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Mar 25, 2009 5:01 PMPublication: The Southampton Press

Southampton Town officials: Capital budget is short $4.9 million

Mar 25, 2009 5:01 PM

Southampton Town officials have discovered that the town’s capital reserve account is $4.9 million in the hole, according to Supervisor Linda Kabot, who revealed the finding on Saturday.

Ms. Kabot and Deputy Supervisor Bill Jones held a press conference at Town Hall on Monday afternoon to further discuss the developing financial crisis.

According to Ms. Kabot, the deficit was discovered during an ongoing examination of the town’s books. Town officials discovered that cash transfers from various town funds, including the general fund, to pay for capital projects, were logged in a computerized ledger in 2005 and 2006, but the cash was never actually moved into those capital accounts. At least a portion of the allocations was spent on actual projects, although town officials have yet to determine how much.

As a result, the town’s general fund and other departmental funds were overstated by $4.9 million during the two-year period, when Ms. Kabot’s predecessor, Patrick Heaney, was supervisor and the comptroller was Charlene Kagel.

The actual discrepancy to be reported to state officials is $6.9 million, although staff members investigating the town’s books have already determined that $2 million of that figure can be chalked up to yet another ledger error during Ms. Kagel’s tenure as comptroller. She left office in early 2008.

The fallout from the findings will be significant, especially when combined with other challenges presented by the economic slowdown, which is already taking a toll on town revenue.

“We already have layoffs and further cuts on the horizon,” Ms. Kabot said Saturday. “This just compounds the problem.” The supervisor said every department at Town Hall, including her own, must brace for the impact.

Though Mr. Jones—at least up until Monday’s press conference—said he believed the oversight was a matter of “human error” by staffers in Ms. Kagel’s office, the supervisor took a less conciliatory tone.

“I’m obviously shocked and dismayed to learn about this,” Ms. Kabot said. “I’m disappointed that we weren’t told about it earlier when she had advance knowledge.”

Ms. Kabot and Mr. Jones said the former comptroller confirmed the multimillion-dollar discrepancy on March 19.

On Saturday, Ms. Kagel acknowledged that she knew the 2005 and 2006 cash transfers were not made when the 2007 books were closed out, but she said she was told by the town’s auditing firm, Albrecht, Viggiano and Zureck, to simply move the money from the general funds into the appropriate capital accounts at that time. Ms. Kagel, who said she had already left Town Hall to become the commissioner of finance for Brookhaven Town when the 2007 books were reconciled, said she told her deputy comptroller, Marie Buday, to make the adjustments and believed the books had been balanced.

Ms. Kabot speculated that the former comptroller revealed the error last week because she knew town officials were zeroing in on the problem, but Ms. Kagel insisted it was merely an oversight.

“Marie was remorseful that she overlooked the transfers,” Ms. Kagel said. “She was beside herself that they hadn’t been done.”

Numerous phone calls and e-mails to Ms. Buday’s home and office were not returned.

Mr. Heaney came to the defense of his former comptroller, saying he is convinced the matter amounts to nothing more than human error. He also said he was never told about the mistake when he was in office.

“It never came to me,” he said. “As I understand it, she contacted AVZ, and they had indicated a simple journal entry that needed to be done.”

Since the revelation of the error first came to light last week, the time line regarding who knew about the discrepancy, and when, seems to have changed. Initially, Mr. Jones said he was under the impression that Ms. Kagel didn’t know until December 2007 that the transfers of cash had not been made; that is just a month or so before she left Town Hall for her new post in Brookhaven. Ms. Kagel’s tenure as comptroller for Southampton Town officially ended on February 1, 2008.

But Ms. Kagel said this week that she and Ms. Buday knew about the transfers as early as June or July 2007 but did not report the mistake to other town officials. In fact, they did not tell anyone other than the auditors that two years of cash transfers were never made, because the auditors instructed her to just move the money.

“I was working on the reconciliation with [deputy supervisor] Bill Jones,” Ms. Kagel stated in an e-mail Tuesday. “We were trying to find the transfer I had directed her to make. I asked Marie if she remembered when she found it and informed me so I could give Bill an idea of what period to look for it. She believed it was the start of the budget process.”

Budgets for a given year must be filed in the town clerk’s office in November of the prior year. So the 2008 budget had to be filed by November 2007. That process usually begins in the summer.

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Really, Bill Jones you are going to pin this on a staffer in a previous administration? When are you all going to take responsibility for this? The Supervisor is the CEO of out town, and for the Deputy supervisor to lay some nebulous blame is unbecoming of the office that you hold.
By SHNative (554), Southampton on Mar 21, 09 8:48 PM
4.9 million is that all, whew I feel better now. the administration should be replaced, or possiably the cuts and layoffs should start with the town stupidviser
By typical (63), southampton on Mar 22, 09 7:17 AM
Both previous posters must be rocket scientists. Did you read the article? It was Charlene and Marie who made the mistake. Do you know them? I do. They were in Skip Heaneys pocket. He would go there and flirt and they'd giggle and get away with obviously a big mistake. Linda is trying to be more than just popular. She's being responsible. Heaney was like all the rest of the failures in business today. Falsely reporting financial records to look good. You idiots.....
By lirider (288), Westhampton Beach on Mar 22, 09 7:50 AM
Blame! Blame! Blame! This sounds too familiar. Take responsibility for fixing the problem. Read Tom Friedman's column in today's NYT. He could be describing Southampton Town administration. Immature is the word he used.
By Viewpoint (26), Southampton on Mar 22, 09 9:37 AM
Looks like we are in the middle of a shell game.
By Bob Whyte (48), Hampton Bays on Mar 22, 09 10:50 AM
Bring back The Southampton Party!
By Doug Penny (64), Lexington, Virginia on Mar 22, 09 11:50 AM
In view of other problems reported in the past few months its hard to believe that this recent discovery was just a human mistake. Its really time to clean house at Town Hall.
By westhamptonboy (227), Westhampton on Mar 22, 09 2:29 PM
ENOUGH ALREADY with the blame game. Get to the final bottom of the problem, recognize how it happened, and provide a solution, provide transparency and move on!
By North Sea Citizen (568), North Sea on Mar 23, 09 6:33 AM
Sally Pope looks like a hero-thanks for exposing these problems.
By Lefty46 (56), Westhampton on Mar 23, 09 7:22 AM
This appears to be a ledger error. The money is not missing, it was not moved from one account to another which apparently nobody noticed at Town Hall in the past two years. Not noticing that there is an extra $4.9 million in the main account? This does not give me much faith in Kabots abilities.
ps stopped into the Supervisors office at 9 a.m. the other day--the office opens at 8:30--just one of her five staff members was in yet. Does she not expect them to work a full day like the rest of ...more
By Hampton (50), Westhampton on Mar 23, 09 8:22 AM
If we really want to know what's going on with the books, maybe it's time for an audit from an outside source. It's sad to say, but I don't feel comfortable trusting anyone in the past or current administration to oversee the town's finances. I'm sorry, but you don't just "overlook" accounting errors of 4.9 million dollars. I'm afraid this might be a much deeper problem than we're being lead to believe. get ready for your tax increase people.
By lol@hb (20), hampton bays on Mar 23, 09 9:45 AM
Ms. Kabot, the buck stops with you.
By dagdavid (646), southampton on Mar 23, 09 10:24 AM
Our supervisor spent money that we did not have. She authorized renovations in town hall. She made the decision to move the justice court to Hampton Bays rather than the receiver of taxes, increasing that project by millions and had a new slate roof put on town hall. She is raising our taxes by the maximum….Now what?
By SHNative (554), Southampton on Mar 23, 09 8:57 PM
Linda has come across as a complete fool over this. Does she realize how bad she has made her public image? One of her advisors should tell her to clam up and get to work. She has been on a crusade against Charlene Kagel since Kagel supported Skip in the election. Remember the infamous You Tube video Linda made bashing each staff member who openly supported Heaney?
Linda, for once, just be quiet, do the work you were elected to do and stop trying to make those who preceded you look bad. It's ...more
By Hampton (50), Westhampton on Mar 25, 09 9:13 AM
I must agree with most of the comments - especially the point about keeping quiet about everything until it is all straightened out. The story has changes 3 or 4 times now and its always someones elses' fault. Just get to the bottom of it, fix it and move on!
By justask (1), Hampton Bays on Mar 26, 09 12:01 PM
AVZ (the auditor) shares part of the responsibility - what is the Town paying them for? (remember Arthur Andersen?). I think the voices here who are calling for a "cease fire" in the numbers game have the right idea; let's cease the finger pointing and solve the problem. There doesn't seem to anything criminal here - just slopiness. Many people may have other issues to call Ms Kabot on but this one seems to be inherited; lets get it solved.
By North of Highway (280), Westhampton Beach on Mar 26, 09 3:23 PM
Kabot inherited this N of Hwy? Where have you been. Kabot has been in Town Hall for well over a decade. First as Vinces Gal Friday, then as a Councilwoman and now Supervisor herself. Saying she inherited the problem makes her look even dumber than she is. Or was that the point of your comment?
By G (342), Southampton on Mar 26, 09 4:32 PM
I understand she's been on finance committees and such in the past and therefore - shame on her - the story broke into the public on her watch whether she knew about it or not.. However, having spent the last 22 years in municipal finance in a number of positions I can tell you sloppy accounting like this can go on for years without anyone addressing it as those in power do not like bad news, regardless of who is to blame. Budget accounting can be a very arcane business and without audits many issues ...more
By North of Highway (280), Westhampton Beach on Mar 27, 09 3:38 PM
Any chance theat King Richard will assume ANY responsibility as a former Comptroller, and "have to keep my fingers in everything" guy? Maybe he was busy spending 4.5 mil on the Flanders Senior Center. 4.5 mil? Yep thats right folks, just drive by and see what you can do for 4.5mil!!
By Terry (380), Southampton on Mar 27, 09 6:45 PM
By sjd (420), Westhampton Beach on Mar 30, 09 11:18 AM