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Written by Larry Hertz: lhertz@poughkee.gannett.com. 845-437-4824. Twitter: @eagles416.
http://www.poughkeepsiejournal.com/article/20120326/WATCHDOG/303260029/The-saga-missing-9-6-million-end-s-gone
This is a important article for Fishkill residents. As you pay more in county taxes than your local taxes. The article identifies a dispute between the prior County Executive and current Comptroller. It also states that the county spent $26.9 million from the Reserve Fund to balance the 2012 budget. The story also indicated that these monies are nearly gone. This suggests to me, that 2013 will be a very difficult budget to balance for 2013.
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It wasn’t what you’d call a friendly disagreement.
Dutchess County Comptroller James Coughlan called then-County Executive William Steinhaus an “alarmist” who was misleading taxpayers about the state of the county’s finances. He announced in December 2010 he and his staff had uncovered $9.6 million in unspent county funds.
Steinhaus counter-punched. He called Coughlan, who had taken office 11 months earlier, inexperienced in county finances and pronounced the comptroller’s claims “ludicrous.”
Fifteen months later, county officials now agree Coughlan had identified $9.6 million in unspent county funds between 2005 and 2009.
But those officials also say all the extra money has since been spent and the county is running on a budget with virtually no extra cash.
Feeling vindicated
Budget Director Valerie Sommerville, who held the same job under Steinhaus, said Coughlan and his staff did, in fact, identify $9.6 million in unspent appropriations.
“The comptroller was diligent in drilling down into our encumbrances to squeeze out the ($9.6 million) that was there,” Sommerville said.
Coughlan said he had always been confident in the work he and his staff had done in scrutinizing county finances.
“Do I feel vindicated? I would say yes,” Coughlan said last week. “The money was there and it was part of the $29 million in fund balance that we had at the end of (2011).”
But the ultimate answer to the question of who was right when the dispute broke out depends on how the term “fund balance” is defined, financial experts say.
Coughlan’s contention that the county had unspent funds that had not been previously noted in county budget documents was confirmed by the independent auditing firm PricewaterhouseCoopers. The comptroller cited a 2010 memo from the firm saying Coughlan had identified $4.99 million in extra funds in the 2007, 2008 and 2009 budget years.
“We recommend that management continue to review all liquidations to ensure they are appropriately posted to the general ledger in the appropriate period,” the auditors’ memo said.
Coughlan said the balance of the money he cited had been found in unspent funds in 2005 and 2006.
Sommerville said last week that while she agreed Coughlan and his staff had uncovered some unspent funds, she still contended the money could not be considered part of the fund balance until all outstanding bills and revenues for the year had been reconciled.
“I’m not arguing with (Coughlan) over the ($9.6 million figure), but I did take exception to his timing,” she said.
Coughlan and Sommerville said some budget lines weren’t adequately funded, such as the costs of housing jail inmates in other facilities.
In addition, some anticipated revenues were not received, further reducing the amount of cash the county had available.
'Fluid concept'
Sommerville said new procedures recommended by the PricewaterhouseCoopers auditing firm are in place and she and Coughlan were “in full agreement” with County Executive Marc Molinaro that there is little or no fund balance left.
“Until we know the full depth and breadth of all expenditures and revenues last year, it’s premature to say exactly what the fund balance is, but Jim and I and the county executive are now on the same page,” Sommerville said.
The county Legislature used $26.9 million in surplus funds to balance the 2012 budget, and in his state-of-the-county address last month Molinaro said there was “virtually no fund balance” heading into the new year.
Coughlan described the fund balance as a “very fluid concept” that varies throughout the budget year and depends on “revenue targets” — the amount of money the county expects to receive in taxes, fees and other sources — as well as how much money the county spends out of each line item in the budget. He said the county often does not receive as much revenue from taxes or state reimbursements as anticipated.
Sommerville noted the 2011 budget adopted by the county Legislature had anticipated $1.7 million from the expected reinstatement of the county’s share of a tax on home mortgages.
That money was not collected because state lawmakers failed to pass legislation permitting the county to collect the tax, she said.
Fund balance
County Finance Commissioner Pamela Barrack said the term “fund balance” doesn’t necessarily signify cash that can be used for any and all county expenses.
“Fund balance is not cash,” Barrack said. “Fund balance is the difference between net assets and net liabilities on the balance sheet as of Dec. 31.”
Ulster County Comptroller Elliott Auerbach said he was not familiar with the facts surrounding the dispute in Dutchess County.
But he cited recent amendments to accounting principles accepted by the financial industry that list several distinct types of “fund balance.”
They can include revenues or expenditures earmarked for a specific purpose and even inventory a government has on hand that cannot be converted to cash.
“When you’re talking about fund balance, you have to ask what kind,” he said. “That question always has to be asked before you get a true financial picture, and that’s done in concert with outside auditors.”
Auerbach said he knew of a school district in Ulster County that had established a fund to be used strictly to pay back taxpayers who are successful in appealing their assessments, reducing their property taxes.
“It would be misleading to call the money sitting in this account part of a general fund balance because it can’t be used for other purposes,” he said.
Looking ahead
Coughlan said he agreed with Molinaro and Sommerville that “almost all of (Dutchess County’s existing fund balance) was used to cover an expected deficit in the 2012 budget.”
Sommerville, Coughlan and Molinaro said they believed a system was now in place to scrutinize county spending and analyze the potential for increasing revenue more closely.
The three officials are meeting regularly with members of the Budget, Finance and Computer Information Systems departments as members of a new committee dubbed FAST (Fiscal Accountability and Strategic Thinking).
Molinaro said it would be the committee’s job to work with department heads “to look for areas of savings and accessing more revenues.
“This county government is a fairly efficient institution, but there are areas where we can enhance those efficiencies,” the county executive said.
Molinaro said Coughlan and Sommerville had already begun analyzing some of the county’s major expenditures.
“Next, we’ll pick a few specific areas and analyze how we might consolidate or deliver services differently,” he said.
Coughlan said the FAST committee would tackle “macro” issues, such as why the county Department of Mental Hygiene spends more than such agencies in other counties of comparable size. But he said he’d also be talking to county employees about simpler ways to save money, such as turning out the lights and turning down the heat.
“Utility costs are one area we’ll be looking at. Knocking a couple of degrees off the thermostat can add up to significant savings,” he said.
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