports. For example, the budget status reports did not include $12,992 of payroll fees and $11,048 of snow removal personal services costs.
Timely, sufficient and accurate accounting records are essential for the preparation of appropriate financial reports that help the board monitor and manage financial operations and assess and make decisions regarding the town’s financial condition. The lack of timely and accurate financial information could lead to errors going undetected and uncorrected and could also hamper the board’s ability to make sound financial decisions.
The supervisor was 841 days late in filing the AUD for the 2016 fiscal year.
After our fieldwork ended, the supervisor filed the 2017 AUD on March 17, 2020 (747 days late) and the 2018 AUD on April 10, 2020 (406 days late).
An annual audit of the supervisor’s records and reports helps the board fulfill its fiscal oversight responsibilities by providing it with an opportunity to assess the reliability of the town’s records and supporting documents. It also serves to identify conditions that need improvement and can provide useful information to help the board monitor the town’s financial operations.
Although the board annually audited the town’s Justice Court, it was unaware that it should also audit the supervisor’s books and records.
The supervisor told us she did not present her 2018 records to the board for an annual audit,…