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Jun 24, 2009 3:12 PMPublication: The Southampton Press

Southampton Town hires new auditing firm

Jun 24, 2009 3:12 PM

Breaking a long silence, a partner of Albrecht, Viggiano and Zureck, or AVZ, the auditing firm used by Southampton Town in recent years, this week rejected suggestions by town officials that his firm failed to identify growing fiscal problems in its audits.

Jeff Davoli defended his firm’s work and said Tuesday that the closing financial statements produced for 2007 clearly reflected some $10 million in budget transfers from the general fund to the capital fund in 2004, 2005 and 2006 for which cash was never actually moved to complete the transactions.

“It was clear as day,” he said of the 2007 audit report, which he said contained a “budget column,” which showed that the transfers were budgeted for, and an “actual column,” which revealed that the money never moved. “It was not hidden and it shouldn’t have been a surprise to anyone.”

Town Supervisor Linda Kabot has been critical of AVZ and has said she was unaware that the money was never moved until March, when former Town Comptroller Charlene Kagel informed town officials of the mistakes.

“It was not clear at all,” Ms. Kabot said of the AVZ audit reports. “If it was, then why wasn’t he telling us that all along? This is nothing more than his concern for his firm’s reputation.”

At a work session on Friday, the Town Board hired a new auditing firm and is severing ties with AVZ, which has audited the town’s books since 2004, although the firm will assist the town in the transition.

After reviewing proposals from various auditing firms, the Town Board voted unanimously to hire Nawrocki Smith, which is based in Melville.

Despite the dispute over the 2007 closing statements prepared by AVZ, Mr. Davoli said he held no grudges and that his firm would provide whatever assistance it could in the transition. “Nawrocki Smith is a very good firm that I am sure will provide the town with proper service,” he said. Ms. Kabot said the decision to change auditors was mutual.

In Ms. Kabot’s view, AVZ’s closing 2007 statements were incorrect, resulting in the firm reporting that the town’s fund balance was $16.6 million, when, in fact, it was actually half that amount. She said AVZ’s closing statement assumed that all of that $16.6 million was available to be spent, when nearly half of it had already been earmarked by the Town Board to fund capital projects that had been completed—in essence, already spent.

Because Ms. Kabot relied on AVZ’s closing report balance of $16.6 million when crafting her budget for 2009, the town went into the current budget cycle thinking it had $16.6 million of surplus when, in reality, the surplus was closer to $8 million.

The ripple effect from AVZ’s failure to correctly state the 2007 general fund balance, Ms. Kabot maintains, means the town could close out 2009 with an overall deficit.

Ms. Kabot had asked AVZ to restate the fund balances, but that request seems to be a point of impasse. In Mr. Davoli’s view, AVZ is not at fault and accurately reported the fund balance.

Mr. Davoli said the $16.6 million calculated in the 2007 statement reflects the amount of fund balance based on what the town had budgeted, not what “should have happened” with the fund transfers. “I have not been supplied with the information necessary to determine that there is evidence of a misstatement,” Mr. Davoli said. “Each of those years has a ‘budget’ to ‘actual’ comparison. Each transfer gets its own line. For each year the transfers were not made, that was reflected. They are among the biggest variances and should be no surprise to anyone.”

“That’s his opinion,” Ms. Kabot said. “And we are going to get another opinion from Nawrocki Smith, another opinion from the forensic capital audit, and one from the state comptroller.”

The town will pay Nawrocki Smith $150,000, money already budgeted for auditing services this year.

Town Councilwoman Anna Throne-Holst, who has been advocating a change in auditors since she took office in January 2008, said hiring Nawrocki Smith was an important step in solving its financial troubles. “I know it sounds chaotic, like we have too many auditors at Town Hall,” Ms. Throne-Holst said, referring to the forensic audits of the police and capital funds and the upcoming state audit. “But this is a really thought out process that will bring our financial history into focus so we know what we are working with going forward.”

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Too many outside consultants, planning experts, environmental experts. Spending money like drunken sailors for years to justify their inept decisions.
What do the people on salary there really do?
By Phanex (83), Southampton on Jun 24, 09 5:55 PM
Many people have the greatest respect for the town employees in the planning department. Anyone who attends planning meetings knows that those town planning staff are very dedicated and highly professional. The outside consultants are a waste of money, but that is a different group entirely.
By Tree Man (19), Southampton on Jun 25, 09 6:08 AM
Sounds like monkey business in Town Hall once again...$10 million transferred but "not" transferred. Figures don't lie, but liars figure! If we taxpayers don't kick these bumbs out of office this November, we're nuts! And how about those guys who want to replace them? They're the same fellas from the same political parties who endorsed Skip, Linda, Nancy and Chris over all the years gone by when this "shell game" was orchestrated to keep taxes "looking low". Now they want to play Musical Chairs...by ...more
By Dodger (161), Southampton Village on Jun 26, 09 10:04 AM
Can I vote for you simply for a change?

I agree, same people, same problems.
By bb (922), Hampton Bays on Jun 26, 09 12:02 PM
What a waste of money-a new auditing firm, but the old auditing firm is offering assistence. Why have the old firm help? so they can cover their tracks?

Nov can't come soon enough.
By EastEnd68 (888), Westhampton on Jun 27, 09 11:57 AM