In Midst of Financial Debacle, Town to Adopt New Finance Policies

Posted on 23 July 2009

In the wake of discovering numerous accounting blunders dating back several years, the current Southampton Town Board hopes to wipe the slate clean for the town by tightening accounting controls and procedures for the future. The town’s present financial predicament stems from two main procedural oversights. Firstly, beginning in 2003, the town doled out a number of interfund loans from the general fund to other funds, like the police, waste management and highway fund, making sure these departments wouldn’t end up in the red at year’s end.

However, at a work session on Tuesday, July 21, comptroller Tamara Wright explained state law dictates an interfund loan cannot be extended for more than a year, meaning the loan must be paid back to the lending fund within a year’s time. In the instance where an interfund loan isn’t repaid within a year, the loan begins to accrue interest. The town’s failure to rectify these interfund loans resulted in several million dollars worth of indebtedness to the general fund.

The second major accounting error on the part of the town was the incomplete transfers from the general fund to the capital fund. A transfer, Wright pointed out at the work session, isn’t a loan and is simply a transference of money from one fund to another. However, beginning in 2004, previous town boards resolved to give a certain amount of money by way of direct appropriations, or direct cash transfers, from the general fund to the capital fund for various capital projects. Several of these transfers, however, were posted to have taken place on the town’s accounting database, but in fact the money wasn’t moved and remained in the general fund.

In order to prevent future town boards from repeating the mistakes of the past, supervisor Linda Kabot presented a draft law directly targeting these kinds of accounting errors.

“It is my belief that interfund loans should be done by town board resolution,” declared Kabot at the work session, detailing the first provision of her proposed law. In 2008, the town first implemented this policy, however, Kabot wishes to make this policy a law on the town books.

“This is an example of administrative policy, but I want to take it from policy to code amendment,” she said.

In addition, the comptroller would need to provide the town board with an annual or semi-annual report on all interfund loans throughout the town, specifying the lending fund and the receiving fund, the original loan amount, and the amount still owed on the loan at the close of the year.

To combat the second accounting problem revealed by the current town board, Kabot seeks to create an annual interfund transfer report. The comptroller would compile the report and distribute it to the town board.

Similar to the interfund loans report, the interfund transfer report indicates “the revenue source district/fund and receiving district/fund and the town board resolution authorizing the transaction.” Interfund transfers will also appear on the town’s annual operating budget and the funding source for each project will be specified.

Councilwoman Anna Throne-Holst, however, wished to take the tracking of available balances and spending for capital projects one step further.

“I want that level of recording and tracking as the project or funding is allocated and as that project proceeds forward, so the town board can always refer back to that to see where the cash lies,” said Throne-Holst. She would like to see information dispersed to the board on the cash available for the projects, how much has already been spent on them and if the full amount allocated for the project wasn’t used in its entirety.

Kabot suggested the town publish an additional report to include this information and said it would give the town an easy “opportunity to recoup money” that wasn’t spent.

In addition to these measures, under the draft law the comptroller would release a report on the “Authorized, Unissued Bonds.” Currently, the town has approximately $19 million in authorized, but as of yet, unissued bonds.

The draft law is still pending validation from the town attorney and it will also be put through the ringer of public hearings.

“I want to show that the board is moving proactively to manage our financial turmoil,” maintained Kabot. “This will lead to greater town board oversight.”

Be Sociable, Share!

This post was written by:

- who has written 497 posts on The Sag Harbor Express.


Contact the author

Leave a Reply

Comments are the sole responsibility of the person posting them. You agree not to post comments that are off-topic, defamatory, obscene, abusive, threatening or an invasion of privacy. Violators may be banned. Terms of Service

Follow The Express…


Pictures of the Week - See all photos