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Editorial Archives The Altamont Enterprise, June 10, 2010
Public monies must be wisely managed. This is especially true in tough times. The state comptroller plays an essential role in auditing municipalities and school districts to turn up problems that need fixing.
But what if the comptroller’s office is part of the problem? What if the comptroller’s guidelines are off or non-existent?
When we wrote about the Berne town budget last fall, our reporter tried in vain to find out how much the comptroller’s office considered appropriate for a rainy-day account. Berne, a rural town in the Helderbergs with a population of under 3,000, has a general fund of about a million dollars with a fund balance or rainy-day account of about the same amount.
We thought this seemed rather large, but the comptrollers’ office told us that there were no guidelines.
Last week, the comptroller released an audit on Berne, covering the period from Jan. 1, 2008 to June 30, 2009, which stated, “The town has raised taxes exceeding the amounts necessary to fund operations.”
Actually, Berne’s budget for 2009 did not increase the tax levy.
The audit also says that town officials generally agreed with the audit recommendations and planned to “initiate corrective action.”
Rather, the current supervisor, George Gebe, told us, “Numbers are great to look at but, as you take a look at the total budget, everyone needs to realize that we don’t get our monies in a lump sum. You do have to have some cash on hand until some of the revenue comes in from property tax. Some people think you get a big lump sum in January; you really don’t, so the bottom line is, it’s a cash-flow problem.”
Kevin Crosier who was Berne’s supervisor during the time covered by the audit, was strident in defense of keeping a large fund balance.
“That surplus was there because I knew we were going to be facing hard times down the road,” he told our reporter, Zach Simeone. Crosier had been supervisor for eight years when he decided not to run again. Crosier went on, referring to Comptroller Thomas DiNapoli, “If I’d followed Mr. DiNapoli’s blueprint for healthy government, our town would be in the same mess that the state is in.”
The real problem is that there is no blueprint for towns to follow on the size of fund balance.
State law says only that a municipality can keep a “reasonable amount” of money in its fund balance, placing no specific cap on how much taxpayer money it can hold.
A comptroller’s spokeswoman, Nicole Hanks, told us last week, it is up to the municipality to decide how much to keep in its rainy-day account.
“It’s got to be based on what they’ve dealt with in the past and where they’re going in the future,” said Hanks. “We couldn’t say a specific percentage without knowing exactly what one place is doing versus another. It’s up to them to look at what they’ve got going, and make the best allocation possible.”
Why then should the audit criticize Berne for its large fund balance?
We know that taxpayers are facing tough times, too, and we understand that the fund balance could be used to reduce the tax levy. Several of the towns we cover have large fund balances, which we note in the fall when we write our budget stories. Guilderland, for example, has a fund balance of about $10 million, or roughly a third of its budget. There has been no public outcry. We take this to mean that taxpayers side with Crosier and Gebe on having large rainy-day accounts to tide their towns over.
Crosier alluded to the billions of dollars in state debt, saying, “They want to come and tell you how to run your government and their government is a disaster.”
Still, the comptroller could come up with guidelines that would help towns plan to have enough to meet a crisis while still not overburdening taxpayers.
State law requires school districts not to keep unreserved, undesignated fund balances greater than 4 percent of the district’s budget for the upcoming year.
This 4-percent limit is too lean. As the state has been late in aid payments this year, many school districts have had to borrow funds in order meet payroll and other expenses.
Two years ago, the Guilderland School Board unanimously decided to break the law to prepare the district for dire financial times. “It’s a technical violation,” said the board president, Richard Weisz, at the time. “We’re not aware of any liability except we’re saving too much for a rainy day.”
We believe that somewhere in the range of 10 to 15 percent of an annual budget would make sense for both school districts and municipalities.
The recent Berne audit notes that town officials said they planned to use the general fund balance for the reconstruction of a building that will be used to house either the town hall or library, but have not set up a capital reserve fund for the project. We agree that developing such a plan is worthwhile.
Concrete recommendations like that make an audit useful, and help citizens in the long run. As we’ve written before, the process needs to be pro-active as well as re-active.
The Guilderland School District is now gearing up for its second comptroller’s audit in three years. One of the comptroller’s criticisms in 2007 was “insufficient segregation of duties in the internal controls over cash receipts and disbursements.” To save money, the district had used one person. “We have years of loyal service and have to spend taxpayer money to prevent a risk we never felt was here,” said Weisz at the time.
The board’s audit committee was frustrated because the comptroller’s office provided no template to guide school districts on how the duties could best be structured for efficiency and safety. Another frustrating point was the 2007 audit’s criticism that the district had not developed “a formal disaster recovery plan for its computerized data.” Guilderland’s business administrator said he could find no templates for a high-school disaster recovery plan. How wasteful to have each school district across the state struggling in isolation, spending time and money, to develop a plan for data recovery in a disaster.
“They only tell you when you do something wrong,” said Weisz at the time.
He summed up his stance to the auditors, saying, “If you would tell us the way you want us to do it…we would do it that way.”
That still holds true, for a town deciding on the size of its fund balance or a school district structuring duties or developing a disaster recovery plan.
Pointing out a problem is a first step. Providing guidelines for a solution is an essential second step one without the other makes for a short and frustrating journey. It’s also expensive for the taxpayers.
Melissa Hale-Spencer, editor