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NYS Comptroller

THOMAS P. DiNAPOLI

Press Releases

March 31, 2016, Contact: Press Office (518) 474-4015

DiNapoli: Fairport Audits Reveal Unauthorized Practices for Economic Development Agencies

Officials with the Village of Fairport Industrial Development Agency (FIDA) made a series of financial and accounting transactions outside their legal authority, including granting $1 million worth of inappropriate gifts and commercial loans, according to an audit released today by State Comptroller Thomas P. DiNapoli. An audit of the Fairport Urban Renewal Agency (FURA) was also released today citing similar issues.

The audits revealed improper governance practices by officials that led to inappropriately commingled bank accounts, and combined and inaccurate accounting records for the FIDA, the FURA and the Village of Fairport Local Development Company (FLDC) – three entities which have been termed the Village of Fairport Office of Community and Economic Development (OCED).

“These audits reveal significant issues with how Fairport officials managed local economic development activities,” said DiNapoli. “Without proper accountability and disclosure, residents cannot be sure the tax breaks and other benefits provided by these entities are appropriate.”  

Village of Fairport Industrial Development Agency Audit found:

Inappropriate Loans and Gifts

  • The FLDC was established to take over the FIDA’s unauthorized revolving loan fund.
  • In May 2013, the FIDA transferred the value of seven outstanding loans totaling $505,669 to the FLDC. Officials then transferred $175,000 from the FIDA to the FLDC as “contributed capital” to cover two new FLDC loans that began in early 2014.
  • FIDA also improperly gifted $143,000 to the FLDC for the completion of a project.
  • FIDA granted two additional unauthorized commercial loans of approximately $187,000.

Questionable Payments

  • FIDA made a $42,000 contribution to the village in 2014 but had no basis for the budgeted amount or contract stipulating services to be covered by this payment.
  • FIDA inappropriately subsidized the FURA by a total of $250,000 from 2010 through 2014, which resulted from commingled accounting records.

Inequitable Activities and Projects

  • The FIDA accumulated $2.2 million in unrestricted assets, which was more than six times its 2014 budget of approximately $343,000. The FIDA was able to develop this balance because it receives lease income from agreements with local businesses that do not contain provisions to share related revenues with taxing jurisdictions.
  • The Town of Perinton and the Fairport Central School District may not be equitably compensated for the loss of revenue resulting from the majority of FIDA’s projects.

Inappropriate Investments

  • The FIDA and FURA investment account had $911,000 improperly invested in bonds of local governments and government-sponsored enterprises not guaranteed by the federal government.
  • Promissory notes totaling $350,000 between the FIDA and the FURA do not represent true debt, but were used as an inappropriate and unnecessary accounting entry.

DiNapoli made a series of recommendations to the FIDA board to address inappropriate financial transactions and help distinguish it as an independent corporate entity that acts within its statutory authority. These include:

  • Maintain the FIDA’s accounting records and bank accounts separately and distinctly from the FURA and the FLDC;
  • Only use the FIDA’s cash for the payment of the FIDA’s expenses and not those of other entities;
  • Cease making commercial loans directly or through the FLDC using FIDA moneys;
  • Seek reimbursement of the commercial loans it transferred to the FLDC, as well as the commercial loans the FLDC issued using the FIDA’s moneys;
  • Seek reimbursement of the FIDA’s startup capital from the FLDC and cease providing gratuitous cash payments to the FLDC; and
  • Consider amending the FIDA’s lease and PILOT agreements to reflect an equitable distribution of payments to affected taxing jurisdictions consistent with current statutory requirements.

The Comptroller also recommended the Village of Fairport appoint different board members for each of the three OCED entities to ensure that all entities are governed individually.

Village of Fairport Urban Renewal Agency
In the separate audit of FURA, auditors found the agency inappropriately gifted $250,000 in assets to the FLDC and also made an annual contribution to the village, totaling $10,560 for the 2014 fiscal year, without a basis for the budgeted amount or a contract stipulating the services to be covered by this contribution.

In addition, all FURA disbursements are made out of the FIDA checking account. By inappropriately charging all expenses against the FIDA, agency staff do not have an accurate record or measure of the expenses attributable to the FURA verses the other entities.

For both audits, agency officials disagreed with certain aspects of the findings and recommendations, but indicated their intent to implement corrective action for many of them.

For a copy of the FIDA audit and the response from local officials, visit:
http://www.osc.state.ny.us/localgov/audits/ida/2016/fairportida.htm

For a copy of the FURA audit, recommendations made to the FURA staff and board, and the response from local officials, visit:
http://www.osc.state.ny.us/localgov/audits/publicauth/2016/fairporturbanrenewal.htm

For access to state and local government spending, public authority financial data and information on 50,000 state contracts, visit Open Book New York. The easy-to-use website was created by DiNapoli to promote openness in government and provide taxpayers with better access to the financial workings of government.

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