Audit report for City of Amsterdam’s 2013-2014 finances released

A year ago, the auditor hired by the City of Amsterdam couldn’t complete a full audit of the city’s 2012-2013 financial records due to the condition of the records at the time and therefore could not offer a written opinion. Less than a year later, the city’s new auditor, the EFPR Group, was able to collect adequate information in order to write an opinion on the 2013-2014 records, but found significant problems and deficiencies.

According to the report, which was released by the controller’s office on Wednesday, the auditor looked at the balance sheets for all the city’s funds. Overall, the auditor stated that in it’s opinion, the balance sheets represent fairly, in all material respects, the financial positions of each fund, with one major exception made in regards to the general fund.

The report states that the city’s figure as to the amount of delinquent taxes owed to Montgomery County is lower than the county’s figure. Controller Matt Agresta said on Thursday that the auditor recommended modifying the general fund balance to reflect the county’s figure as a cautionary measure until the dispute can be resolved.

The beginning balances of the other funds were also modified to “correct accounting errors made in prior periods.”

According to Agresta, the main reason for the modifications to the other funds was because delinquent user fees were not correctly re-levied as taxes. The effect of the corrections was reductions in the sewer, water, and sanitation fund balances.

The reduction in the three funds were added to the general fund balance, however once the modification due to the discrepancy on taxes owed to the county was subtracted, the net result was a $1.5 million reduction, leaving a negative $931,905 balance. The ending fund balances, including the general fund balance value of $2,450,615, have not been changed.

AUD Beginning Balance Correction Re-stated Beginning Balance AUD Ending Balance
General Fund 607,432 -1,539,337 -931,905 2,450,615
Special Grant Fund 358,419 -200,204 158,215 297,186
Refuse and Garbage Fund 1,029,082 -456,271 572,811 1,209,385
Recreation Fund
(Golf Course)
29,093 -7,916 21,177 -106,847
Transportation Fund -347,344 -13,855 -361,199 -340,244
Water Fund 1,053,247 -757,624 295,263 1,054,415
Sewer Fund 1,142,946 -546,083 596,863 1,349,766
Capital Projects Fund* -11,560,253 -837,000 -12,397,253 -7,394.16

* The Capital Projects Fund is normally negative, as it utilizes borrowed funds.

Agresta said the corrections will be added as “prior year adjustments” in the 2014-2015 Annual Update Document (AUD).

There were other reasons listed in the report that contributed to the corrections, including “utility billing transactions,” however when asked for more details, Agresta said he was unable to provide anything further.

“I think these would be questions best asked – in terms of exactly what every change they made was – to the auditors,” said Agresta.

Agresta said he hopes a representative of the auditing company will be able to be interviewed by the common council at the next regular meeting in September.

The report faulted the city for not reconciling property tax records with the county on a monthly basis, which Agresta said was the cause of the discrepancy between the city and county. However, he said that since he took office in 2014, that the monthly reconciliations have been taking place, and the problem was a result of practices in prior years.

According to the report, the city’s response to the problem will be to look at the possibility of hiring a “forensic accountant” to reconcile the discrepancy.

Another issue that the auditors faulted the city  for was not being up-to-date on monthly bank reconciliations which could lead to significant differences between the city’s bank’s numbers and the city’s general ledger. According to the report, the city’s response is that work currently being done by Freed Maxick, an accounting firm hired earlier this year, will get the city “up to current on our bank reconciliations” and will provide training so that the controller’s office staff will be able to continue to keep the reconciliations current.

Lack of an updated capital assets inventory was another problem cited by the report. The auditors recommended that the city complete an inventory of all it’s property and equipment. The federal government specifically required an inventory of all assets purchased with funds received by the city as part of a Community Development Block Grant issued over the span of 2011 to 2013. Because of the lack of a current inventory, the city failed the requirement.

Asked why the inventory hasn’t been completed yet, Agresta replied, “That’s a very expensive undertaking. And the correction of the financials in this office were, I think, of paramount importance compared to that. Once we are at a point where we’re just moving forward, certainly we want to look at having the inventory updated. But what the process is for that and how much it specifically will cost is not a known quantity now.”

According to the audit report, the city’s response is to have at least a plan for the inventory by June 2017.

Finally, the report indicated that during the fiscal year, the city was uninsured for approximately $1.1 million in bank funds, because the city “did not adequately communicate with their collateralization financial institution about opening additional bank accounts.” Agresta said this problem has already been corrected, and that the city’s current bank, First Niagra, now insures all the city’s funds.

The report acknowledged that many of city’s record keeping problems and delays in required state reporting stemmed from problems with the transition to a new accounting system in 2011, as well as the passing of former controller Ron Wierzbicki in 2012.

Agresta said the process of completing the Annual Update Document for each fiscal year, which is required before an audit can be started, has become quicker with each successive year, due to improved compatibility between the city’s accounting system and New York State’s system. As an example, he said that the initial submission of the AUD for 2013-2014 had 30 to 40 required edits that needed to be corrected before it was accepted. The 2014-2015 AUD, which has not been completed yet, only had about 15 required edits initially, which has now been reduced to only 8. He said he hopes to have the 2014-2015 accepted within several weeks at which point the audit for that fiscal year can begin.

Tim Becker

Tim Becker is the owner of Anthem Websites Inc. which publishes The Compass. He serves as both editor and a writer.