2010 town audit points to problems with staff, oversight and computer system
Riverhead Town is now up to date on its audits, as the 2010 audit was completed and made public last Thursday.
The town entered 2011 without completed audits for 2008, 2009 or 2010, and had hired the accounting firm Albrecht, Viggiano, Zureck & Company to do all three this year.
“I want to congratulate all of you for helping us accomplish this,” Supervisor Sean Walter told the auditors at last Thursday’s work session. “Now, next year, can we have the audit by June 1?”
The lack of audits from those three years prevented the town from selling bonds, the supervisor said. But with the audits completed, the town last week sold $22 million in serial bonds at a 3.05 percent interest rate, which Mr. Walter said he was “elated at.”
The 2010 audit lists 11 “control deficiencies” in the town’s internal control methods. who of which are considered a “material weaknesses” — the most severe type of weakness in auditor-speak.
Failure to file the audit on time was one of the material weaknesses. The other dealt with the town’s use of a computer program that is 25 years old.
“The town’s software system is 25 years old and no longer supported by the vendor that developed it,” the audit states. “Some departments have migrated off the mainframe to Microsoft Windows for operational purposes.”
The audit said the town relies on third-party consultants to supplement its maintenance of that mainframe system, uses different sources to maintain the computers and lacks a disaster recovery system or off-site disaster recovery location.
“There is a potential for the town’s books and records to be compromised when using software that is no longer supported by the vendor and there is no disaster recovery in place,” the audit states. “In addition, the town’s operations may not be running efficiently with a software that is 25 years old and the reliance of third-party consultants.”
“There is a commitment on this board to update our 25-year-old accounting program,” Mr. Walter said last week.
The town is in the process of reviewing software proposals with the intention of moving a number of accounting functions off the mainframe and onto a Windows platform, the audit notes.
The computer system was listed as a material weakness in the 2009 audit as well.
Among other problems cited by the audit are the lack of documentation supporting the nature of some interfund transactions, failure to properly track income received by the water district from renting its towers to cellular companies, starting capital projects without any funding in place and then borrowing the money from other funds and eight instances of purchases made without purchase orders.
The report also said the town’s accounting department employees have “a need for additional knowledge of governmental accounting, as well as designing, revising and following proper policies and procedures.”
The town also lacked proper segregation of duties in the information technology department, the tax receiver’s office and the Justice Court, the report states.
“Lack of appropriate oversight increases the risk that errors and/or fraud will not be prevented or detected in a timely manner,” the audit states.
The auditors also found several trust and agency accounts that were not reconciled “to determine if the balances are proper and if funds should be returned to other funds or third parties.”
Some of these issues go back to 1990, according to town finance administrator Bill Rothaar. The funds include things like bid deposits or performance bonds that would normally be given back after a job is completed, he said.
He said the town currently monitors these funds and will begin reviewing old balances one at a time.
“I’m ready to throw a consultant at this because it’s not acceptable,” Mr. Walter said.
AVZ recommended putting the money into a reserve fund and then paying it out of that fund if any claims are made for it.
Mr. Rothaar said the town has begun working on problems identified in the 2008 and 2009 audits, but because those audits weren’t completed until this year, the town is still working on correcting many of those issues.
He said the town has either fixed or started to fix many of the problems cited in the audits.
The audit also points out that the town’s effort to curtail spending in 2010, a measure instituted when it discovered a deficit of more than $4 million, resulted in a savings of $2.4 million in spending and an increase in revenue of almost $300,000.
“We made this town run very lean in 2010,” Mr. Walter said.
