The Journal Register (Medina, NY)

October 9, 2013

Audit finds $100k in question in Gaines

Medina Journal-Register

Medina Journal-Register — GAINES — The preliminary results of a forensic audit approved by the Town Board of Gaines were presented to the public Tuesday night. The results, reported by attorney Terry Connors, left the board with some decisions to make going forward.

Before the report was presented board member David Kast made the motion to go into an executive session. However, the board voted four to one to have the preliminary results read in front of the packed town hall.

The forensic audit was conducted by The Bonadio Group, and it uncovered a handful of deficiencies during its audit. The grand total of those deficiencies total around $100,000.

In getting its information, the auditors interviewed eight town employees and all five board members. Analysis was also done of all available documentation and financial records, including credit card statements, mileage reimbursements, etc.

The report found several discrepancies financially from both the Gaines Town Clerk and the Town Highway and Water Superintendent.

The clerk, Jean Klatt, was found to have reimbursed a Town of Byron employee for mileage after the annual NYS Town Clerks Association Conference in April of 2012. The reimbursement was for one-third of the mileage, as the report said three clerks carpooled to the conference. However, the report found that later in 2012, the Gaines Town Clerk submitted mileage reimbursement paperwork for the same conference, but with different dates and a different amount of mileage. Also, the report mentioned how the clerk also submitted mileage reimbursement forms for trips to a bank and the board of elections during the dates of the conference.

In reading that part of the report, Connors said the town needs to create formal policies and procedures to avoid such occurrences. He said fraudulent transactions should not be taken lightly, and the town should adopt a policy to guard against fraud.

Moving on to the town’s health insurance available for employees, Connors said the report found that the town clerk and highway and water superintendent were not eligible for cash buyouts. However, both received one.

“The language states that the bargaining unit consists only of employees,” Connors read. He continued on, noting that the board approved payment to the clerk and superintendent despite their ineligibility in the system. The payments were $10,000 each.

“This is another example of the lack of checks and balances inherent in the towns functions,” Connors said. He said employees need to know what they can and cannot be a part of.

The biggest issue the report found was in the highway department, where Connors said the town was found to have a credit balance of $79,423 for materials and services rendered. However, the goods and services ordered from the vendor — Barre Stone — were evidently not received.

The report showed the town continuing to pay the vendor when it could have used its credit balance as part of a prepayment, Connors said. Also, the report showed the materials and services delivered to the town over the past three years do not match the invoices on record. The documents in question were signed by the town’s highway superintendent, Ron Mannella.

The $79,423 was part of the town’s tax levy, Connors said, and represents an overcharge. Much of that total, he said could be from the highway department “spending down” its budget to make sure it does not see a decrease in its budget the following year. That practice, he noted, results in excessive tax liabilities and increases the risk of unethical or fraudulent charges. He said the report recommends the town seek an immediate refund of the $79,423 credit.

The recommendations of the report were for the town to pursue financial recovery of the roughly $100,000 in question. It could do so in a variety of ways, such as through litigation, Connors said. 

The board listened to Connors read the report, and later in the meeting, when the floor was opened for public comment, only silence could be heard.

After the meeting, Town Supervisor Carol Culhane said the board will take the report under advisement before making any decisions. When the audit was voted on in July, Culhane noted that it was the first one done on the town in six years, while most municipalities have one done annually.

In other town business, the board unanimously approved a resolution to override the two percent state property tax cap. The state has mandated that municipalities may not exceed increasing taxes more than two percent annually, and municipal attorneys have recommended passage of a local law to exceed the tax cap if necessary since the law was enacted.