Democrat File Photo OUTGOING TOWN OF Mamakating Supervisor Charles Penna admitted that mistakes were made.

Report Slams Mamakating

By Dan Hust
WURTSBORO — December 25, 2007 — Not surprisingly, Mamakating Supervisor Charlie Penna won’t end his political career without a fight.
But the just-released audit by the NYS Comptroller’s Office won’t do anything for his already controversial image.
The state and Penna trade barbs in an alarming report on Mamakating’s fiscal condition, with auditors blaming the supervisor and board for irresponsibly digging the township into a deep financial hole, while Penna mostly blames other officials, past administrations and the town’s accounting firm of Rouis and Co.
Auditors took a look at the town’s financial records and operations from January 2005-August 2006 and found literally millions of dollars’ worth of discrepancies, provoking a harsh assessment of leaders’ evidently inadequate financial abilities.
“The board did not provide adequate oversight of the town’s financial operations, including inadequately instituting and using a meaningful annual budget process; inadequately providing for the town’s capital infrastructure; and failing to provide minimal oversight over the supervisor’s financial operations through an annual audit,” wrote auditors.
“Further, the supervisor did not meet the fundamental expectations of his financial duties,” they continued. “The supervisor assumed that the accounting firm contracted by the town was performing significantly more than the accounting functions they actually were. Consequently, the financial records and reports, used by the board to make decisions, were not complete and thus inaccurate.
“All of these breakdowns in the town’s financial management precipitated the town’s worsening financial condition. Deficiencies in internal controls, combined with a lack of board oversight, resulted in errors that were not detected and corrected in a timely manner. These errors led to misinformed decisions by the board that had, and continue to have, long-term detrimental financial effects.”
Although the full text of the audit can be found in the town hall in Wurtsboro or online at www.osc.state.ny.us, here’s what auditors specifically noted:
• Penna is considered Mamakating’s chief fiscal officer and, as such, is ultimately responsible for proper financial recordkeeping.
But auditors said those records were incomplete and/or inaccurate, leading to the board making “uninformed decisions.”
“Cash reports provided to the board indicated that general fund cash at June 30, 2006 was $1.3 million, thereby not providing the board the true amount of available cash,” auditors wrote. “However, there was only $50,000 on deposit in the bank account.”
When officials were asked about the discrepancy, they told the Comptroller’s Office that approximately $1.25 million in wire transfers and payment transactions went unrecorded – which auditors found to be true.
The problem, they said, was the lack of account reconciliations, which were not up to date – and which Penna said he thought were supposed to have been done by Rouis and Co. The Wurtsboro-based accounting firm, however, was not bound to do so in any contract with Mamakating, according to auditors.
• To cover expenses, money was taken out of various funds for the highway department and water district and used to pay debts for unrelated services and needs.
While that in and of itself is not illegal, many of those funds already were operating with deficits, and thus replenishment of any fund became near-impossible.
To make matters worse, the Wurtsboro Hills Water District was discontinued, so raising fees to cover outstanding debt is no longer an option.
Topping it off, however, was the fact that nearly $1 million in the general fund mainly consisted of IOUs from other already cash-strapped funds.
• “We found that annual reports submitted to the board and to the Office of the State Comptroller for at least the past four fiscal years (2002-2005) were unreliable because they were not completely supported by amounts recorded in the accounting records and therefore lacked competent financial data,” wrote auditors.
Rouis and Co. provided them with an amended annual financial report for 2005, but Penna’s accounting records had not been adjusted to match.
• But the supervisor wasn’t the only one to come under fire.
“The board failed to manage town finances,” auditors bluntly assessed of board members Regina Saunders, Judith Young, Nicholas Salomone and Sean Moriarty. “Town finances are now under stress because of the board’s failure to fulfill its oversight responsibilities including the failure to ensure budget projections were realistic, provide for adequate maintenance of the town’s capital infrastructure, and perform an annual audit of the accounting records of the supervisor and other departments that handle money.”
Indeed, auditors said the board “adopted unrealistic budgets for fiscal years 2003-2006” because board members had not ensured sufficient cash to pay for services. In an effort to not significantly increase property taxes, the board had “appropriated fund balances that did not exist” – which auditors said would lead to increased taxes anyway.
Penna said he didn’t realize that was what the board was doing.
“The supervisor and board members have not had sufficient training in the budget process and therefore do not fully understand their roles in the process,” concluded auditors.
• Building Department employees “were not consistently collecting fees in accordance with the established fee schedule.”
Though auditors did not infer intentional wrongdoing, they noted with alarm that fees were haphazardly collected (sometimes at incorrect amounts or not at all), numerous records and receipts were not available, and thousands of dollars in fees that were supposed to have been deposited were not locatable.
In all, auditors estimated that as much as $144,000 went uncollected.
In addition, the computer system for the department allowed every employee to modify, add and delete transactions at will, with no authorization required from supervisors.
• Though they praised the design of the township’s internal controls, auditors found that employees did not solicit quotes for six of the 11 reviewed purchases that required a bidding process, totalling $21,367.
They also found that Penna did not sign any of the 37 audited purchase orders, as required by the town’s purchasing policy.
• The board did not sufficiently fund the highway department or, as required by law, conduct an independent audit of the records and reports of the supervisor, clerk, tax collector, justices and building inspector in 2005 and 2006.
• Penna’s written response, included in the audit, pointed fingers of blame at various officials yet only attempted to answer a few of the charges levied by auditors.
“Previous administrations reduced taxes and used the surplus to balance the budget,” Penna wrote. “This caused irrevocable harm to the Town of Mamakating and was not fair to the incoming administrations or taxpayers.”
Penna said the last three years have been spent replenishing reserves, resolving discrepancies and otherwise undoing the damage done before he came to office.
He also pointed out that serious flooding in 2004, heavy inflation and the state’s new mandate on traffic tickets (which reduced justice court revenue) greatly hurt Mamakating – though he promised that this year the town has a balanced budget.
He did accept responsibility regarding oversight of each department – to a point.
“Ultimately, the blame falls on the town supervisor because it is his responsibility as head fiscal officer to know what these departments are doing,” Penna wrote.
But in the very next sentence, he said, “In this situation it was the responsibility of the board members to report to the supervisor so that the correct decisions could be made, not for the supervisor to report to the town board members.
“The supervisor’s office staff was cut, and only $1 was allotted for his personal assistant,” he continued. “This office, with minimal personnel, has met every deadline, reconciled every checking account, balanced every budget line and corrected every shortfall consistently for the last four years.”
In specific, Penna blamed the Building Department issues on town board members who he felt were not fulfilling their duties as liaisons to that department – that and the fact that the department has had three heads in as many years.
“When I became aware of the shortfalls, legal actions were taken to correct the misunderstandings in that department by the town employees, and at that point we started to collect revenues that had previously not been collected,” he wrote – adding that probably more than $144,000 in fees went uncollected in that department alone.
Board member Judy Young took issue with those statements, saying the letter of response was never read or approved by the board beforehand.
“We’ve been asking for a bookkeeper all through Charlie’s [tenure],” she explained – a request that she said he shot down.
She added that Penna himself cut the personal assistant position and refused to change the bidding process, despite the board’s concerns. Young said she looks forward to a more cooperative atmosphere with a new board and supervisor next year.
The town board is required to submit a corrective action plan by February, but that will apparently be a job Penna’s successor, Bob Fiore, and the new town board will undertake.
“Everyone have a wonderful life,” Penna concluded in his letter of response to auditors. “It has been a great four-year experience. Remind me to never do it again.
“This is the equivalent of getting married twice!”