Knox clerk says she learned from audit that found she failed to make timely deposits and accurate reports

Enterprise file photo — Noah Zweifel

Town Clerk Traci Schanz signs her name after being sworn in on Jan. 1, 2020, while Supervisor Vasilios Lefkaditis, right, looks on. Both are implicated in a recent state comptroller’s report of an audit that uncovered more than $3,000 in unremitted funds.

KNOX — Knox Town Clerk Traci Schanz failed to send more than $3,000 in collected fees to whom they were owed over a two-year period, while the Knox Town Board failed to provide the legally required oversight that likely would have caught those errors according to a July 31 report from the New York State Office of the Comptroller, which conducted an audit of the town.

While the errors are substantial, the report indicated that funds were deposited appropriately, if late, and not lost or stolen.

“There was no fraud, no theft, no misdealings whatsoever,” Knox Supervisor Vasilios Lefkaditis told The Enterprise in an email on Tuesday. “For the most part there were merely missed deadlines that we were unaware of.  The audit was a great learning experience and very helpful.”

“I am grateful for the audit,” Schanz told The Enterprise in an email. “That may sound strange, but the auditors taught me things I was unaware of. Stepping into the Clerk’s position has been an extensive and continual learning curve. The auditors were extremely helpful in clarifying certain deadlines and filing procedures/requirements. The Supervisor and I have since put procedures in place to follow the auditor’s recommendations.” 

The audit looked at financial material from Jan. 1, 2018 through Jan. 21, 2020, with the objective of determining whether Schanz “recorded, deposited, disbursed, and reported all money collected timely and accurately.” 

The audit stems from a preliminary audit that was carried out after Knox resident Brigitte McAuliffe complained to the comptroller’s office that Lefkaditis did not file the town’s financial reports for 2016 and 2017. The preliminary audit was completed in February.

“We did not identify significant concerns with the Supervisor’s records during audit planning,” Deputy Secretary for the State Comptroller Tania Lopez told The Enterprise. “The risk we identified during audit planning was with the Town Clerk.” 

Lefkaditis failed to file the town’s 2018 financial reports as well, even though the deadline for that report had been extended from March 2019 until May 2019. The 2016 and 2017 reports were also filed in 2019.

The town’s 2019 financial report was not filed on time this year, either. On June 10, Lefkaditis told The Enterprise that he was focused on the safety of residents and town employees during the peak of the coronavirus quarantine period in New York State, and that the report would be filed shortly after that date. The report was originally due in March, but the comptroller’s office granted an extension to May. 

Lefkaditis told The Enterprise on Aug. 4 that the 2019 financial reports are “still being compiled,” restating that the coronavirus pandemic has “slowed operations down significantly.” 

When asked over email if the audit has prompted any effort to be more proactive in dealing with fiscal malfeasance, Lefkaditis said, “There’s no need.  The Town has never in its history had any material financial flaws and the audit recommendations serve the Town well in helping smoothing out any rough edges like they did in 2012 and more recently in 2020.”

Lefkaditis later described the most recent audit as “a pleasurable experience,” and said that the auditors were “professional, helpful, and efficient, and having them there for five months was a big benefit.” 

Findings

The audit found that, in addition to failing to send $3,161 to the appropriate sources — mostly the supervisor’s office, but also the Department of Agriculture & Markets, which is owed $7 — Schanz did not deposit 367 collections totaling $22,586 within the legally required timeframe, and did not report or remit collections to the supervisor within the legally required timeframe for 21 out of the 24 months that were analyzed. 

Remittances to state agencies like the Department of Agriculture and Markets and the New York State Department of Health were frequently late.

“Had the Board performed the required annual audits,” the report reads, “it may have recognized the deficiencies in the Clerk’s records and procedures and brought them to the Clerk’s attention to encourage corrective action.”

The report indicates that the various failings were the result of purported ignorance of the law on the part of both the clerk and the town board. 

Knox’s counsel throughout the examined period was Javid Afzali, of Bond Schoeneck & King, which now represents the town of Berne, with Afzali as lead counsel. Afzali resigned as Knox’s attorney in April and was replaced by Michelle Storm, of Monaco Cooper Lamme & Carr.

“It should be noted that another finding resulting from this audit was that the tax collector is to remit proceeds to the Supervisor weekly,” Lefkaditis wrote to The Enterprise. 

“The town was unaware of this and it was never done that way in the past,” Lefkaditis wrote. “Rather the tax collector would wait until all or most of the tax monies were collected and then remit one large check to the supervisor.  This is another example of an administrative error that had no effect on the Town and was remedied by the recent helpful audit findings.”

When asked if his faith in Schanz was damaged by the audit’s findings, Lefkaditis said “absolutely not.”

“Traci is very bright, personable, organized, overly capable and now better informed,” Lefkaditis said. “She’s a pleasure to deal with.”

Lefkaditis also denied that he felt Afzali should have noticed failure to adhere to municipal procedures laid out in the state laws.

“[It] it was merely a learning curve much like starting any new job,” Lefkaditis said. “But unlike a new job there [is] no HR or on-site training. When training classes are available and scheduling permits, we send newbies out to be trained.”

The report says that Schanz did not perform bank reconciliations or accountability analyses since she took office on Jan. 1, 2018 (she was re-elected for a two-year term in 2019). Schanz told auditors that “she did not make the time and did not receive training on how to complete an accountability analysis.”

“Preparing bank reconciliations and accountability analyses are critical procedures that serve to document the status of money held by the clerk and provide a means of demonstrating the clerk is properly addressing her custodial responsibilities,” the report reads.

The report details the various errors Schanz made in remitting collections to the supervisor, including: a $1,681 underpayment in August 2018, which resulted from an inaccurate report, and an $830 underpayment in December 2018, which also resulted from an inaccurate report printed early in the month that preceded eight collections made later in the month.

In total, the comptroller’s audit found that $2,670 was due to the supervisor, and $7 is due to Agriculture and Markets. Of the total unremitted fund balance, $473 was left over from the clerk preceding Schanz, Tara Murphy, while $11 did not have a known source. Lopez told The Enterprise that it is also unknown to whom the $473 is owed.

Murphy could not be reached for comment.

Most of the collections that Schanz failed to deposit on time were cash collections, the report said, while check collections were deposited almost immediately with the aid of a remote check-cashing machine. Clerks are required to submit collections once they exceed $250 within 3 business days, while Schanz’s deposits were up to 32 days late, the report said.

Going forward

The comptroller’s report concludes with five recommendations for the town clerk and one recommendation for the town board moving forward, and contains a copy of a letter sent by Lefkaditis that indicates a willingness to comply with all six recommendations. Lefkaditis described them to The Enterprise as “commonsensible, basic, and informative.”

The recommendations are:

— That the town clerk “Deposit all collections within three business days after the total exceeds $250, as required by Town Law, and retain supporting documentation for all deposits;”

— “Remit collections to the Supervisor and other agencies accurately and within the required time frames;”

— “Perform monthly bank reconciliations and accountability analyses to ensure errors are detected and corrected timely;”

— “Turn over the unremitted cash balance to the Supervisor or other agencies as owed. Consult with the Town’s attorney for remittance of any unknown liabilities;”

— “Obtain training on the financial responsibilities of the Town Clerk from the State Comptroller’s Training Academy and/or The Association of Towns’ training manual;” and

— That the town board “Conduct or obtain an adequate annual audit of the Clerk’s records and reports.”

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