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Jun 10, 2009 2:07 PMPublication: The Southampton Press

Southampton capital budget to undergo forensic audit

Jun 10, 2009 2:07 PM

In the ongoing effort to clean up its financial mess, the Southampton Town Board has retained an outside firm to conduct a forensic audit of its capital program—a move that board members Anna Throne-Holst and Chris Nuzzi have been calling for since February.

During a special meeting on Friday, the Town Board voted unanimously to hire Manhattan-based FTI Consulting at a cost not to exceed $200,000. The town will pay the firm, according to the adopted resolution, with unallocated interest in the capital fund.

Unlike routine financial reviews, forensic audits are more thorough and investigative in nature, though not necessarily aimed at uncovering wrongdoing. Instead of producing a general analysis of the books, forensic auditors zero in on specific projects or records in an attempt to pinpoint the sources of problems going so far as to interview town officials involved with a given transaction.

Pressure to bring in an outside firm to review the capital program began building in February when former Town Councilman Dennis Suskind publicly criticized town officials for the $19 million variance in the town’s capital fund, which came to light in January. That pressure has only increased with further revelations that $10 million of general surpluses earmarked to fund capital projects between 2004 and 2006 was never moved to the appropriate capital accounts to pay for the designated projects—although the transfers were marked in the corresponding ledgers thus skewing the actual amount of cash that town department heads thought they had on hand.

The failure to complete those direct appropriations means the town must now dig itself out of a multimillion-dollar hole, and town officials are in the process of crafting a corrective action plan to do just that.

The focus of the forensic capital audit, according to newly appointed Town Comptroller Tamara Wright, will be the six-year period from 2003 through 2008. “There have been inconsistent practices during that period,” Ms. Wright said. “We need a second opinion.”

FTI’s forensic audit, Ms. Wright said, should produce a clear picture of what capital projects the Town Board authorized during those years and the subsequent status of those projects—in other words, if they’ve been completed, haven’t started yet or are somewhere in between.

Based on the audit’s findings, some projects may be abandoned altogether, according to Town Supervisor Linda Kabot, who said the forensic audit would help the town in moving forward with its corrective action plan. If a project can be scrapped, then the town would not be responsible for its funding even though the project had been approved by a prior Town Board. That, in turn, would reduce the amount of money the town must repay to the capital budget.

“The outcome of this audit will produce a database that will help us to manage our capital projects in the future,” Ms. Wright said.

Ms. Kabot added that the results of FTI’s work would aid state auditors who will also be conducting an audit of the town’s books. Town Councilwoman Sally Pope, who spearheaded the initiative to bring in the state comptroller’s office, said she was pleased with the FTI choice.

“They have the capacity to come in and do their work quickly,” Ms. Pope said.

FTI will begin the audit on Tuesday, June 16, according to Ms. Wright.

Though relatively new to Town Hall, FTI has some familiarity with the town’s finances, which is one reason why Ms. Throne-Holst considered the firm a good choice for the task of untangling the capital mess.

In February 2008, Ms. Throne-Holst began calling for a forensic audit of the police fund, which at that time was running a $4.5 million deficit. The Town Board hired FTI in July to get to the bottom of the police fund shortfall and that audit, according to the Ms. Kabot, should be wrapped up next month.

But the suggestion of a more thorough, independent capital accounting was first offered to the town by Mr. Suskind before Ms. Kabot took over as supervisor in January 2008, according to Town Councilwoman Nancy Graboski, but the town did not take action. “Dennis made the suggestion, but we didn’t know then what it meant,” Ms. Graboski said. “But we know it now.”

After Mr. Suskind recommended the forensic capital audit in February, Ms. Throne-Holst and Mr. Nuzzi jumped on the idea and the town began looking at prospective firms.

Mr. Suskind suggested, and the Town Board agreed, that continuing to solely rely upon Albrecht, Viggiano and Zureck—the town’s auditors since 2004—was akin to letting the “foxes guard the henhouse.”

Ms. Kabot has made public her displeasure with AVZ for their failure to catch the direct appropriation errors in 2004, 2005 and 2006 and has requested the firm to restate the town’s fund balance based on the corrected numbers and has threatened legal action to get the firm to do so. Because AVZ missed the errors, the town’s stated fund balance was off by millions, according to Ms. Kabot, which produced a ripple effect all the way through to the 2009 budget.

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Another $200,000. of taxpayer's money so the town can cover it's incompetence.
Firing Brautigan would free up $l00,000 toward this now necessary audit, before the state audit, after the consultant now Comptroller's consultant bills are paid, and of course the disgraced previous auditors probably have a bill in there to be paid. .
Then, if Blowes, would finally be given the boot and his salary thrown in the hopper there might be a tiny surplus. After the state audit, Town Hall needs to ...more
By Phanex (83), Southampton on Jun 10, 09 5:17 PM
Audits paided for by the town are of no value.
By westhamptonboy (227), Westhampton on Jun 10, 09 5:29 PM
This is all fine and good but the biggest waste of local tax revenues is obviously in the school districts... why not do a "forensic" audit there?
By deKooning (106), southampton on Jun 11, 09 9:37 AM
Most of our local schools have been audited when it was found some schools up island had serious breaches in their budgets.
By squeaky (291), hampton bays on Jun 16, 09 2:47 PM