By Marcello Iaia

Enterprise file photo – Marcello Iaia
Valerie Lounsbury listens at a candidates’ forum in October, when she ran unopposed to finish the last year of former supervisor Marie Dermody’s term. Lounsbury, a Republican, was appointed in February of 2012. A financial audit by the state comptroller’s office was conducted through April, and its recently released report made several recommendations that Lounsbury said have been acted upon. One of the main reasons for its conclusion that the town’s records “do not provide an accurate portrait” of town fiscal health is the delayed submission of annual financial reports to the state. Lounsbury said she expects the 2011 report to be filed “within the next month.”RENSSELAERVILLE — Layers of accounting practices spread over several years have generated inaccurate financial records and overstated tax revenues in the town.

According to a report released by the state comptroller’s office on Jan. 11, town board members could not monitor the financial health of Rensselaerville, and security of town money was compromised during the period of its audit, from Jan. 1, 2011 to April 30, 2012.

Property and sales-tax revenues were overstated by almost 30 percent of general fund revenues; online bank accounts had ineligible users; an “improper” road machinery fund was created; and required reports had not been filed with the state, according to the audit report.

The town’s current supervisor, Valerie Lounsbury, said this week that all the recommendations made in the report have already been acted upon.

Over the course of years, the town has been identifying discrepancies between bank statements and its own records, correcting errors in order to submit its annual financial reports to the comptroller’s office.

A town supervisor is required to submit the report within 60 days after the fiscal year ends. Lounsbury said the town’s 2010 report was submitted in 2012 and the 2011 report is close to being filed “within the next month.”

Lounsbury, a Republican who had worked as a private accountant, came into office when she was appointed in February of 2012. Her first three months in office coincided with the audit period. She ran unopposed for 2013.

“I was aware that…there were problems with 2010, that that had not been filed. But I very honestly did not realize the extent of the issues for 2011, and I really don’t think anyone was aware of the extent of it,” said Lounsbury. “And again, basically because of the two accounting programs being run at the same time, and trying to switch from one to the other.”

Marie Dermody, a Democrat who resigned in January 2012, had been supervisor for most of the audit period. In her resignation letter, she stated that the “culture” of the town board kept her from making progress.

Lounsbury said old accounting software, Enhance, and a new software with subsidized training from the county were used simultaneously from July 2011 through the end of the year, when Lounsbury was not working with the town but her current clerk was. Payroll was kept in Enhance, with all other accounting handled in the new software, Municipal Information Systems (MUNIS).

“We didn’t want to get confused, having two different W-2’s,” said Lounsbury.

As Lounsbury and her clerk, Sarah Hunt, described, Hunt was making entries into the MUNIS system, while Dermody used Enhance, without either aware.

Enterprise file photo – Michael Koff
Marie Dermody awaits results on Election Night. Dermody, a Democrat, resigned as supervisor in January of 2012, towards the end of a financial audit of Rensselaerville done by the state. The audit report released Friday said the town’s financial records are in “poor condition.” Dermody said this week that inaccurate records were inherited when she took office in 2010.Dermody, a Democrat, stepped down as supervisor in January of last year when, she wrote in her letter of resignation, the “culture” of the town board had prevented her from making progress.

All entries Dermody made into Enhance for the later half of 2011 were what she claimed this week were corrections of errors made during Conservative Jost Nickelsburg’s term before her. He could not be reached for comment.

Dermody told The Enterprise that, for any given credit entry, “There would have to be a corresponding debit. And the other confusing thing is, what we consider credits, like a deposit in normal life, is actually a debit in municipal accounting.”

She said the town’s accounting firm guided her.

“She [the accountant] would look over the bank statements and then match it to a report that I would send to her from the accounting program,” said Dermody, “and she could see where the one side was and what the corresponding other side needed to be and she would tell me what needed to be done in order that each entry had an offset.”

Revenues

The overstated revenues detailed in the audit report came from ambulance and fire district revenues recorded in both the district funds and the general fund.

When the two accounting systems were ultimately combined, an additional $78,000 of sales tax revenue was counted twice.

Dermody said her only knowledge related to these funds is that the bill for workers’ compensation insurance was received after the town budget was adopted, and it was higher than budgeted for.

“Because, in effect, the three fire companies and the ambulance do cover the entire town and they had no way of generating funds to pay the difference, I know that we transferred money to pay that for them,” said Dermody.

County fund in

a town budget

A “road machinery” fund was created in the new MUNIS system in 2011. The report notes this is a county fund and does not conform to the chart of accounts prescribed by the Office of the State Comptroller.

The report states that current town officials said the fund was created by Dermody and did not know why.

“I wasn’t aware that it was a county fund,” said Dermody. “We were trying to be as specific as possible so that we knew where our money went…I wasn’t aware it was a new fund. I thought it was part of the highway fund.”

Lounsbury said the road machinery fund, following the state’s recommendation, is now inactive.

Reconciliations stalled

When the MUNIS system was being used, starting in July, Dermody said she was waiting on guidance from the county before she proceeded with reconciling bank accounts.

“You just go through to see what’s outstanding, to make sure the transfers are correct,” said Lounsbury, describing bank reconciliations the report states must be done on a monthly basis.

Reconciliations were made and approved by town board members monthly until the two systems began, Dermody said.

Guidance she received on the new system, Dermody said, was stopped after a complaint was made to the Albany County Comptroller’s Office about it.

An audit report from the county comptroller’s office at the end of 2010 indicated the town’s accounting system was inadequate and provided training on the new MUNIS system.

Comptroller Michael Conners visited the board after Lounsbury was appointed as supervisor in February to offer additional training.

“You guys were at a critical point to have somebody leave,” Conners said at the time of Dermody’s resignation.

Lounsbury did not determine the beginning cash balance for 2012 so the regular bank reconciliations could be made for successive months, the report stated.

Compromised accounts

The security of the town’s online bank accounts was at risk because user accounts were granted to people without privilege, according to the report.

Two former employees still had online banking user accounts during the time of the audit.

Lounsbury said the names of the employees had been left on the online user accounts, but they did not have access and have now been removed.

The supervisor and her clerk had access to online banking modules for the town clerk, which includes water rent, sewer rent, town clerk, and tax collector accounts, but did not make any transfers, according to the report.

“I have made sure that authorization to go into the town clerk’s account has been removed from clerk 1,” said Lounsbury.

The report identified problems with online banking as a result of the town board’s failure to establish policies and procedures to grant specific authorizations for user accounts.

“I haven’t taken anything before the board because I felt that we had addressed the issues, their concerns with the corrections that we have made,” said Lounsbury.

Corrective action

The town has 90 days respond to the report with a corrective action plan.

Lounsbury said there are no recommendations made in the report that have not been acted upon.

She explained how transfers are now verified by her twice, a practice not done before the audit report.

“She puts all of her figures together on what needs to be transfered,” Lounsbury said of her clerk. “I verify them, then authorize the transfer. Then, when the transfer is done, she comes back and I then verify that the amount that was actually transferred is accurate to what we need,” she said.

The state, said Lounsbury, now requires that town justices send money and reports directly to the state comptroller’s office, to be processed. Quarterly payroll reports, she said, are being filed on time.