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September 23, 2008

DiNapoli: Butternuts Books Inadequate

Supervisor’s Deficient Records Prevented Proper Board Management

The Town of Butternuts has been run virtually without accounting records or financial reports, according to an audit by State Comptroller Thomas P. DiNapoli. Due to poor record keeping auditors were unable to verify that all moneys disbursed were accounted for properly even after extensive testing. Records were so incomplete that the town was unable to explain why a savings account balance was decreased by $7,628. The audit covered the period January 2006 to November 2007.

“Public officials are responsible for keeping proper accounting records that track revenues and expenditures,” said DiNapoli. “Now more than ever, every dime counts, and taxpayers’ money has to be protected. Without the right accounting and recordkeeping, this money could be lost or stolen.”

The supervisor did not maintain complete and accurate accounting records, perform monthly bank-to-book reconciliations or effectively use the town’s financial software. He did not provide auditors with certain detailed records until 42 days after DiNapoli’s auditors began their work, indicating that the delay was caused by financial software that had crashed.

Because the financial reports provided to the board and filed with the state Comptroller’s Office were filed late and filled with errors, the board was unable to make informed financial decisions or adequately monitor the town’s fiscal health.

The absence of complete records forced auditors to trace all moneys received from source documents to bank statements and 133 cancelled check images totaling $255,000 to audited and approved warrants and related claims. Auditors were unable to verify that all moneys disbursed were accounted for properly.

When auditors finally received the accounting records, they found:

  • inter-fund advances totaling approximately $467,000 were not recorded in town books;
  • a comprehensive record of all investments (certificates of deposit) was not maintained. As a result, it could not be determined from what fund the invested moneys originated;
  • savings account registers were maintained for various funds. However, in January 2007, the balance in one of the savings account registers was reduced from $27,973 to $20,345 to reflect the actual bank balance. He did not identify the reason for the change. Due to the poor condition of the accounting records, auditors were unable to reconcile the difference; and
  • monthly bank-to-book reconciliations were not performed.

Auditors also found that the town did not effectively use its financial software. Although the software had the capability to generate financial reports, which could have been used to maintain complete and accurate accounting records, the supervisor did not generate these reports.

DiNapoli recommended that town officials should:

  • maintain accurate and complete accounting records;
  • obtain board authorization prior to making inter-fund advances;
  • repay all outstanding inter-fund advances, including appropriate interest. Any new inter-fund advances should be repaid, including appropriate interest, by the close of the fiscal year in which they were made;
  • prepare and provide complete and accurate monthly financial reports to the board, including monthly balance sheets and general journals;
  • prepare and file accurate annual financial reports with the town clerk and state Comptroller in a timely manner; and
  • present accounting records and reports, for each fiscal year, to the board by the 20th of the following fiscal year. Upon receiving the supervisor’s records and reports, the board should audit, or contract with an independent auditor to review those records and reports.

Officials generally agreed with DiNapoli’s findings and indicated they would take corrective action.

Click here for a copy of the report.



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