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LOCKPORT – A scathing audit of the City of Lockport’s cash flow, released by the State Comptroller’s Office today, estimates that Lockport will run out of money next month.

The audit says the financial records kept by Treasurer Michael E. White are so poor, no one can tell how much money the city really has.

White is an elected official whose term runs until the end of 2015.

“The treasurer is responsible for maintaining accurate and up-to-date accounting records and for providing accurate and financial reports to the Council so they can monitor and control city finances. The city’s accounting records are in such poor condition that city officials do not know the severity of their fiscal problems,” the state auditors wrote.

But they estimate that the city’s “cash deficiency” will rise to $4.6 million by the end of this year unless something is done to reduce costs or provide an emergency cash infusion.

The city obtained passage of an emergency borrowing bill by the State Legislature in June, which would allow it to issue up to $5.35 million in 10-year bonds to pay off the accumulated deficits.

However, Gov. Andrew M. Cuomo has not signed the bill, and his office insisted that the city grant the Comptroller’s Office a veto over its budgets for the next 10 years. The city agreed to that condition, Mayor Anne E. McCaffrey said Monday, but Cuomo has yet to act.

McCaffrey and White were unavailable for immediate comment on the audit, but they know what’s in it. The city’s official response, dated July 22, was attached to the document. They wrote that the city is “considering options to improve the structure in the Treasurer’s Office to increase accountability and ensure accuracy and timeliness of accounting records.”

White has previously blamed the long-term absence of employees because of illness, workers that were not replaced, as a reason for the records falling out of date.

The other major factor in building the city’s financial problem was reliance on the city’s fund balance to pay expenses and avoid tax increases. The city’s 2013 budget was built on the assumption that the city still had a fund balance. A previous audit issued by the state in December showed the city was already more than $1.1 million in the hole at the end of 2012, but didn’t realize it because of poor recordkeeping.

The city’s 2013 fiscal records are still not complete, and probably won’t be done until October, the audit said. “The general ledger cash balances are unreliable and were not reconciled to cash in the bank,” the report added.

The state auditors said the city needs a complete cash flow analysis, but White doesn’t keep one.

“We found that the treasurer was only maintaining a record of daily cash flows of cash receipt and disbursement activity and was not analyzing future cash flow for the fiscal year. Without cash flow projections, the Council and city officials were unaware of the magnitude of the city’s shortfall,” the audit said.

The city’s cash flow crunch is exacerbated by the emergency borrowing it did to keep afloat last year, shortly after the Comptroller’s Office rated Lockport “moderately fiscally stressed.”

The Council last October passed a $2.7 million revenue anticipation note – short-term borrowing with the city’s water and sewer bill payments used as collateral.

The city set $2.7 million aside this year to pay off those notes, meaning that money can’t be used for anything else. The 2014 budget also used $1.05 million in state grants as general revenue, but the Comptroller’s Office said those grants were for specific projects and also can’t be used for anything else.

The city laid off 16 workers at the start of 2014 and this year has abolished the youth and recreation director position and allowed the public works director post to remain vacant. It also ordered the reduction of fire department shift sizes to reduce overtime, but hasn’t instituted that despite winning a court case brought by the firefighters’ union. McCaffrey has said that won’t happen until the abolition of city ambulance service is ready to take effect, but the city has yet to prepare a request for proposals from private ambulance firms,

The state auditors said, “Based on current contractual obligations and staffing levels, we are conservatively projecting that 2014 overtime costs will exceed the budgeted appropriations by at least $200,000, or 15 percent.”

The city’s official response said further reductions in personnel or other expenses may be needed during this year. Also, the city may ask for an expedited payment of its annual state aid, which normally comes at the end of the year, and also might delay making its state-mandated payment to the public employee pension fund from December until February 2015.

email: tprohaska@buffnews.com