FORESTVILLE - A state comptroller's audit is critical of the village of Forestville's handling of water and capital project funds.
The comptroller's office investigated financial records from June 2010 to July 2012 and later extended the investigation to records dating back to June 2006 to see if the Village Board adopted realistic water fund budgets and established appropriate user rates. The audit also investigated if there were adequate internal controls over water billing and collections and whether related financial activity was recorded correctly.
Marcia Peterson was the clerk of the village for the time investigated by the comptroller, but her name is not listed in the report. Peterson resigned in August while the audit was taking place.
The audit states the clerk-treasurer's records for the water fund were inaccurate and didn't show the fund's actual financial condition. It also states the clerk-treasurer improperly reported certain project spending in the operating fund, making the costs to operate the system seem higher than they should have been. The village board then prepared annual budgets based on the incorrect data.
The report went on to state the village board increased water rates five times since June 2007 at an increase of 233 percent for water users and also did not create a debt service or capital reserve fund for which to pay for the water project. The report said the board raised water rates because it thought it needed to in order to get funding for the water project from the Environmental Facilities Corporation, not for the purpose of saving money to pay for the debt service incurred by the project.
"The clerk-treasurer did not provide village officials with complete and accurate historical data and projections on which to estimate revenues and appropriations. The clerk-treasurer did not properly record certain costs associated with the capital project; instead, she included project expenditures with operating expenditures, which resulted in overstated actual operating expenditures that exceeded budgeted appropriations. Board members were unaware of the fact that of reported operating expenditures over the five-year period ending May 31, 2011, seven included certain water project expenditures," the report said.
According to the report there were instances of no documentation for revenues and several unsupported adjustments to the operating fund.
"Because of the reporting inaccuracies, neither the clerk-treasurer nor the board was aware of the water fund's actual operating results and its overall financial condition. Further, given these inaccuracies, the board was unable to gauge the impact of recent rate increases on the financial position of the water fund, or to determine if the rates were sufficient to meet the fund's operational and debt service needs," the report continued.
It went on to say if no changes are made to the water rates the village will have a $96,000 deficit in 2013-14, although it will have enough surplus to account for the first debt service payment of $123,000.
The comptroller's office recommended the clerk-treasurer provided complete and accurate historical data and maintain records for project expenditures separately. Also, the board should adjust water rates to generate revenue for appropriations and set aside money for reserves to pay for future debt service costs.
The report also recommended the board create a capital project plan that states how it plans to pay for the project and any additional projects. The report also targeted the lack of oversight by the board or another employee over the clerk.
"Because the clerk-treasurer bills, collects, records, deposits, and makes adjustments with no oversight, errors have occurred and not been corrected," the report said.
The report gave evidence of thousands of dollars in under-billing and over-billing due to poor recordkeeping practices.
"We attribute the relatively high error rate we found, in part, to the board's failure to properly segregate financial duties or provide for board review of water billing and collection as a compensating control," the report added.
The report's other recommendations included establishing policies and procedures for billing and collection of water charges, segregating water billing and collection duties or implementing controls for oversight and developing policies to document all requests for shut-off of services and when the service was disconnected. Also, the board should approve water billing adjustments before they are made, verify the list of unpaid water bills is complete and accurate before it is received on the tax roll and ensure shut-off policies are enforced. The clerk should ensure penalties are applied to delinquent bills and establish and maintain an accounts receivables control account.
The report included a response from the village and signed by Acting Mayor Katherine "Beth" Bowker. The response thanked the comptroller's office for its report and said it will take its recommendations into consideration. A Corrective Action Plan was not included in the report.
The full report is available at www.osc.state.ny.us/localgov/audits/villages/2013/forestvillewater.pdf.
The report said 32 percent of the water bills randomly selected were incorrectly billed. The report said the village also did not keep record of the shut-offs done by the water department, so some customers received water and were not billed.
Late payment fees were also not enforced as well as service not being shut-off for payments later than 60 days which would incur a $40 turn off/on fee, both leading to a loss of revenue for the village.
The report also stated the clerk inaccurately levied past due water bills with unpaid property taxes to the county, where some amounts were inaccurate, some customers were listed wrongly and others who should have been listed were not. This also resulted in a loss of revenue.