County comptroller tells Rensselaerville: “You need an accounting system”

RENSSELAERVILLE — County Comptroller Michael Conners said Tuesday that the town has inadequate internal controls.

“You need to have an accounting system, because you don’t have one right now,” Conners told the town board at a special meeting. “You cannot continue doing what you’re doing.”

Six months after his office offered to review Rensselaerville’s finances at no cost to the town, Conners has completed his audit, and came to Town Hall Tuesday night to give a preliminary report to the town board.

The audit followed several years of citizens raising questions about the town’s finances and bookkeeping practices.

Supervisor Marie Dermody, who took office in January, said after Conners’s staff that she, Clerk Kathleen Hallenbeck, and Bookkeeper Andrea Cornwell had met with Conners’s office to discuss the purchase of a municipal software system for accounting; Conners said after the meeting that they were looking into a system called MUNIS, which would assist with putting together town budgets.

Conners also told board members that they are fortunate to have an “active and involved citizenry.”

“I don’t know if you realize how lucky you are in Rensselaerville to have people who are really interested,” said Conners. “But I can tell you that we have budget hearings in the county, a $600-million budget, and you don’t have anyone there,” he said, adding, with a laugh, “I’m sure, sometimes, you may not agree with me on that, but I think it is a real blessing.”

Challenges

Tony Fontanelli, who works with Conners, began the presentation by summarizing the report, starting with accounts payable.

“Deposits are not reported on a daily basis,” said Fontanelli. “Therefore, where was the money kept? The money was kept in a cabinet. Should it be locked in a safe? I would think so.”

Though the town clerk and deputy town clerk are the only people authorized to receive cash and checks or to give out receipts, this function was sometimes performed by other town employees, Fontanelli said.

The clerk’s system that records when people pay their taxes and pay for dog licenses is not connected to the general ledger system, Fontanelli went on.

“You’re going to read here that you can’t determine your financial condition in a timely fashion,” he said.

The comptroller’s office also found a duplicate payment of $7,586 to Carver Sand and Gravel in 2007, and the payments were made close to six months apart, Fontanelli said.

“A claim was filled out, and it was sent in, went through the process, everything looked good,” he said. “For some unknown reason, six months later, another invoice was sent in.”

This, he said, could be avoided in the future with proper accounting software.

“Our recommendation is…that you pursue this duplicate payment, because I’ve not seen the money come back as a credit memo, nor as a check.”

The town board should conduct an audit of claims every six months, as well as periodic external audits, Fontanelli said — “You should have a constant check on internal controls.”

On the other hand, the town’s system for disbursements, Fontanelli said, is effective.

About 20 minutes into the presentation, Conners arrived and took over.

He began by pointing out that the town had complied with only about a quarter of the recommendations in the 2007 audit by the Office of the New York State Comptroller.

“Bank deposits are made by the clerk, who also balances daily revenues,” Conners read from his report, adding, “You don’t want to have the person that handles the money be the person that reconciles your checking account. You want to separate those duties; it’s a check and balance. It’s critically important for handling finances to do that.”

There were many inconsistencies, Conners said, concerning outstanding checks in 2005. And different copies of annual financial reports, sometimes called annual update documents (AUD), he said, displayed different numbers.

Conners’s report lists close to a dozen other findings in reviewing the town’s bank reconciliations, including $40,000 that was transferred from the wrong account.

And, the town’s procurement policy is “de-centralized,” Conners said.

“There’s no encumbering of funds,” he said. “So, if somebody spends funds, but nobody knows they spent the money, and that money’s not encumbered, you can think that you have more money than you actually have, or you could have less money than you think you have available. You’ve got to follow the New York State procurement guidelines.”

The town is in good shape in terms of fixed assets, Conners went on.

“You’ve got a pretty good amount of rolling stock,” he said. “There’s no, currently, fixed-assets system in town; by the way, trust me, there’re a lot of other towns that don’t have it either, but there’s an easier way to look at this.”

Further, the town’s internal controls over records relating to funding received from the Federal Emergency Management Agency are inadequate and unorganized, and the FEMA clerk kept records at home that should not have left Town Hall; “When asked for supporting documentation on a CD in the amount of $204,399, the FEMA clerk faxed this information from home,” the report reads.

And the town has an abundant fund balance, one that would likely be criticized by the state comptroller’s office, as it did neighboring Berne’s unexpended balance. Conners got a laugh from the audience when he encouraged the town board to buy a snowplow if the town needed it; the town board has debated with the highway superintendent at recent meetings over how soon it needs to replace its heavy-duty truck.

“We wouldn’t bat an eye at $60,000 for a 10-wheeler with a winged plow on it,” he said. “You wouldn’t think twice about it; yup, need it, got to have it.”

In closing, Conners told board members they had their work cut out for them.

“There’s a lot for you to sleep on,” he said, “and if you want to sleep well, I’d do something about it.”