Audit: City under ‘fiscal stress’
WATERVLIET, N.Y. » The city faces the second-highest amount of “fiscal stress” in New York state, in part because of City Hall’s use of reserves to close budget gaps, according to a state audit released Monday.
The report isued by the Office of the New York State Comptroller studied Watervliet’s municipal financial condition from 2014 to 2017.
The audit report specifically looks at the city’s financial condition between Jan. 1, 2014 up until June 30, 2017. According to the report, the objective of the audit was to determine whether the City Council adopted realistic budgets that were structurally balanced, routinely monitored financial operations and took appropriate action to maintain the City’s fiscal stability.
Only Monroe County in western New York found itself under more financial pressure than the Albany County city among more than 1,000 counties, towns, cit- ies and villages in 2016, state Comptroller Thomas DiNapoli said in the report, with the city of Albany right behind Watervliet. Those three governments, along with Broome County in the Southern Tier, were the only ones to be classified in the report as being under “significant” fiscal stress.
Albany and Watervliet, as well as the town of Colonie, which was deemed “susceptible to fiscal stress,” were the only Capital Region governments among the 27 to make DiNapoli’s list.
The most recent audit report notes that the city’s previous director of finance retired in October 2015 and was not replaced until August 2016, and that the previous city general manager resigned in November 2016 and was replaced with an acting general manager who was formally appointed the city’s full-time manager in June 2017. The report also noted that one council seat was vacant during most of 2017.
Some key findings in the audit report included things like how the council adopted general fund budgets that were not structurally balanced because of continued reliance on fund balance. The report also says that the city experienced operating deficits, and declining fund and cash balances in all three operating funds from fiscal years 2014 through 2016. One final key finding in the report was that the council did not receive budget-toactual reports on a regular basis, and accounting records did not agree with annual financial reports.
The report also said that the city’s accounting did not agree with annual financial reports.
“The [finance] Director reported general fund revenues in the City’s 2016 annual financial report (AFR) that were approximately $625,000 less than recorded and general fund expenditures that were approximately $ 465,000 less than recorded. The Director also reported water fund expenditures that were $33,509 higher than recorded because of an unrecorded transfer to the capital projects fund,” the report reads.
The report also offered city officials some recommendations based off of the key findings. The state comptroller’s office believes the council and officials should develop and adopt structurally balanced general fund budgets. The report also recommends that the Council should ensure that the [finance] Director maintains accurate and timely financial records. The report said that the [finance] Director should provide the Council with quarterly budget status reports and cash flow projections for each fund. The report also believes that the Council should use these reports to monitor the City’s financial operations and prevent a further decline in the City’s financial condition.
“To develop such plans and effectively monitor the City’s financial operations and financial condition, the Council needs complete, accurate and timely financial information. The City’s Charter requires the GM to attend all Council meetings, provide the Council with periodic reports of the City’s affairs, and keep the Council fully advised of the City’s financial condition and
its future financial needs,” the February report reads.
In the report, city officials were able to give a written response to some of the findings of the audit.
“In an effort to stay below the NYS imposed Tax
Cap law while still providing the same level of service to the residents of the City of Watervliet, City officials appropriated Fund Balance to help finance operations,” Watervliet Mayor Michael Manning wrote in written response to the audit report dated Jan. 31. “For five years the City of Watervliet appropriated fund balance, but the efforts of
City administration and department heads prevented utilizing these appropriated funds. Although it was continued in 2017, it is anticipated that it will NOT be utilized. Following recommendations from NYS OSC, this practice was of allocating fund balance was discontinued in the implemented 2018 budget and going forward.”
Another response from Manning in the report touched on the accounting records not agreeing with annual financial reports.
“In 2017 the City began the transition to showing expenditures in the appropriate funds, as recommended by the Office of State Comptroller,” Manning said in another written response to the audit.
“In doing so, the Director of Finance adjusted reporting to show these expenditures properly rather than a lump sum transfer to the General Fund. While making the transition to this method, the Director maintained consistency within the City’s software system to allow for comparable reports to be presented to the Council.”