R’ville adopts $2.2 million spending plan, budgets for forensic audit next year

By Zach Simeone

RENSSELAERVILLE — At $2.2 million, the 2010 town budget looks to spend about $70,000 more than this year’s $2.14 million spending plan, and the board has budgeted for a forensic audit of the town’s government, which may be conducted in the coming year.

The amount to be raised by taxes is $1.2 million, about $60,000 less than this year. The tax rate will drop to $7.85 per $1,000 of assessed value next year, a 50-cent decrease from the current rate of $8.35 per $1,000 of assessed value.

The town board’s three Democratic members voted in favor of adopting the 2010 budget last week; Republican Supervisor Jost Nickelsberg voted nay, and Republican Councilman Robert Lansing declined to vote. Neither Nickelsberg nor Lansing had sought re-election.

Some audience members were vocal in their disapproval of the budget, and Nickelsberg and Lansing declined to support the plan when requests from residents for further discussion were silenced by Councilman Gary Chase.

“It’s not public comment time,” Chase persisted.

Councilwoman and Supervisor-elect Marie Dermody reminded the audience and Nickelsberg that the board had voted to close the public hearing on the 2010 budget at its Nov. 10 work meeting; after a motion from Dermody to close the hearing at that work meeting, she, Lansing, and Councilwoman Sherri Pine voted in favor. Nickelsberg opposed the motion, and Chase was absent from that meeting.

Nickelsberg had said last week that, despite the harsh national economic climate, the town is in good financial shape, but could have delivered more of a tax cut to town residents.

“It’s real solid — no debt, lots of equity, and we have several amounts in various pockets, dry powder capable of being used for some kind of calamity that may occur, stuff like that,” Nickelsberg said. “So, here, we’ve got a healthy financial picture, and we could have passed along a substantial tax cut to the taxpayer, and we just didn’t do it, and the taxpayer is going to get whacked on the state level or the county level.”

The town board has projected nearly $35,000 more in total revenues, totaling $836,140. But revenues for the general fund will decrease by more than $13,000.

“One of our sources of revenue is our sales tax we get from the county, and it’s down substantially,” said Nickelsberg. “So, what do you do about that? The rate isn’t going to go up. Retail sales are down, consumer spending is down, so, we can’t expect — nor do we expect — to get this year what we got last year.”

However, the town anticipates revenues from mortgage taxes to increase by $20,000, climbing 33 percent from the current budget.

“Our guess is that there is going to be greater turnover in homes, greater mortgage activity, and, therefore, greater revenues from that,” Nickelsberg explained. “All we can say is that, in light of the backdrop of the current economy, that we hope to see more houses bought and more mortgages taken out.”

Next year will also see a near-10-percent increase in the highway budget, up by about $105,000 to $1.1 million.

“Well, oil-related products, which is, of course, a lot of what we buy,” said Nickelsberg on what caused the increase. “Be it oil and stone added to the surface of the roads, be it asphalt, or just paving outright, it’s obviously a critical part of it, and those costs were up.”

The appropriated amount for hospital and medical insurance will drop by over $20,000 from the current budget — a 27-percent decrease — due to last year’s change in the insurance policy for town employees.

“We’re now on the Empire Prism Plan,” Dermody said this week, “which was a considerable cost saving to the town.”

Forensic audit

What with mysterious vouchers, a former supervisor who was arrested for stealing large sums of money from local charities, and a highway superintendent who has been accused of breaking state law by loading salt and sand from the town’s supply into a private citizen’s truck, Rensselaerville is a town with much controversy in its recent history.

Supervisor Nickelsberg has spoken at several town board meetings of the necessity for a forensic audit of the town’s government. Though there has been little talk at these meetings as to what exactly a forensic audit is, the phrase became increasingly prominent in January, when the town’s finances came under investigation by the Office of the Albany County Comptroller and the Office of the Albany County District Attorney.

Residents Robert Bolte and Ken Cooke, who have developed reputations as citizen watchdogs, came to the town board meeting this January with photocopied vouchers that recorded payments from the highway department that the supervisor and councilmen could not account for, and there was suspicion of foul play. Bolte, Cooke, and a group of other town residents had begun looking through town records the previous spring. [Cooke’s wife, Marion, was recently elected to the town board on the Republican, Conservative, and Independence lines; Bolte narrowly missed his bid for town board.]

During the budget discussion at last week’s town board meeting, Nickelsberg, with the support of a handful of audience members, made a motion to add $20,000 to the line for independent auditing and accounting, raising the total budgeted amount to $25,000. But no one at the meeting knew whether or not this would be enough to cover the cost of a forensic audit.

This week, Michael Torchia Jr., a certified public accountant, told The Enterprise what a forensic audit entails, and hypothesized a price range based on his experience. Torchia is a partner at Sickler, Torchia, Allen and Churchill, the firm that recently completed a risk assessment for the town, though the results have not been made public.

“When you do forensic work, you’re digging down into more details of transactions, and a lot of times it could be rumors or allegations of fraud or something along that line,” Torchia said this week. “So, you basically follow the trail of every dollar coming in and going out in a particular area. We’ve been called in when a fraud’s been discovered, and they want us to come in and find out how much money was embezzled.”

While Torchia could not provide specific examples from forensic audits in which he has been involved, due to confidentiality, he used the following scenario to illustrate his point:

“A lot of times, we’ve been asked to do forensic audits for credit cards,” he said. “Sometimes, a town, village, or county has a credit card, and no one really watches what gets charged, and, all of a sudden, there’s an issue with this credit card. So, we trace it to a store, and then do an investigation on what the store sells, make sure the item purchased was a business expense, that kind of thing.”

Torchia went on to say that he could not approximate a dollar amount for a forensic audit, since it depends entirely on what specifically is being investigated, and how long it takes, but the $25,000 in next year’s budget may be appropriate for a town of Rensselaerville’s size, he said.

“If you were doing a fraud examination, there’s more work involved, especially if you already know a fraud occurred,” said Torchia. “If you get involved in federal money, and there’s a fraud issue, you’re talking about a whole new ball game, and the fees for the testing would just explode…I’ve been involved in forensic audits that we’ve gotten $40,000 to $50,000 on, but we’ve also done them for $10,000 or $12,000; it depends on how many transactions you’re looking at.”

Torchia concluded, “With accounting services, all we have to sell is time and knowledge.”

Councilwoman Dermody said this week that, when she becomes supervisor in January, she wants to discuss with the town board whether or not a forensic audit is necessary.

“I don’t know if the town has the deep pockets to do a forensic audit as opposed to just a good financial audit,” Dermody said this week. “I don’t want to commit to anything until we know exactly how much it’ll cost.”

Councilwoman-elect Marion Cooke said this week that she would indeed support a forensic audit; John Kudlack, councilman-elect and chairman of the town’s Democratic Committee, had a similar perspective to Dermody: While such an audit may be necessary, he wants to see the price tag first.

“I was kind of against spending that kind of money for an audit,” Kudlack said, “but it may be necessary so we can find out exactly where we stand.”

Whether or not the audit is conducted will be the prerogative of the new supervisor and town board, on which the Democrats will retain the majority.