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Audit Firm Criticizes Cold Spring Village Accounting Practices
Gasoline usage questions results in tighter controls over duplicate pump keys
by Kevin Foley
The Cold Spring budget pot boiled over for at least one member of the Board of Trustees at the weekly Village Hall workshop meeting on Tuesday, April 22, 2008. Trustee Seth Gallagher, who had summoned constituents to the meeting with a heated email regarding alleged threats from Mayor Anthony Phillips in response to Gallagher's investigation of the possible misuse of village gasoline supplies, continued his months-long critique of the administration of village operations and budget accounting.
Gallagher was ultimately thwarted in his effort to exact board sanction of the Mayor, but not before he used the two-and-a-half hour meeting to highlight the village's budget deficiencies and ballooning debt.
From the outset the meeting had a melodramatic air with an unusually large audience of approximately forty citizens, a police officer stationed at the rear of the meeting room and the unexplained, but significant, absence of the Mayor.
The meeting began with an hour-long presentation to the Trustees by the outside audit firm of Sedore and Company of their draft review of the past budget year ending May 31, 2007 as well as their un-audited perspective on the budget year ending this coming May 31.
The auditors characterized several aspects of Cold Spring budget procedures under the heading of "material weakness." They criticized the methods used to book revenues and expenditures, citing numerous and ultimately costly accounting mistakes attributed to both a lack of training for the Village Treasurer and an antiquated software system in the village computer system.
In addition, the auditors reported that the village in its 2007 budget had exceeded budgeted expenses in several categories including police salaries and equipment, highway salaries, street lighting and employee benefits. This over-spending created a deficit that was carried into the current budget year. "The Village should monitor the budget closely and cease spending when limits are reached. The Village should create a budget for the 2009 fiscal year that will fund the deficit," recommended the auditors.
"Hundreds of items went over budget without any budget modification by the Board," said Seth Gallagher who has complained for months that village finances need to be reined in by not allowing spending beyond budgeted limits without trustee's approval.
The auditors also reported that the Village failed to adequately account for employee compensation for vacation and sick time resulting in payments not budgeted for when employees leave village employ.
Gallagher pressed the auditors to offer their perspective on the current budget year, which they were somewhat reluctant to do since they hadn't formally studied it. "I can say that what you were looking at during the year was not an adequate reflection of your actual budget," said auditor Susan Tucker.
Gallagher also questioned the auditors on their knowledge of village gasoline usage from prior audits. He asserted that the misuse issue had come up in previous years and that a former treasurer had left village employ shortly after raising questions about how gasoline was accounted for.
For their part the auditors acknowledged there were unanswered questions in accounting for gasoline usage and that they didn't believe they had been given the full picture of procedures used to track usage in prior years.
Gallagher described the situation as the Mayor possessing a duplicate set of keys for every village employee authorized to fill up at the highway department pump. The keys monitor accounts for usage, which are logged, but according to Gallagher the system was repeatedly over-ridden, resulting in excessive usage. He laid the blame squarely at the Mayor's feet.
According to Gallagher, the Mayor told him he was authorized by the Board of Trustees years ago to use village gas at his discretion. Trustee Edward Mancari confirmed that point recalling a time "five years ago when Anthony asked if he could occasionally fill up his car because he often drove around the village. He's the CEO of the village. He has a cell phone we pay for," said Mancari, who clearly did not see the problem in the same light as Gallagher.
"His use of it defeats the gas use system," declared Gallagher, who elicited the auditors comment that any usage should be formally accounted for. "I don't think the Mayor would object to that," said Mancari.
Although the meeting moved on briefly to other business, it soon came back to the subject of budget accountability as audience members expressed dismay over the transition from a surplus budget two years ago to one running an accumulated deficit of perhaps as high as $200,000.
Gallagher described a multi-year run during which the village spent more money than budgeted on items such as a new Highway Department employee and police overtime without the trustees actually approving the expenditures.
Gallagher was frustrated in his effort to have the trustees discuss specific budget recommendations for the new 2009 budget when Mancari, the meeting chair, said they would be held for the formal budget hearing on April 29. Instead Gallagher returned to the gasoline issue which he said caused "thousands of dollars to leak out of the budget."
At length he described how he had gone back through village records to determine that gasoline usage was in excess of normal needs when measured against actual logs for usage. He said records indicated that different employees were tagged with unusual use of up to 150 gallons in different months.
Obviously angry from an earlier encounter with the Mayor over this issue, Gallagher declared, "The Mayor shouldn't have the keys." He said wanted the Trustees to formally remove the Mayor's authority to access village gasoline by a resolution.
The three other trustees however had no appetite for that approach and told Gallagher there would be no second to such a motion.
Gordon Roberston, who earlier had argued that there were many possible explanations for what happened with the gasoline, said, "I don't want to arbitrarily do this to a man who served the community all these years."
Audience member David Birn appeared to speak for many present. "I have no problem paying for the Mayor's gas. He works hard all around the village and it's not like we pay him a lot of money for that. We have to have transparency. So, give him a key and let him account for it."
John Teagle introduced a motion that proposed the Mayor get his own key for gas for village business and that he fill in a weekly log of his use. Over Gallagher's objection this passed by a vote of 3-1.
As the discussion continued, Teagle proposed two-person lock box idea for the spare gas keys, requiring the agreement of both the Mayor and the Village Clerk to open it. That motion passed unanimously.
Some audience members asked if the investigation of the gasoline usage and other budget problems would continue and the Trustees nodded their affirmation as they closed the public portion of the meeting so they could move to executive session to discuss a personnel matter.
During the public portion of the meeting the Trustees also approved a proposal by the Comprehensive Plan Special Board to pursue a grant for funds to have a consultant study whether the village historic district should be expanded.
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