Kabot Says Capital Fund Deficit Is $3 Million

Posted on 16 December 2009

After uncovering a landmine of accounting errors in the town’s capital fund earlier this year, Southampton Town Supervisor Linda Kabot announced at a work session on Tuesday that the capital fund owes $3 million for spending from 2003 through 2008.
Over the course of this year, the town board estimated the capital fund deficit was between $6 and $10 million. Kabot has subsequently lowered the estimated deficit following the release of a forensic audit of the capital fund, which was conducted by FTI consulting and presented at the work session. These debts, noted Kabot, mainly stem from money that was earmarked for capital projects but the funds were never moved into the capital fund’s coffers.
According to Brian Ong with FTI consulting, around $20.9 million was slated to be transferred into the capital fund from 2003 to 2008 through direct appropriations, or the movement of cash from one town fund to another. Kabot pointed out that of these $20.9 million in failed direct appropriations, around $7.75 million was designated for a road reconstruction project. The money for the project was expected to be moved from the highway operating fund to the capital fund, but was financed through the highway fund. Based on this finding, the actual amount of failed direct appropriations due to the capital fund is closer to $13 million, stated Ong. In addition to the money never moving into the appropriate fund, Ong added there was rarely a recording of the town board’s intended purpose for these monies. In other words, the town’s financial records failed to show that certain monies were already spoken for and due to the capital fund. Ong’s team also discovered that close to $153,000 was transferred into the capital fund without the approval of the town board.
Kabot added that of the $13 million almost $6 million is actual liabilities, or actual money spent. Several capital projects are showing a positive fund balance. Kabot hopes the accounts for these projects can be closed and the left over monies will bring the overall capital fund deficit down to $3 million. This debt, intimated Kabot , will be manageable for the town to correct. To address this shortfall, the town could use deficit financing, bring in new revenue or surplus — meaning sell — town owned properties, a suggestion which Kabot has strongly supported.
Rectifying the town’s financial records was a particularly arduous process for town comptroller Tamara Wright, her staff and the FTI consultants. The team poured over every resolution authorizing or amending spending for capital projects dating back to as early as 2002. Because the statements for 2008 were based on inaccuracies in the financial documentation from 2008, Wright said the group had to expand the scope of their work to include 2008 and 2009; And they had to effectively “reconstruct the financial records of the town.” She added that there are close to 300 projects with open accounts. In order to effectuate this task, Wright and the FTI consultants created a financial database system for the town to show the spending, funding and activity for each capital project.
“[The database] is a repository for all financial information related to these capital projects,” explained Ong.
“The database was set-up for the past but it will help us keep track of projects in the future,” added Kabot.
Regarding the future of the town’s capital projects, Kabot stated “We still need road work and drainage, but we are putting a hold on parks and aesthetic projects and so forth. I believe going into the future there should be concerted controls over the capital fund.”
Although Kabot’s supervisor term ends this month and she will not have a say in future accounting controls at the town, employees with the state comptroller were in the audience on Tuesday to sit in on FTI’s presentation. The town is currently being audited by the state comptroller specifically on policies and procedures related to internal controls, wrote principal examiner D’jyna Labossiere in a letter to the town dated July 2, 2009.
Kabot added that the board will review several resolution next Tuesday, December 22, to correct the capital fund deficit.

Be Sociable, Share!

This post was written by:

- who has written 496 posts on The Sag Harbor Express.

Contact the author

One Response to “Kabot Says Capital Fund Deficit Is $3 Million”

  1. Art says:

    I think Linda was the right person at the wrong time and had to be replaced for the sake of change. I hope the new supervisor will do a good job leading us into a new era of fiscal responsibility and we do not regret loosing a very capable leader.

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