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State comptroller’s audit follow-up finds issues with Pittsford budget process

State comptroller’s audit follow-up finds issues with Pittsford budget process

The village of Pittsford has demonstrated limited progress implementing corrective actions with regard to its budget, a follow-up audit from the state comptroller’s office shows.

In a previous report issued in July 2017, auditors identified problems with the board’s oversight over the village’s financial operations. When auditors revisited the village in August 2020 to review progress, they found limited corrective actions had occurred. Of the seven audit recommendations, one recommendation was fully implemented, four recommendations were partially implemented and two recommendations were not implemented.

The village’s annual budget for the 2016-17 fiscal year was roughly $1.3 million and was funded primarily through real property taxes, sales tax, state aid and user charges.

In a letter to Pittsford Mayor Robert Corby and the village’s board of trustees this month, state Comptroller Thomas DiNapoli’s office noted that the budgeting recommendation — that the board adopt budgets that realistically reflect the village’s operating needs based on historical or other known trends — was only partially implemented. DiNapoli noted that the board’s ability to adopt realistic budgets continues to be limited due to ongoing litigation.

“Despite efforts to approximate litigation expenditures using historical data and estimates provided by legal firms, legal expenditures exceeded the budget by approximately $266,000 (38 percent) from fiscal year 2018 through 2020,” according to the audit follow-up.

The board has since improved that facet of the budget, and DiNapoli noted that for fiscal 2020-2021, “with the exception of legal fees, the board generally budgeted reasonably and managed operations within budget.”

But the board, according to the audit review, “continued to adopt sewer fund budgets with overestimated expenditures.” From 2017-2018 through 2019-2020, expenditures were overestimated by $176,200, or 29 percent.

The original audit also recommended that the board monitor the level of fund balance and ensure that budgets are structurally balanced. Corrective action has been partially implemented in that regard, the comptroller’s letter states.

In the general fund, the board instituted a monthly review of fund balance, but despite that practice, the village was unable to maintain a level of 15 percent of the current year’s appropriations, and, in fact, the fund balance was less than 7 percent during 2018-2019. That had recovered to 12 percent for 2019-2020. The fund balance policy states that if the balance falls below the optimal level, the board will develop and adopt a fiscal plan to restore the balance within a five-year period. That wasn’t done, according to the letter from DiNapoli’s office.

The original audit found several problems within the village’s sewer fund.

“The board continued to adopt unbalanced budgets, resulting in net operating surpluses of approximately $213,000 from 2017-2018 through 2019-2020 and a net increase in unrestricted sewer fund balance of approximately $53,000,” according to the audit review. “However, unrestricted fund balance for the sewer fund ranged from 279 to 312 percent of appropriations. This level of unrestricted fund balance does not align with the village’s adopted policy nor is supported by long-term financial and capital plans.”

It was recommended in 2017 that the board adjust sewer rent rates to correspond with the actual annual cost of sewer services provided. That has not been implanted and the village continues to overcharge customers for sewer rent, according to the letter.

“Village officials have not adjusted sewer rent rates to correspond with the actual annual cost of sewer services provided. Sewer rent charges continued to significantly exceed annual sewer expenditures, resulting in operating surpluses,” the follow-up letter stated. “The board has not established appropriate reserves for future expenditures and to provide transparency to taxpayers regarding the use of surplus funds. As stated within the village’s corrective action plan, the village hired a dedicated sewer department employee following the prior audit. However, the employee left the position shortly after being hired and was not replaced.”

In addition, it was recommended in 2017 that the board discontinue making sewer fund transfers to its general fund and recover the money previously transferred. That has been partially implemented, with the village’s last transfer from the sewer fund to the general fund in 2018 for roughly $18,000. But village officials have not transferred back funds identified in the original audit or from the 2018 transfer.

It also was recommended the board develop a long-term financial plan to identify revenue, expenditure and fund balance trends for its sewer fund. That also has not been implemented, according to the comptroller’s letter. The board stated that it was in the process of developing a long-term financial plan for the sewer fund, but that it has been delayed due to various factors including personnel turnover and other priorities such as litigation.

The board has updated its procurement policy to provide clear guidance for procuring professional services as indicated in the original audit. It has partially implemented a recommendation that it enter into written agreements or approved detailed board resolutions for all individuals and firms who provide services.

The audit follow-up found that the village of Pittsford made improvements in maintaining written contracts with sufficient detail. The review included payments totaling $1.2 million made to 11 professional service providers between 2017 and 2020.

“We obtained and analyzed the written service agreements for sufficient detail. The village had sufficiently detailed written agreements on file for six of the professional service providers (55 percent), who received payments totaling $249,562,” according to the follow-up.

“During our review, we discussed the basis for our recommendations and the operational considerations relating to these issues,” the follow-up letter states. “We encourage village officials to continue their efforts to fully implement our recommended improvements.”

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