New York State Comptroller Thomas P. DiNapoli today announced a completed audit for Riverhead Town that questioned chargebacks.
According to the audit, Riverhead "allocates services provided by the town-wide general fund departments to other funds and districts. Town officials, however, have not developed an allocation plan based on the direct relationships between the services paid by the general fund and the actual services received by the benefiting departments or funds. Therefore, the cost for services may be inequitably charged to different tax bases."
Riverhead Town Supervisor Sean Walter said when he first took office in 2009, he called on the state comptroller to audit records; results indicated that annual financial audits were two years behind, capital project audits were ten years behind.
In 2011, Walter said he asked the comptroller to come in and audit the town again.
After the audit, Walter said the state comptroller had some policies they wanted implemented, including a recently adopted travel policy.
In addition, Walter said he told the state comptroller's office he wanted an answer on administrative chargebacks.
"The comptroller's office was giving the Town of Riverhead conflicting information," he said, adding that there was no uniform policy regarding chargebacks.
During the budget season for 2012, Walter said DiNapoli's office advised him to craft the budget while the audit of administrative chargebacks was ongoing.
The issue arose, Walter said, because, across the board in regard to various departments including the sewer, water, and highway departments, a percentage was assessed for those various departments; a general fund fee for chargebacks associated with the services each department provided was assessed.
"The long and the short of it is that the comptroller didn't like that fact that we did it on a percentage basis," Walter said. "He wanted some relationship between the services provided and the amount charged. He didn't feel that just having a percentage reflected reality."
In addition, Walter said the comptroller indicated there could be no chargebacks for the highway department at all. In the past, Walter said, there had been some confusion and "an absolute conflict" regarding that point. "Now we have an answer," he said.
Walter said a new methodology has been introduced which reduces chargebacks.
The new methodology, Walter said, could leave the town $1 million behind.
Currently, he said, the budget reflects $2.5 million in chargebacks. "With a new methodology, we will only be able to charge back $1.5 million. Unfortunately, that puts us $1 million behind in a structural deficit."
Walter added that his adopted budget called for $2.98 million out of reserves, plus an additional $100,000 added back by the town board, to total $3.1 million. That number will rise by another $1 million, to total $4.1 million, that will need to come out of the town's general fund.
Walter said he hoped the comptroller would agree with the new methodology the town has utilized, which includes vouchers for payment and calculations for square footage regarding maintenance for building and grounds. The hope is that the town will be able to retain at least the $1.5 million in chargebacks, he said.
One hundred percent of the town's $4 million structural deficit, Walter said, can be attibuted to landfill debt service.
"The town's been hiding this deficit through chargeback for 13 years or more," Walter said. "Whoever is sitting in the supervisor's seat in 2014 has a tough road."
Donning his political hat, Walter said there is for continuity in supervisor over the next years.
"I've got a glide path going here to be able to fix these situations in town," he said. "But it all depends on Enterprise Park at Calverton, on the subdivision, and the amazing amount of growth I am trying to have happen. All of that changes if the supervisor changes next year."
Should a new candidate win the supervisor's race during the next election, Walter said, "I feel terrible for both residents and as supervisor, because that supervisor will be a one-term supervisor. It will take them at least a year to figure out how to be supervisor -- and by then, it's too late."
Walter said "there are certain things that have to happen" to avoid hitting taxpayers with a 20 percent tax increase. "If it doesn't happen, the tax increase is coming."
The supervisor said he has a plan to stave off the tax increase but needs time to implement his strategy.
"We can balance one more budget for 2014, and after that, things have to happen," he said. "I have a plan to fix this." He added, "This job isn't for the faint of heart."
Of the audit, Walter said the discrepancy "can be fixed," and he has pleased the comptroller has decided on a uniform policy for chargebacks statewide.
“My office's audits of local governments improve their financial management practices," DiNapoli said. "These audits are tools for local officials to make sure proper policies and procedures are in place to protect taxpayer dollars and provide the best possible service these taxpayer dollars can deliver."