BERNE — The Berne Town Board has not been upholding its fiscal responsibilities to taxpayers, according to the Office of the State Comptroller in a recently released audit report that details serious financial mismanagement.

The report concluded that the town board “exceeded its authority” when it allowed Supervisor Sean Lyons to pay bills without town board review beginning in January 2020 — which is when GOP-backed candidates took control of the board —  and that financial records were sorely inaccurate as a result of this and other issues. 

Further, the report found that poor credit-card management led to late fees and interest charges totaling $468 — the sum of the total financial loss to the town.

Altogether, the audit found no instances of misappropriation. 

The audit period formally spanned Jan. 1, 2020 through Dec. 31, 2020, though auditors reviewed documents from December 2019, as well. It was triggered by a “combination of information received from various sources, like taxpayer complaints, as well as the conducting of a risk assessment,” according to Tania Lopez, deputy press secretary for the Office of the State Comptroller. 

The Enterprise reported that an audit was underway last September, after Councilman Joel Willsey, the sole Democrat on the town board, lodged complaints with the comptroller’s office about how the town’s 2020 budget was constructed. The audit did not address those concerns, however. 

Instead, it focused on town board oversight and analyzed financial materials from September 2020 — selected “to capture a month within the fiscal year,” the report states — as well as December 2019 and December 2020, which were selected for the year-end reports.

Deficiencies

The audit discovered that the town’s senior accounting clerk, Andrea Borst, who is referred to in the document as a bookkeeper, did not perform bank reconciliations because she was “working from home and had multiple tasks,” according to the report. Borst is paid $28,255 annually, per the town’s 2021 budget.

“As a result, the bookkeeper had to perform several months of bank reconciliations to catch up when we requested the bank reconciliations for September 2020,” the report says. “However, without accurate and timely reconciliations, the Board cannot be sure that all transactions are properly recorded.”

Auditors recalculated the book figures “to include unrecorded interest earned, deposits and withdrawals for each month reviewed,” and found that, as of Dec. 31, there were discrepancies between the reported figures and the actual funds, with General Fund Operating overcounted by $135,840, Payroll Clearing undercounted by $8,736, and Health Insurance-Trust undercounted by $31,659.

“Based on our reconciliations, these differences were likely caused by transactions not being recorded in the accounting system resulting in the book balance being overstated,” the report says.

The report states that Deputy Supervisor Dennis Palow had signed four bank reconciliations without adequately reviewing them, explaining that Palow told auditors that “he only looked at bank statements and did not review and trace information from the bank reconciliation sheets to balance sheets or general ledger reports.”

“The Deputy began reviewing bank reconciliations in December 2020 when the bookkeeper provided him with all prepared bank reconciliations for the year,” the report says. “However, the Deputy did not perform a proper review of the bank reconciliations to make sure adjusted bank balances agreed to general ledger reports so the bookkeeper could resolve the differences. 

“The bookkeeper and Supervisor said they were unaware of the benefits of the independent review of bank reconciliations,” it says.

Palow received a $1,500 pay raise in the 2021 budget to accommodate his responsibility to sign documents in lieu of the supervisor.

The audit also reviewed expenditure claims made between February and August 2020, which accounted for $166,792 across 170 claims, none of which, the report says, were audited by the entire board.

“All 170 claims were listed on six abstracts but only three abstracts (showing 161 claims totaling $150,731) were recorded in the Board minutes,” the report says. “Of these 161 claims, 144 with payments totaling $148,200 cleared the Town’s bank account before the monthly Board meeting.”

The report says that the late fees and interest charges on credit-card payments were a result of untimely processing and lack of board review. In addition to the $468 paid in interest charges, Borst reportedly made an erroneous duplicate payment of $540 toward the credit-card balance, though this was not technically a monetary loss as the amount was credited, Lyons told The Enterprise this week.

“While any oversight is not favorable, $468 dollars in a 2 year time period where millions of dollars had been moved [is] not what I would consider huge losses for the town,” Lyons wrote in an email answering Enterprise questions. “This was not exactly a bookkeeper issue but rather a lack of policy for Credit Card use and payment (the Board approved a new Town Credit Card policy a few months ago). We have also worked with the creditors and moved ‘due dates’ after our monthly meetings.”

The audit also found that the town board “did not annually audit or cause the audit of the records of the Supervisor, Town Clerk, Tax Collector or Code Enforcement Officer.” Lyons reportedly told auditors that he was “unaware” of this requirement.

Town’s official response

In a written response to the findings that was included in the audit report, Lyons said, “I cannot argue the board did not provide adequate oversight of financial operations based on the summary of your audit and the letter of the law, but I would assert that the financial operations of the Town received better than adequate oversight of the claims and financial records during my 3+ years as Supervisor with 7 different board members for many reasons.”

Lyons went on to say that claims were available for the board to review and that abstracts were emailed to the town board along with the supervisor’s monthly report before meetings. 

“At every board meeting the Board is asked if they have reviewed the Budget Transfers, the abstracts for each claim, and the bills to be paid for the month, then the board is asked if they have any questions, comments, or concerns with the Budget Transfers, the abstracts for each claim, and the bills to be paid for the month,” Lyons wrote, ending with an acknowledgement that all these documents are approved by a vote.

He also stated that the town’s annual update document has been accepted by the state comptroller each year he has been in office and that the audit did not find any instances of misappropriation.

“As we all know,” he wrote in his response, “2020 was marked by the covid pandemic that made normal operations of town’s business all but normal that lead to a number of new challenges in completing simple tasks such as Bank Reconciliations in a timely manner, added to the fact that the Account Clerk position charged with these duties has been vacant since July 2018. 

“As of 8/11/2021 the administrative assistant/account clerk position has been filled and immediately assigned the task of bank reconciliations that shall be provided to the board post reconciliation each month,” Lyons continued. “... The supervisor would also like to point out the account clerk did have 67% of bank statements complete and that 74% were accurate and prepared properly.” 

Lyons also took issue with the comptroller’s office justification for focusing on the months selected, writing that he believed they were chosen because of “insight from the audit requesters as [redacted] has repeatedly called these months as deficient reports.”

Lyons told The Enterprise this week, “It ... seems odd that the auditors would pick separate months for board reports and bank reconciliations, almost as directed by those that called for the audit, former councilmembers [Dawn Jordan and Karen Schimmer] and Mr. Willsey.” 

Jordan and Schimmer are both Democrats who left office at the end of 2019.

Lopez told The Enterprise that the correlation between the comptroller’s focus and that of Democratic board members was “coincidence.”

Lyons also said that it’s “important to note that this audit period covers two board majorities,” both the Democrat-controlled board of 2019 and the current GOP-controlled board, which was inaugurated at the same meeting where the motion to allow the supervisor to pay bills without review was passed. Several other illegal, but otherwise unrelated motions were also made at that meeting.

Willsey had abstained from that vote, as he frequently does, while the GOP-backed members of the board all voted in favor. 

“[The audit report] makes it pretty clear why I alway abstain from spending votes,” Willsey told The Enterprise this week. 

Lyons told The Enterprise that the town’s attorney at the time, William Conboy III, had reviewed the motion. He also said that the town’s current attorney, Javid Afzali, of Harris Beach, made no comment about it anytime after he was hired by the town in April 2020.

The same motion was made at the January 2021 reorganizational meeting and passed along similar lines, though Willsey voted against it instead of abstaining.

The town board has since rescinded that motion.

The town now has just under 90 days to come up with a corrective-actions procedure, which Lyons said will be done after budget season but before the Dec. 16 deadline.