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May 4, 2009

DiNapoli Audit: City of Rensselaer Has Lax Financial Controls Over Purchasing

Weak or nonexistent financial controls expose City of Rensselaer assets to risk of misuse or theft, according to an audit released by State Comptroller Thomas P. DiNapoli. Moreover, controls over purchasing were so weak that the city routinely made purchases in complete disregard of its own policy and General Municipal Law bidding requirements.

“In good times or bad, officials must take care to protect taxpayer assets,” said DiNapoli. “But in the current economic climate, every dime counts, especially taxpayer dimes. It’s never been more imperative for local governments to protect public moneys from being misspent or stolen.”

This is one of a series of five audits of Rensselaer that DiNapoli’s office will be conducting, each focusing on specific aspects of the city’s financial operations. DiNapoli’s audit found that the city:

  • made payments totaling $39,901 to a company owned by a city employee which violates the city’s ethics code, and paid insurance premiums totaling $14,577 for vehicles that were no longer possessed by the city;
  • disregarded its purchasing policy, which itself is outdated and doesn’t reflect changes in the law that governs purchasing. Specifically, the GML thresholds for competitive bidding are $10,000 for purchase contracts and $20,000 for public works contracts. However, the policy incorrectly references $7,000 for purchase contracts and $10,000 for public works contracts;
  • did not annually review its purchasing policy as it is required to do;
  • routinely allowed departments to purchase goods and services even though the charter designates this responsibility to the purchasing agent;
  • made purchases in excess of $380,000 that were not competitively bid as required by GML and purchases totaling $37,406 that were made without obtaining the required quotes as required by the procurement policy;
  • did not audit all claims prior to payment to make sure they were for a proper city purpose. For example, the city made payment on 25 claims totaling $33,906 with no evidence of approval by the audit committee;
  • neglected to submit for tax refunds on fuel purchases that would have saved the city about $60,000. The availability of these refunds should have been identified during an adequate claims audit; and
  • did not issue the required tax information forms to properly report non-employee compensation payments totaling $163,355.

DiNapoli recommended that city officials:

  • review and update the city’s procurement policy annually and ensure it conforms with GML;
  • ensure that the purchasing agent performs his duties and responsibilities according to the charter.
  • improve the timeliness of the purchasing process to ensure that the city can take advantage of discounts and avoid late fees;
  • ensure that officials and employees are not conducting business with the city;
  • ensure claims are supported, reviewed, and approved by the audit committee prior to payment, and that this approval is properly documented; and
  • submit necessary documentation to the state Department of Taxation and Finance to receive refunds of taxes on eligible fuel purchases.

City officials generally agreed with DiNapoli’s recommendations and indicated they would take corrective action.

Click here for a copy of the audit.



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