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Hudson's final 2010 audit in... with comments
Dec 20, 2010 6:31 am
Late December, and municipal governments are counting their money, making final year-end payments, and getting reports from independent auditors on how they've doing at balancing their books and checking them twice. In Hudson, the Register Star reports this morning, City Treasurer Eileen Halloran is saying that this year’s independent audit conducted on Hudson’s financial records indicate some opportunities for strengthening internal controls and operating efficiency, but overall, the results were satisfactory. The audit, completed this year by Certified Public Accountants Craig Sickler, Michael Torchia, Robert Allen and Victor Churchill, is conducted annually. “I think it’s a good thing,” said Halloran. “It’s costly for the city, it’s a lot of work internally with the departments and my office — we pull all kinds of files and spend time — but I feel like it’s worth it, because the most important thing to me is that our financials are fairly stated.” One of the audit’s criticisms was that the city does not maintain a complete listing of its fixed assets, and “no records are maintained for current year acquisitions or disposals.” Furthermore, the audit asserts that the city’s internal control system of financial statement findings “lacks certain controls with respect to separation of duties. This is mostly due to the small number of staff with relation to the numerous duties they’re responsible for.” There have also been some questions about how the City utilizes its petty cash allowances
Halloran said this finding is pointed out as a weakness year after year, but this is because the independent auditor uses standards that are different than what the state Comptroller’s Office requires.
“Because we don’t have our assets inventoried and valued and part of our financials, they always cite that as a weakness for the federal single audit,” said Halloran. “That is required to be reported at a federal level because of the stimulus money, but in New York State, the way we’re doing it is not required to meet that standard.”
The auditors suggested that the city review its procurement policy, because in going over the city’s bidding documentation, in one instance the city was unable to locate the third of three written proposals received. Halloran said this was for the project to install pay stations at the Front Street Amtrak station.
“The committee that worked on that — the mayor’s aide (Carmine Pierro) and the police chief (Ellis C. Richardson) — they did get bids, but they could only find the paperwork on two of the three,” said Halloran. “It was just a housekeeping item that the auditors recommended for us to make sure we always keep the documentation to support.”
In regard to budgets, the auditors noted that final budget revenues and expenditures were not in agreement with each other.
“The budget is an essential ingredient in the financial planning, control and evaluation process,” the audit’s memorandum reads. “Budgetary accounting is a management control technique used to assist in controlling expenditures and tracking revenues. We suggest the City review its budgetary accounting procedures and State of New York statutory laws.”
But Halloran said at the end of the year, incoming revenues will likely be different than the revenue projections the city makes when voting on its budget in the beginning of the fiscal year, and she thinks the auditors were simply cautioning the city to “do the best we can in not over- or under-projecting revenues and not to over-allocate or under-allocate the budget for the departments.”
“Some expense lines will be run into higher costs — we might transfer some funds out of a department’s equipment line and transfer it into their materials and supplies line, or we might have to actually dip into the fund balance for projects like the streetlighting replacement,” said Halloran. “Those are the reasons why, at the end of the year, our projected revenues and our appropriations expenses will look different than they did when they start the year.”
Halloran said the auditors are unable to make any suggestions as to how the city might rethink its budget process because it would compromise their independent auditor status.
For example, “With the budget — what they’re suggesting about looking closely at revenues and expenditures: If we were to say to them, ‘Okay, what’s a tolerable margin? Is it within 5 percent or 10 percent?’ My experience with the independent auditors is the same thing with the Comptroller’s Office,” said Halloran, in that “they hesitate to give an answer on something like that, because then, in the future, they’d be auditing their own advice.”
Overall, the auditors wrote, the city “complied, in all material respects, with the requirements ... that are applicable to each of its major federal programs for the year ended December 31, 2009.” However, instances of noncompliance were disclosed and are required to be reported, the auditors wrote.
Among the items found in prior years that were reiterated in this year’s budget:
* Expenditure Testing: In 2006, 2008 and 2009, the auditors observed numerous vouchers which did not contain the mayor or finance committee’s approval.
* Trust and Agency Fund: In 2006, 2008 and 2009, numerous accounts carried small balances year after year, with very little change.
* Payroll Testing: Numerous supporting documentation issues were indicated, including the city’s inability to produce documentation for a department involved in ongoing legal investigation; the auditors not being provided with all direct deposit authorizations requested; copies of I-9 forms unable to be located, with no explanation; and “several cases where gross pay recalculations did not tie in exactly to the payroll being tested.”
* Interfund Transfers: Permanent transfers between funds occurred without budgeting or Common Council approval.
One item that the auditors found to be remedied since fiscal year 2008 was the issue of petty cash accounts, which at the time were not authorized by the Common Council. Having found that the council did reauthorize petty cash levels for various departments in 2009, the auditors declared the issue resolved.
Halloran said this finding is pointed out as a weakness year after year, but this is because the independent auditor uses standards that are different than what the state Comptroller’s Office requires.
“Because we don’t have our assets inventoried and valued and part of our financials, they always cite that as a weakness for the federal single audit,” said Halloran. “That is required to be reported at a federal level because of the stimulus money, but in New York State, the way we’re doing it is not required to meet that standard.”
The auditors suggested that the city review its procurement policy, because in going over the city’s bidding documentation, in one instance the city was unable to locate the third of three written proposals received. Halloran said this was for the project to install pay stations at the Front Street Amtrak station.
“The committee that worked on that — the mayor’s aide (Carmine Pierro) and the police chief (Ellis C. Richardson) — they did get bids, but they could only find the paperwork on two of the three,” said Halloran. “It was just a housekeeping item that the auditors recommended for us to make sure we always keep the documentation to support.”
In regard to budgets, the auditors noted that final budget revenues and expenditures were not in agreement with each other.
“The budget is an essential ingredient in the financial planning, control and evaluation process,” the audit’s memorandum reads. “Budgetary accounting is a management control technique used to assist in controlling expenditures and tracking revenues. We suggest the City review its budgetary accounting procedures and State of New York statutory laws.”
But Halloran said at the end of the year, incoming revenues will likely be different than the revenue projections the city makes when voting on its budget in the beginning of the fiscal year, and she thinks the auditors were simply cautioning the city to “do the best we can in not over- or under-projecting revenues and not to over-allocate or under-allocate the budget for the departments.”
“Some expense lines will be run into higher costs — we might transfer some funds out of a department’s equipment line and transfer it into their materials and supplies line, or we might have to actually dip into the fund balance for projects like the streetlighting replacement,” said Halloran. “Those are the reasons why, at the end of the year, our projected revenues and our appropriations expenses will look different than they did when they start the year.”
Halloran said the auditors are unable to make any suggestions as to how the city might rethink its budget process because it would compromise their independent auditor status.
For example, “With the budget — what they’re suggesting about looking closely at revenues and expenditures: If we were to say to them, ‘Okay, what’s a tolerable margin? Is it within 5 percent or 10 percent?’ My experience with the independent auditors is the same thing with the Comptroller’s Office,” said Halloran, in that “they hesitate to give an answer on something like that, because then, in the future, they’d be auditing their own advice.”
Overall, the auditors wrote, the city “complied, in all material respects, with the requirements ... that are applicable to each of its major federal programs for the year ended December 31, 2009.” However, instances of noncompliance were disclosed and are required to be reported, the auditors wrote.
Among the items found in prior years that were reiterated in this year’s budget:
* Expenditure Testing: In 2006, 2008 and 2009, the auditors observed numerous vouchers which did not contain the mayor or finance committee’s approval.
* Trust and Agency Fund: In 2006, 2008 and 2009, numerous accounts carried small balances year after year, with very little change.
* Payroll Testing: Numerous supporting documentation issues were indicated, including the city’s inability to produce documentation for a department involved in ongoing legal investigation; the auditors not being provided with all direct deposit authorizations requested; copies of I-9 forms unable to be located, with no explanation; and “several cases where gross pay recalculations did not tie in exactly to the payroll being tested.”
* Interfund Transfers: Permanent transfers between funds occurred without budgeting or Common Council approval.
One item that the auditors found to be remedied since fiscal year 2008 was the issue of petty cash accounts, which at the time were not authorized by the Common Council. Having found that the council did reauthorize petty cash levels for various departments in 2009, the auditors declared the issue resolved.