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NT: City accountant refutes state audit findings

Fri, Aug 14th 2020 12:35 pm

By Michael DePietro

Interim Tribune Editor

In response to a blistering audit from the New York State Comptroller’s office, City of North Tonawanda Accountant Jeffrey Zellner addressed the council Tuesday night and refuted some of the audit’s findings. He also referred to the audit as being “politically motivated” and criticized the auditors themselves as being “unprofessional.”

Tuesday’s meeting marked Zellner’s first time speaking to the board since beginning the position on March 7, per the mayor’s office. On Jan. 19, the council accepted the resignation of then-city Accountant Amanda Reimer. In the interim, the position was filled by former city Accountant Mark Dotterweich, who had previously retired in 2018.

Zellner was admittedly a little nervous as he addressed the council. He primarily read from a prepared statement, noting at one point that he wasn’t a fan of public speaking. The statement began:

“I am new; I was on the job for a month by the end of this audit process, which has been dragging on for over seven months. I, like you, read the audit as a draft and was very nervous.

 “As the accountant, I understand it is my responsibility to provide the mayor and the council with timely and accurate data and an accurate picture of the city’s finances. This clearly was not happening during the period in question. I am not going to rehash the absence of the city's only accountant for much of 2019. I can address the financial concerns as of today and address some of the findings in the audit.”

Zellner went on to highlight some issues he saw with both the audit and the negative media coverage surrounding it. Perhaps the most significant response came from the question “Was there wrongdoing or malfeasance alleged in this audit?”

“No wrongdoing is alleged. Monies are accounted for and the numbers balance,” Zellner read.

The first overall question addressed was whether North Tonawanda has a “balanced budget” (per the written statement).

“Money coming in equals money going out. That is your simple layman's terms for a balanced budget. And that was the case,” Zellner said. “The term ‘structurally unbalanced’ means one-time revenue sources will not be available the next year. NT has a balanced budget; however, we do need to replace funds that are not recurring. This happens in every municipality and NT is no different.”

Zellner went on to say he had "no immediate concern" that the city is running out of money, noting the balance in the general fund is projected to last until next April. However, he said, "I am concerned about the state funding we should receive in November. There’s been no confirmation of what that actually will be. They talk about 60%-90% of what they had projected. (However), even with that, we still have enough to make it through the year without having any kind of bonds needed or any of those kinds of things.”

He also addressed a practice criticized in the audit wherein the city had borrowed money from the Water Fund to guarantee payrolls in the early part of the year.

“All five council members voted in favor of it several years in a row. It is not illegal or improper according to the (Governmental Accounting Standards Board); it is just not recommended. ... It was an effort to save interest on what they call a tax anticipation note, which municipalities can take out in tight periods. Whether or not it is good practice is up to the beholder, but it did save the interest payments and application fees,” Zellner said.

 On whether or not the city depleted the fund balance to unsafe levels, Zellner said, “Fund balance is the monies not used in previous years budgets that ends up in a savings account and (is) used for unanticipated expenditures. The 2020 budget did not spend down on the fund balance, although it was used in previous years to avoid increasing taxes.”

As to whether the 2020 budget was prepared correctly, Zellner said, “I was a little concerned that the 2020 budget, which had to be prepared without the expertise from the actual city accountant being there to provide updates along the way (on historical information).”

Zellner also said budget projections for 2020 have so-far been “spot on, if not a little conservative.”

“I was very surprised to find that, despite one of the audit’s key findings saying sales tax projections were overstated, we are exactly close to where they projected, even with COVID,” he said. “As well as with our real property taxes coming in under 1% different from projections.”

There were some recommendations in the audit that Zellner agreed with, at least partly. The audit highlighted that, while the operating expenditures for the city’s water and sewer departments have increased by nearly $1.3 million (32%) over the past three years alone, sewer taxes have not seen increases since 2010. Zellner said, “I definitely think addressing that going forward is something to consider, but that's not until 2021 because, as of this year, it is not going to be the deficit that was mentioned in (the report).”

In his closing remarks, Zellner criticized the auditors themselves and said the audit was politically motivated:

“This has been my first experience with state auditors as the city accountant and, although I was hired near the tail-end of the audit, I found them to be highly unprofessional. They were condescending and gave suggestions that they later claimed they did not endorse. Many of the suggestions were not based on accepted accounting practices (GASB), but were merely the opinions of the bureaucrats. I believe this audit was very political in nature considering the 2017 audit of Niagara Falls is much more tame despite severe structural deficiencies. If you read both, they are striking in how different the tone is.

“I am not from the political world – thankfully so – and am learning as I go. I am becoming familiar with the city's finances and, based on what I have found, I see no reason to believe the sky is falling – as if it would appear if you read the newspaper. While the financial condition of the city could be better, I find it is much healthier than some of our neighboring municipalities that have raised taxes much more in recent years, and are still in serious financial troubles. I believe North Tonawanda’s elected representatives have been responsible in their approach and will continue to be in the future. Going forward, I will continue to work with the mayor, the City Council and the future treasurer to prepare a budget that is responsible and balanced.”

Other meeting moments:

•A measure proposed by Alderman-at-Large Austin Tylec to create a fiscal stability committee, which he said would be “tasked with developing and implementing the changes recommended by New York state auditors,” was shot down by the mayor and the Common Council. Members said that, with a full-time city accountant in place, transparency and data keeping shouldn’t cause the issues that were noted in the audit.

During the meeting’s end, Council President Eric Zadzilka said he was looking into a resolution to appoint Zellner as the chief budgeting officer. However, there were questions whether that was allowable per the town charter. As such, no action took place.

•Elsewhere, Zadzilka announced the council would be reviewing applications for the city’s vacant clerk/treasurer position. He said candidates will take part in phone interviews with each council member.

During her closing comments, 2nd Ward Alderman Donna Braun indicated she would abstain from the interview process, as she had submitted her resume for the clerk/treasurer position.

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