Audit blasts former Colonie town gov’t

PHOTOGRAPHER: Jill Bryce

The state Comptroller’s Office issued a scathing audit of town finances Wednesday, saying the huge deficit the town is now facing — which it estimated at $18 million, significantly higher than the town’s own estimate, $14 million — could have been avoided with better official oversight.

Town Supervisor Paula Mahan said late Wednesday a tax increase is likely and layoffs are possible to reduce the deficit.

“The report the comptroller gave us is very comprehensive,” said Mahan, a Democrat who defeated Republican Mary Brizzell in November. “I agree with their finding and we will move forward with their plan.”

For town residents, it’s alarming to learn the town has an $18 million deficit and it’s difficult for them to comprehend, said Mahan. “The most difficult thing to understand is how this grew to $18 million and something wasn’t done sooner,” she said.

By all accounts, the town operated efficiently, was flush with cash, had no town tax increases and was rife with development only a few years ago.

But state Comptroller Thomas DiNapoli said the town went from a $12.5 million fund balance surplus to a $10.1 million deficit in four years due to “ineffective town board oversight.”

“Local officials have to manage public assets responsibly in good times and bad,” said DiNapoli. “It’s pretty clear that wasn’t happening under the prior administration in Colonie. This audit provides the new administration and the citizens of Colonie with an accurate assessment of town finances, enabling them to address the challenges that lie ahead.”

Brizzell could not be reached Wednesday to comment.

The audit, which covered January 2006 to June 2007, found the town increasingly relied on landfill fees, revenue anticipation notes and interfund advances and transfers to subsidize general fund operations, “causing further fiscal stress.”

It found that town officials improperly appropriated fund balance money in the general highway, library and Maplewood refuse district funds in excess of what was available.

DiNapoli said the town overestimated revenues in the town budget by $2 million and underestimated expenditures by approximately $8 million in a four-year period.

In three years, the town budgeted for a $1 million one-time sale of town land that never occurred.

“Town officials have been unable to maintain adequate cash flow. This has required the issuance of short-term borrowings in amounts ranging from $5.4 million to $11 million in 2004, 2005, and 2006 and the use of interfund transfers and advances,” according to the 28-page audit.

According to the audit, the significant operating deficits and exhaustion of the town’s positive fund balances have resulted in insufficient cash flow to pay bills as they come.

The audit said that during 2006, the Pure Waters and Latham Water district funds advanced a total of $5.1 million to the general fund. Town officials also inappropriately used $6.6 million of sales tax money to fund the general fund when it was supposed to be used to eliminate the tax levy in the highway fund.

“We also found the board has not established adequate internal controls over cash disbursements,” according to the audit.

And town officials agreed to pay the Colonie Youth Center $200,000 over and above the $10,400 in budgeted monthly payments despite the town’s worsening financial condition.

The audit also found that during 2003 through 2006 the town transferred approximately $12.5 million from the landfill fund to the general fund to finance the cost of general fund operations and enhance general fund cash flow. “These transfers contributed to the landfill deficit.”

In other observations, the audit said:

* The fact that no one is reviewing checks being written could “result in errors or irregularities occurring and going undetected and uncorrected.”

* The town needs to plan to pay for the landfill’s future closure.

* The board should adopt policies to ensure the supervisor’s office “independently verifies appropriateness of all cash disbursements.”

When she campaigned for supervisor, Mahan focused on the town’s poor financial state after Moody’s issued a low bond rating.

Several weeks ago, Mahan announced that the deficit was $14 million, much higher than the $8.5 million that had been projected.

She said Wednesday it was the responsibility of Brizzell and the previous Town Board and administration to manage town finances. “Looking at what’s been going on, they haven’t followed through on their responsibilities,” she said.

Under Brizzell, department heads were trying to cut waste and save money and were working under conditions they thought were real. “They thought there was plenty of money and there was no need for concern.”

She said this poor fiscal management dates back at least six years.

She also said that no single finding in the audit surprised her. “In the beginning, when I started researching, it was hard to comprehend. Now that I have been working on it for seven weeks, it all seems to make sense,” she said.

Mahan estimates it will take 10 years to stabilize the town.

With a deficit this size, Mahan said increasing taxes is very likely, but she wants to lessen impact on town residents.

With the right plan and discipline, the town can stabilize its finances and become financially healthy again, she said.

The goal now is to reduce the deficit to zero, build a surplus and protect the future of the town, Mahan said.

“It is what it is,” she said. “I’m in the same boat as everyone. I’m a resident. I think it’s very sad it came to this. Bottom line is it’s a great town and I’m confident we will be strong again.”

DiNapoli recommended that town officials:

* Estimate revenues, expenditures and available fund balances more conservatively in future town budgets and develop a comprehensive plan for resolving the deficit, fund balances and cash flow deficiencies

* Review state law regarding the use of sales tax revenues and consult with the town attorney to ensure compliance with the statute

* Review all internal fund-to-fund cash advances and eliminate them by the end of the fiscal year.

The town’s 2007 budget was $79.4 million, which is funded by real property taxes, sales taxes, user changes and state aid.