September 6, 2012
DiNapoli: Town Deficit Caused By Inaccurate Budgeting
Due to unreasonable budget estimates, the Town of Poughkeepsie was left with a $1.5 million deficit in its major fund balances at the end of 2010, according to an audit released today by State Comptroller Thomas P. DiNapoli. The town has also failed to repay more than $3 million in inter-fund loans it made between different tax bases.
From 2008 to 2010, auditors found the town's three major funds declined from a total surplus of $77,500 to a combined deficit of $1.5 million. The deficits were caused by the failure of the town to develop reasonable budget estimates and make adjustments when it became clear that the anticipated results would not be achieved.
Revenues in the town's major funds were overestimated by a total of approximately $4 million and $2 million in 2009 and 2010, according to the audit.
"Budgets should be an accurate financial blueprint so that local governments can provide needed services with the resources available," said DiNapoli. "Town officials need to make more realistic budget estimates so they don't experience continued revenue shortfalls and operating deficits."
Town officials addressed their cash flow problems by using inter-fund loans, mostly from the town's water fund, to pay for recurring expenditures in the general town wide fund, general town outside village fund, and highway fund. Inter-fund loans transfer money from one fund to overcome shortages in another fund.
Auditors found that 79 percent of inter-fund transfers made as of Dec. 31, 2010 came from the water fund. The town has yet to repay $3.5 million to the water fund. It is improper to use special water tax assessment revenues for non-water fund purposes without repayment.
Other audit findings include:
DiNapoli recommends that the town board develop reasonable revenue estimates and monitor and adjust budgeted revenues when necessary. Town officials should also adopt a policy to govern unexpended surplus funds.
The audit also called on town officials to:
Town officials disagreed with certain aspects of the audit, but indicated they planned to implement some of the recommendations contained in the report. Their full response is included in the audit.
For a copy of the report visit: http://www.osc.state.ny.us/localgov/audits/towns/2012/poughkeepsie.htm