EVANS - The town of Evans was cited in a recent New York State Comptroller's Office audit. The audit examined internal controls of the town from Jan. 1, 2007 to March 28, 2012. Records from the water fund dated back to Jan. 1, 2006.
The audit found "town officials allowed the water fund to sustain repeated operating losses and did not ensure that town records and reports are accurate and timely." The town was issued $12.3 million to finance a water capital project but $2.1 million in proceeds from that amount were used for water operating funds instead of the capital project. Audit results also included the town entering into a lease-purchase agreement with a third party for reimbursement for operating expenditures for the highway and general fund. These expenditures of $343,000 were never authorized by the board prior to other expenditures, totaling $225,112, being incurred and paid for.
The town took out bond anticipation notes (BAN) for the capital water project. BANs are supposed to be used solely for the object or the purpose for the debt they are issued for or payment on said debt. The state comptroller's office found over the past five years the town's BANs were expended illegally.
"We found that the town had illegally used approximately $2.1 million in proceeds from the debt issue to finance the water project to fund water operating expenditures," the audit states.
The audit also found that town officials failed to properly monitor proceeds use from 2007 to 2011. In August 2007, a total of $12.6 million was used to fund a water project. A total of $12.3 million was issued as of Dec. 31, 2010 which the town could not account for all the funds.
The state comptroller's suggested the town ensure the BAN accounted for and expended in accordance with requirements and the board should also amend their budget to include interest payments due in 2012 that were not previously budgeted for. The town board should also take action to address the inappropriate use of $150,000 from BAN proceeds to reimburse water funds operating costs.
Municipal law allows towns to authorize a lease purchase contract as long as the town solicit and evaluate financing alternatives. The town must provide an explanation as to why the lease purchase agreement is in the best interest of the town. Lease purchase agreements must also be used for machinery equipment or apparatus.
The town entered into an agreement in January 2011 to pay for four town vehicles which were paid for in July and November 2010. While the town authorized $343,000 in financing, documentation indicated the amount available was $7,000 more.
The state comptroller's office recommends the town consult legal counsel in regards to the remaining lease purchase proceeds and be in compliance with requirements as well as solicit and evaluate financing options to find the best option in the best interest for the town.
Water fund operations were not budgeted or accounted for properly. The water fund then had a long standing deficit which the town did not alleviate with proper action. The town also failed to include principal and interest loan payments in the current fiscal year's budget. Recommendations to the town board include developing a plan to address operating costs in the water fund as well as ensuring the director of finance accounts for all water fund activity.
The town has responded to the state comptroller's office recommendations and corrected all the errors cited in the report. A copy of the full audit report can be found at www.osc.state.ny.us/localgov/audits/towns/2012/evans.pdf.
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