Comptroller to Westerlo: 'Plan and reconcile'

WESTERLO — The town received an indictment by the state comptroller’s office in a financial audit report that described the poor financial health of the water district and weak record keeping in the town’s court.

“The Board and Town officials were aware of revenue shortfalls in the water district fund, but did not take appropriate action to align estimated revenues in the adopted budgets with actual rate schedules,” the report said.

Additionally, the report states, cash from the town’s general fund was used to fund costs exceeding actual revenues for the water district, a separate tax base, over a period of years starting in 2008; one transfer, of $7,000, was made without board authorization, according to meeting minutes.

The town’s two justices had no practice of documenting reconciliations of their accounts, the report found, and in some cases their balances didn’t correspond with computerized records. Cases from former justices had been left open, the report found, in need of being closed or reassigned to a sitting justice.

The period covered by the audit was Jan. 1, 2012, to Jan. 31, 2013.

The comptroller’s office recommended developing “realistic and accurate estimates” in creating the town’s budget. It also recommended the town monitor the budget during the year, developing a comprehensive plan to ensure balances are paid within a fiscal year, and establish a multi-year plan to fund the long-term needs of the water district.

In letters responding to the report, the town said that it would act on the report’s recommendations and correct the water-district deficit starting with the 2015 budget. The justices wrote that all issues have been corrected.

The Westerlo water district was created in 2005. It comprises just a portion of the town with about $71,000 in spending in the 2014 adopted budget. The report describes a system plagued by leaks and broken water meters, which are meant to read usage for billing. Water users are also billed for payments on the debt incurred for constructing the system, but rates weren’t adjusted over time as the number of users decreased, Supervisor Richard Rapp told The Enterprise.

Expected surplus money of $12,000 will be used to repay the town’s general fund, according to this year’s spending plan. The audit report, however, claimed the 2014 budget’s estimated revenues for the district of $83,000 are based on a rate structure before 2010, when the town hired a consultant to review the water district.

The report noted a system operator hired by the board last year had repaired meters. “However, the estimated increases to revenues resulting from these changes will not be sufficient to fund all expenditures and begin to repay the general fund in 2014,” the report said. “For example, the increase for water usage is only 61 cents per 1,000 gallons, resulting in a $500 increase for the year based on minimum quarterly billing. The increase to the annual bond repayment is $57 per parcel, resulting in about $5,000 in additional revenues.”

The report anticipates a continued deficit fund balance for the water district. In December 2013, the report found, the water district fund owed the general fund $66,400. Since the water district is a separate tax base, the report notes, it must by law repay with interest any money borrowed from another fund within a single fiscal year.

In a response letter signed by Rapp, the town acknowledged that transfers from the general fund to the water district “have not been specifically noted, and set out separately, and interest has not been assessed to these transfers.” The letter stated that such transfers would be voted on separately in the future, and an interest rate recommended by a hired accounting firm would be applied to transfers beginning this year. Finally, the budget process for 2015 would include a proper rate for paying off the owed money and covering expenses.

In the letter, the town acknowledged it had been aware of the budget shortfall and noted changes had been made to bring revenues closer to expenses. Specifically, it cited a rate increase and minimum usage fee that were established in 2010.

“This statement is not accurate,” the comptroller’s office wrote in response to the town. “The Town’s changes have not resulted in revenues more closely matching water district expenses. The revenues recognized during 2012 are the most accurate depiction of annual revenues the water district can expect from the rate changes adopted in 2010. The 2012 revenues fell short of budget estimates by more than $18,000 and were significantly less than annual expenses the district has historically incurred.”

In 2013, Councilman William Bichteman, once a resident vocal about the district’s financial condition, was appointed to the town board. He formed a water committee, the town’s law on the water district was amended to outline the committee’s responsibilities, and a system operator was hired, ending a contract with LVDV Operations, Inc. out of Cobleskill.

Bichteman said that, prior to 2013, a committee had never been formed, and that its function had been assumed by the town board. For two years, he said, the district had had no meetings.

The current town hall, formerly a school, is one of two properties within the district but not connected to the system. Rapp told The Enterprise the town would connect the town hall before the summer.

The comptroller’s report described informal accounting by the town’s justices. When reviewed, their bank statements agreed with the Justice Court Fund to which all courts must send their receipts. There was, however, no documentation to confirm this process, the report stated.

Computer bail records had not been reconciled with their corresponding bank accounts.

“For example, the computerized bail reports had a balance of $13,687 for Justice [Kenneth] Mackey,” the report said, “but Justice Carl told us that the bail account balance was $1,115, the amount contained in the bail bank account. Justice [Robert] Carl did not have bail on hand at the time of our review.”

By mid-2013, after the auditors had completed their fieldwork, Justice Carl had reconciled the court’s bail accounts, starting with the judges’ terms in 2011 and 2010, with computer records, according to the report.

A third point of weakness in the court’s records was in its open case files. Three previous justices had transferred their money to the town, but not their pending cases, the report said; Justice Carl reported that many of the cases had been closed and did not need to be reassigned.

“The computerized records indicated that there were 322 defendants with one or more cases from those prior Justices which were still open, and had not been transferred,” the report said. “The oldest case listed from the three Justices dated back to December 30, 1991.”

The justices wrote in their responding letter that all recommendations had been acted upon, which included: performing monthly comparisons with available cash and bank statements, accounting for all bail received and disbursed, and continuing to review open cases. The board, the audit report recommended, should perform an annual audit of the justices’ records.

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