June 26, 2012
DiNapoli: Chautauqua County Internal Controls Reviewed
Audit Finds IDA Investment Failing to Produce Expected Returns
Chautauqua County has lost nearly $600,000 in revenue and stands to lose another $3.6 million because of risky investments and questionable management decisions, according to an audit released today by State Comptroller Thomas P. DiNapoli.
After two Chautauqua County Industrial Development Agency (CCIDA) bonds failed to meet expected returns, the county lost out on $500,000 in interest revenue and $94,000 in property taxes through October 2011. Another $3.6 million in direct payments is still owed to the county.
“Encouraging economic development in our upstate communities has never been more important. In today’s fiscal climate, however, imprudent investments can have a devastating impact on local taxpayers,” said DiNapoli. “Financial risk should not be shifted from businesses and an IDA to the county and its taxpayers.”
In 2000 and 2001, the Chautauqua County Legislature purchased CCIDA bonds to fund the construction of speculation (spec) buildings in the Towns of Sheridan and Busti. Auditors, however, found that payments from the businesses in these spec buildings did not cover the required annual IDA debt payments.
As a result, the first bond defaulted causing the county’s general fund balance to be reduced by $1.8 million. The county also lost $94,500 in outstanding property taxes.
Further, the county stopped receiving principal payments from the second IDA project in February 2010. The county is still owed $1.8 million on this bond. Auditors said there is no guarantee the county will recoup its investment even with reinstatement of principal and interest payments.
The audit also examined the county’s internal controls relating to real property tax services and the county-owned nursing home. The additional audit findings included:
Auditors made a series of recommendations, including:
A copy of the Comptroller’s audit and the county’s response can be found online at: http://www.osc.state.ny.us/localgov/audits/counties/2012/chautauqua.pdf