A problem that started years ago in the city of Mechanicville’s Finance Department and then snowballed has resulted in a critical audit from the state Comptroller’s Office.
The audit released Wednesday cites the city for poor bookkeeping and budgeting that makes it difficult to tell how much money the city has. City officials failed to reconcile accounts and report cash totals and actual spending to the City Council, the audit says.
City officials have blamed faulty financial software for their recordkeeping issues, saying the entire 2010 fiscal year had to be re-created by an accounting firm before officials would know how much money they had in the bank. And until the 2010 books were settled, officials didn’t have a starting point for 2010 and 2011.
The critical audit says the lack of accounting records “makes it difficult for the mayor and the council to evaluate the city’s financial activities, and inaccurate records can obscure the city’s true financial condition.” It calls the state of accounting records “extremely poor.”
The audit covered the period from January 2010 through February 2012.
Recordkeeping was so bad that the city didn’t know from day to day how much cash it had on hand.
“In fact, the records are so bad that the city’s cash balance is monitored on a daily basis by calling the bank to ensure that the city has enough money to pay bills,” according to the audit.
Bank accounts weren’t reconciled on a regular basis, and the city also had cash-flow problems, the audit stated.
On Feb. 29, 2012, the city’s cash account had a balance of just $6,000. And a lack of cash on hand resulted in the city paying the New York State Retirement System late and incurring a $2,765 late fee on the $402,120 bill.
“Although this cash flow problem lasted only a short period of time, this is a result of the council not monitoring the city’s finances and addressing issues that arise during the year,” the audit states.
City officials say the city has corrected the issue with the accounting software, installing a new system and hiring a new deputy finance commissioner to run the department. In the city’s commission form of government, the elected finance commissioner oversees the department and a hired deputy runs the day-to-day operations.
“The commissioner of finance appointed a new deputy commissioner of finance who with the independently retained certified public accounting firms has brought all general ledger accounts into balance and has reconciled all bank accounts,” says a response letter submitted to the Comptroller’s Office and signed by Mayor Anthony Sylvester and Finance Commissioner Peter Chauvin.
Because of the software problem, officials didn’t know how much money the city had when they tried to come up with new budgets.
The Comptroller’s Office also criticized the city for using prior years’ budgeted amounts rather than actual expenditures when it came up with new budget numbers. That practice has been corrected with the 2013 budget, Sylvester and Chauvin said in their Jan. 24 response.
“The current 2013 budget was developed using actual figures from 2012 and 2011 along with collaboration of input from the various department heads.”
Also, city officials are working on developing a monthly report to submit to the City Council with the cash balance for each fund and actual spending to date, something the Comptroller’s Office pointed out the city did not do.
“Because of the council’s failure to fulfill its oversight responsibilities over the course of several years, city finances could be under fiscal stress and the council would not know it because of the poor state of the accounting records,” the audit says.
The city plans to submit a corrective action report to the Comptroller’s Office within 90 days.