Craig Wolf • Poughkeepsie Journal • August 21, 2010
FISHKILL —A state audit says the town government has been spending more than it’s been taking in for several years, leading to an overall deficit of $4.9 million from 2008 through February.
The audit was sent out Friday by state Comptroller Thomas DiNapoli’s office and a copy was obtained by the Poughkeepsie Journal.
The audit said the deficit was equal to about 35 percent of the $14 million 2008 budget. It said that ”several years of operation where expenditures exceeded revenues” led to deficits in three of the town’s major operating funds. The town covered the gap by juggling money among funds.
It took money from certain funds to bolster shortfalls in its main operating funds, but some of those transfers weren’t appropriate because the money was reserved and needed for the purposes of those funds, the state said. The town has 33 funds for general, highway, sewer, capital and other purposes.
Town Supervisor Joan Pagones said Friday that cost-cutting programs are well under way, that the interfund loans are being repaid and that a five-year plan for recovery has been prepared. She blamed a bad economy in the past few years for sudden drops in town revenues, saying that because the national economy turned down, it had an effect that “rippled throughout ” municipalities.
Pagones is also budget officer and chief fiscal officer. She was first elected supervisor in 1991.
Town officials were criticized for the manner of borrowing from various funds since 2006 to bolster the town general and highway funds. The comptroller’s staff noted the law requires that if such interfund advances are made, they must be done like budgetary transfers and must be repaid by the end of the fiscal year. But the report says “board minutes did not provide any indication that the board authorized any of these interfund loans.” And, it said, “These loans were not repaid by the end of the fiscal year, as required by (General Municipal Law).
“ Town Comptroller Robert Wheeling said it’s true they weren’t repaid by the end of the year, but that plans are in place to repay the funds.
By the end of 2008, the town had loans due to other town funds amounting to $10.6 million, the audit said.
About the loans, Pagones said Friday that “every single one was made with board approval” and that some transfers don’t require it. “I think many of them have been repaid and those that aren’t will be repaid shortly. We intend to repay them,” she said.
The audit said despite some cost-cutting, town officials “have not developed a comprehensive multi-year plan to address the deficits and cash flow problems.
“ Such a plan is drafted, Pagones said. Wheeling said it was in the hands of the town’s own auditing firm for review.
Pagones disputed the comptroller’s $4.9 million deficit figure, differing with the state’s method of figuring it and saying that the town’s auditors, Sedore & Co., also had disagreed.
Wheeling said that if all 33 of the town’s funds were considered, including some that had surpluses, then the overall deficit was less. Pagones said it was about $3.6 million at the end of 2009.
Troubles continued in 2009, when older interfund transfers were not repaid but increased by $100,000, the state auditors noted.
Lack of controls
The board was criticized for lack of controls and monitoring and for failing to amend budgets when actual revenues did not meet estimates. Budgets were unrealistic in estimating revenues, the comptroller said.
“The board and supervisor have not adopted realistic budgets to effectively control town operations,” the audit said. Cash flow problems have resulted causing a reliance on extensive loans from one fund to another.
The board and supervisor used “restricted moneys from trust funds and capital projects,” the audit said.
The law, the auditors said, restricts trust funds, like the town’s Affordable Housing Trust Fund, to purposes outlined in the local law adopting it. About $269,000 was borrowed out of this fund. Pagones said borrowing was OK because the housing goals include related infrastructure work and that it will be repaid.
In November 2008, the town issued bonds for $7 million for the Rombout sewer project, but then transferred $1.2 million from the proceeds to the townwide general fund.
“These transfers were an improper use of borrowed moneys,” the audit said. “Local Finance Law does not allow such debt proceeds to be used to finance operations.
“ In some cases, such borrowings among funds created taxpayer inequities, the auditors said.
“For example, moneys raised in water and sewer districts through bills to customers were not used solely to finance those operations. Instead, taxpayers outside those particular districts benefitted from the sewer and/or water revenues collected. Therefore, water and sewer rates in some town sewer and water districts were higher than necessary to fund operations,” the audit said.
Other findings include lack of proper controls on cash receipts, insufficient separation of responsibilities and some security issues regarding town computers.
Pagones said she was proud that the state “found absolutely no instances of misuse of funds or malfeasance of any kind.
“ The state report censored part of Pagones’ written response under the heading of “cash receipts” noting, “Because of the sensitivity of this information, certain vulnerabilities were not discussed in this report but have been communicated separately to town officials so they could take corrective action.
“ The audit said the town lacks an effective internal control system to adequately safeguard cash receipts in the Building and Zoning, Recreation and Planning departments. For example, there is a lack of segregation of duties between billing and collection functions.
Pagones said, “The town must operate on a limited budget and cannot afford to hire additional staffers whose main duty is to ensure segregation of duties at all times.
“ The audit staff said there are other ways, including reassigning duties of existing staff, to create checks and balances.
No improprieties were found, they said, but “there is a high risk that moneys may be misappropriated and go undetected.
“ The Fishkill Town Board is set to meet at 10 a.m. today at Maurer-Geering Park’s pavilion. The audit is not on the agenda, but a further cost-cutting program is — a retirement incentive program.
Reach Craig Wolf at cwolf@poughkeepsiejournal.com or 845-437-4815.