The state Comptroller’s Office is calling into question how capital project activity and debt are handled in the Village of Depew, while village officials argue that some of the problems originated during prior administrations.
State Comptroller Thomas P. DiNapoli said his office recently completed an audit of the village’s internal controls over capital projects and found several errors.
Auditors found significant problems with the accounting for and reporting of capital project activity as well as the use of certain debt proceeds for projects studied from June 1, 2006, to Oct. 12, 2012. The village did not maintain capital project records in a manner that readily provides information about actual resources committed and expenditures incurred throughout the course of each project, which often span two or more fiscal years, the audit stated.
One example that auditors cited concerns the 2005-06 fiscal year, when the administrator is said to have improperly recorded $1.5 million of bond anticipation note proceeds in the sewer operating fund to finance a capital project. The audit noted that this should have been recorded in the capital projects fund.
The village also borrowed $4.2 million for three separate projects, but auditors found that the village could not demonstrate the financial activity related to each project because they were not recorded separately. Further study found that the administrator made several inter-fund transfers without Village Board approval and relied too heavily on outside auditors to address the disposition of remaining capital funds. Additionally, the Village Board didn’t provide enough oversight over capital projects, the audit stated.
“These capital project errors occurred because the board did not properly monitor or provide adequate direction to the administrator, instead placing undue reliance on her to handle the village’s finances,” the audit stated. “Moreover, the administrator places undue reliance on the village’s external auditor to address the accounting and reporting of certain activity.”
State auditors listed several steps village leaders could take to remedy the situation, including reviewing current financial management and auditing publications, recording each capital project separately, using the records for each capital project to track progress, properly disposing of excess funds in accordance with relevant statutory provisions, properly tracking debt proceeds and ensuring the Village Board approves all inter-fund transfers.
In the village’s official response, Mayor Steven Hoffman explained that there was an issue in the 2005-06 fiscal year when journal entries for revenues and expenditures for a sewer project were recorded in the sewer fund instead of the capital fund, adding that the error has been corrected. He added that the debt service fund was closed several years ago on the advice of the village’s auditing firm.
“The interest was retained in the general fund, which is used to pay the principal and interest on the debt,” he wrote. “The debt service fund will be utilized in the future for any interest earned on borrowed funds.”
He added that the inter-fund transfers were done before the current village administrator, Elizabeth Melock, was appointed, adding that she did not have time to comb through 10 to 20 years of Village Board meeting minutes to see when the reserves were established. He added that future transfers would be listed individually on resolutions to be considered by the board.
Outside of the village’s official response to the state, Hoffman would only add that the problems have been addressed.
“All errors from the past years have been corrected,” he said.
DiNapoli said that such audits protect taxpayers.
“My office’s audits of local governments improve their financial management practices,” DiNapoli said. “These audits are tools for local officials to make sure proper policies and procedures are in place to protect taxpayer dollars and provide the best possible service these taxpayer dollars can deliver.”