HANOVER - The Town of Hanover was recently criticized for its weak accounting controls in the supervisor's office by New York State Comp-troller Thomas DiNapoli's Office.
The audit came down hard on both the clerk and the supervisor for a lack of separation of duties and timely record keeping from January 2011 to January 2013.
"The Supervisor, as chief fiscal officer, is responsible for maintaining accurate and up-to-date accounting records and preparing accurate financial reports to provide the Board and public with information needed to monitor the Town's financial affairs. The Supervisor does not adequately monitor those individuals handling his financial duties. The account clerk maintains the Supervisor's accounting records, prepares bank reconciliations, and is responsible for all financial reporting with little or no oversight by the Supervisor," the report said.
The audit revealed an account clerk and the deputy town clerk perform almost all of the supervisor's financial duties, without "proper oversight." The report said this weakens audit controls of the town's finances because the deputy clerk performs duties in both the clerk's and supervisor's office.
It also pointed out weak controls within the supervisor's office where the deputy clerk was given the supervisor's stamp.
"The Deputy prepares the abstract of audited claims, enters the payments into the accounting system, prints checks, and then signs them with the Supervisor's signature stamp. The Clerk does not prepare and present certified abstracts of audited claims to the Supervisor. As a result, the Deputy can initiate, pay, and record payments without oversight. The Deputy could add claims that were not approved by the Board and use the Supervisor's signature stamp to make unauthorized payments. Although the Supervisor stated that he reviews claims, he does not review printed checks or canceled check images to ensure that payments were made for valid Town purposes," the report stated.
Although the audit did not find any "material discrepancies" in the supervisor's office financial records, it did say that accounts were not kept up-to-date when the account clerk was on vacation for several months. It was noted this could be problematic if there is a problem, it could take months to find.
The audit also found a lack of oversight in the payroll process as well as failure to do an annual audit of the supervisor's records.
Also, a problematic interfund transfers of almost $400,000 from the sewer fund to the water fund for a capital project were found.
"Although the account clerk stated that he expects the money to be repaid to the sewer fund over the next six to seven years, he did not record this activity as a transfer or an interfund loan in either fund. As a result, the Town's financial records do not properly reflect the true financial condition of the water and sewer districts accounted for within these funds. ... Furthermore, while (General Municipal Law) authorizes the temporary advance of moneys between funds, such loans are required to be repaid no later than the close of the fiscal year in which the advance was made. Moreover, if all of these moneys are not repaid, this activity would violate other provisions of GML that limit the use of sewer rents to certain purposes, which do not include financing water district improvements. We strongly encourage the board to contact legal counsel to ensure these actions do not violate pertinent statutes," the report said.
Recommendations included more oversight on the supervisor's part to make sure there is no "incompatibility of office," and records are maintained timely and accurately. It also recommended the supervisor ensure cash receipts and bank deposits match and net pay disbursements agree with payroll records. It also said the supervisor should maintain control of his signature stamp.
It was also recommended the board seek legal counsel in regard to the interfund transfers and adopt budgets that closely mirror realistic expenditures as well as annually audit the supervisor's records. It was also recommended town officials use unexpended bond proceeds to pay for debt service.
The report also criticized the clerk for untimely records and deposits of fees, taxes and bills.
"We found that, during 2011, the Clerk did not report and remit fees for 10 of the 12 months in a timely manner. Five of the 10 payments were remitted over 20 days late. For example, the Clerk did not report and remit the September 2011 Clerk fees totaling $1,545 until December 12, 2011, three months late. During 2012, the Clerk did not report and remit fees for eight out of 11 months on time. Six of the 11 payments were more than 20 days late," the report added.
Although no discrepancies were found, the report recommended the clerk deposit funds "timely and intact," ensure receipts and deposit amounts match, document individual receipts and the type of payment and remit all funds to the supervisor in compliance with statutory requirements.
Supervisor Todd Johnson responded to the report saying, the water fund will be able to repay the sewer fund in six or seven years and it is common in other towns for the book not to be closed until after February.
He also said some of the inaccuracies found in the clerk's office in the audit was human error in inputting the dates of deposits. He also said the town is open for suggestions on how it can record every payment during tax season with such a small staff. He also said types of payments are marked and deposits are made properly.
The comptroller's office responded saying at the end of the 2012 fiscal year the water fund was not in a position to repay the funds advanced, as of January the supervisor's records were not accurate and complete, it is the supervisor's job to make sure reports are accurate and timely for the board and many conversations were had with the clerk about recommended practices.
The audit can be viewed at www.osc.state.ny.us/localgov/audits/towns/2013/hanover.pdf.