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Oct 21, 2009 12:57 PMPublication: The Southampton Press

Audit finds numerous errors in Southampton Town's accounting practices

Oct 21, 2009 12:57 PM

Preliminary results of an audit of Southampton’s capital budget confirmed many of the findings uncovered by the town’s administration earlier this year and exposed numerous financial blunders and bookkeeping errors from 2003 through 2007, according to town officials.

The town’s auditing firm, FTI Consulting Global of Baltimore, found more than $11.25 million in authorized transactions that were never made from 2003 through 2007, Supervisor Linda Kabot said in an e-mail. The money was supposed to go to the capital fund to pay for projects, but instead stayed in the general fund and overinflated the general fund’s balance.

“This is budget gimmickry at its worst,” Ms. Kabot said in the e-mail.

Although they discussed its findings, town officials refused to release the preliminary report to the public this week. FTI presented a 21-page status report on the audit to the Town Board in a closed meeting on October 13. Much of the information contained in the report—including the number of faulty transactions in prior years—remained confidential as the Town Board mulled whether to pursue litigation against external auditors and town officials formerly charged with overseeing Southampton’s books.

Town Attorney Daniel Adams said the details of the report fall under “attorney-client privilege” and are not to be made public. He declined to comment on agencies and town officials possibly involved in the accounting errors.

Even though Ms. Kabot said the Town Board took a straw vote last week against litigation, despite her “strong feelings” that it consider opening lawsuits—FTI warned the board that “negligence and purposeful acts” by former auditors and town officials would be difficult to prove in court—she said Wednesday that the report would not be made public yet. She said she plans to urge the Town Board to reconsider taking legal action.

“Until the Town Board is back behind closed doors to do the people’s business to determine whether or not there is culpability here, the document is going to remain in the possession of the town attorney,” Ms. Kabot said. “It is not going to be released.”

New York State Committee on Open Government Executive Director Robert Freeman said the town’s argument against releasing the report “doesn’t seem to be meritous.” Mr. Freeman said documents that are prepared for reasons apart from litigation are considered open public records under New York State law. Generally, documents related to a municipality’s budget are considered public records.

“I don’t think the attorney-client privilege applies. It’s not confidential. It’s subject to Freedom of Information Law,” Mr. Freeman said. “The blanket denial of access, I would guess, is inconsistent with law.”

The Press filed a FOIL request seeking the document on Wednesday.

Ms. Kabot said the audit report shows an apparent “pattern” of officials fudging figures in the general fund between 2004 and 2007. She said the past accounting errors “smacks of a Ponzi scheme” that has “happened all under our noses.”

“What I am doing is unraveling the Ponzi scheme,” Ms. Kabot said.

Repeated accounting errors led the town to compile inaccurate year-end financial statements that were approved by the Town Board and led the town to receive high bond ratings from Wall Street, Ms. Kabot said. “The misleading math and distorted reporting to the Town Board and our creditors in official financial statements adopted during the years 2004 through 2007 is shameful,” she wrote in her e-mail.

Despite the inaccuracy of the statements, the town was awarded a “Certificate of Achievement for Excellence in Financial Reporting” from the Government Finance Officers Association—a foundation that judges conformance to accepted accounting practices—for at least two financial statements in 2005 and 2006. Plaques of the achievement awards still hang in the town comptroller’s office.

Town Comptroller Tamara Wright, who took office earlier this year, said she was stunned by the audit report.

Exposed in the report were examples of booking mistakes, including numerous errors by former Comptroller Charlene Kagel, Ms. Wright said. One common error, Ms. Wright said, was failure to alter budget records to reflect approved Town Board amendments. In one such instance, a Town Board resolution to reduce spending on a sidewalk project from $100,000 to $75,000 was never recorded.

“I was surprised, definitely, definitely,” Ms. Wright said. “What was most surprising to me was how many mid-year amending resolutions were not recorded.”

In addition, budget transactions between the general fund and capital fund were made inconsistently or not at all from 2003 through 2007, Ms. Wright said. “In some years those direct appropriations were made, and in some years they were not,” Ms. Wright said. “They really were not consistent.”

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Linda Kabot was on the Town Board for all the time these irregularities were happening, and then she became Supervisor, which office she has held for the last two years. Chris Nuzzi has been on the Town Board for the last four years. Why is that no awareness of this mess even began to dawn until Anna Throne Holst started asking questions when she joined the Board less than two years ago? Why is it that nothing remedial really got started until Sally Pope started pushing for action when she joined ...more
By Turkey Bridge (1979), Quiogue on Oct 22, 09 12:45 AM
More Kabot corruption ... to deny the taxpayers their right to see the audit report by FTI which was procured with taxpayer monies ... is illegal and the height of arrogance by the "ruling class" against the people who elected them to office. Unbelievable !

Do the voters "get it" ?

Kabot so wants re-election she will dictate that all Town Board members should hide behind "attorney client privilege" knowing if it be challenged in court by the time the court rules this hiding of ...more
By JimmyKBond (156), Hampton Bays on Oct 27, 09 10:23 PM
Its clear that Skip Heaney et al were cooking the books - Ms Kabot inherited this situation and has come up with a credible plan to fix it. Her efforts are clear and they are transparent - the fact that the Town budget is on line and in a very understandable format is an example of this. I think Ms Wright and staff have done a terrific job in bringing all this out. Blame who you want, but the fact remains Ms. Kabot has come up with a viable solution.
By North of Highway (280), Westhampton Beach on Oct 22, 09 11:30 AM
Sort of like the fireman who started fires so he could be a hero ...
By Noah Way (450), Southampton on Oct 26, 09 9:15 PM
You can cut the feigned indignation, Kabot, and start taking some blame for this mess.
By peoplefirst (787), Southampton on Oct 22, 09 2:58 PM
You don't know Ms. Kabot, do you. P1st?

Yeah, I know, you just can't pass up any opportunity to take pot-shots at a GOP, can you?
By Frank Wheeler (1826), Northampton on Oct 22, 09 3:25 PM
I know she's going to lose.

By peoplefirst (787), Southampton on Oct 26, 09 7:13 PM
Doesn't anyone out there care that the "deficits" in the budget are going to be
paid for by "adding a new line to the tax bill" which will be each person's "share" of the tab for the incompetence, self-serving, hand in the till and hire your niece practices that have passed for "governance" and "transparency" from the crooks and incompetents in Town Hall? Why is administrator-Czar Blowes still on payroll? Why is Brautigan still here -- and in a Civl Service job to boot. Who will see to Heaney's ...more
By Phanex (83), Southampton on Oct 22, 09 5:27 PM
1 member liked this comment
Czar Blowes is there because he has his subordinates take the blame on over budget projects!
By LUVSH (28), Southampton on Oct 22, 09 8:02 PM
1 member liked this comment
funny how golfbuddy has no comment on this subject......
By tookatz (83), westhampton beach on Oct 23, 09 2:45 AM
Don't worry, Frank Wheeler has made up for it.
By peoplefirst (787), Southampton on Oct 26, 09 7:13 PM
We're talking about accounting errors -- to prevent them, you need a sharp eye and a sharp pencil. Jim Malone, the Conservative Party Chairman and Republican Town Board candidate, claims to have both, but it's hard to see how he'll have time for this kind of scrutiny in Southampton if he hangs on to his County job, which he has not committed to leaving if elected.

Mr. Malone's website states that he is the "Senior Deputy Clerk and Chief Fiscal Director" for Suffolk County, saying he ...more
By Turkey Bridge (1979), Quiogue on Oct 23, 09 6:25 PM
Isn't anyone going to comment on the obvious cover-up in not making this document public knowledge. Linda does not want this document seen before election day.
By EastEnd68 (888), Westhampton on Oct 26, 09 9:28 PM
This is what happens when people without proper business experience are elected into office. The town needs hands on business people. Just look at the amoutn of money that is spent on studies because they cannot make a decision by themselves. SUre Kabot inherited it but her continued lack of knowledge allowed it to continue. Time for a turnover. We need new management and amore vocal population.
By North Sea Citizen (568), North Sea on Oct 27, 09 7:12 AM
1 member liked this comment
Turkey bridge it is obvious that you are working on the Democratic campaign and I suspect you are a campaign manager. I hope people understand that your “comments” are one big political advertisement and are in no way a real impartial assessment of the candidates. If they were, you would be honest about how embarrassingly clueless Sally Pope has been since her time on the Town Board and how awkward and painful it was to listen to her in debates when she didn’t know the answers to simple questions. ...more
By hb guy (17), Hampton Bays on Oct 27, 09 9:32 AM
It's clear that if you refer to Sally Pope as clueless on the Town Board, you don't follow Town Board meetings. If you did, you'd know that Ms. Pope has initiated a State audit of the Town's disastrous (Republican) finances, has required monthly budget reports to prevent the crisis from recurring, has obtained real reform of the Planning Board to ensure full public input before any environmental determination is made, has stood alone to limit runaway development on County Road 39, has waged constant ...more
By Turkey Bridge (1979), Quiogue on Oct 27, 09 2:58 PM
By the way, if you check out today's piece on a more recent debate ("Southampton town candidates debate town finances, services"), you'll see it reported that "Ms. Pope ... skewered Mr. Nuzzi by saying that the town has not done enough (on affordable housing)." That's how it goes with debates -- you have good nights and bad nights -- but what really counts is not the passing sound bites of a campaign debate, but the hard day-to-day work of government, and that's where Chris Nuzzi has failed, and ...more
By Turkey Bridge (1979), Quiogue on Oct 27, 09 3:13 PM
Chris Nuzzi ... Nice guy, yes. "Excellent" job ... c'mon, he's been a Kabot puppet and GOP strawman from Day One. Nothing "Excellent" about that job.
By JimmyKBond (156), Hampton Bays on Oct 30, 09 7:00 PM
The fact that this thing is being hidden from public scrutiny until after the election is reprehensible. As an elected official it becomes your responsibility to scrutinize the budget documents annually until you get a total understanding of them. If you don't comprehend something , get answers from town finace people or annual independent auditors. These mistakes should have been exposed. We are talking large sums of money here. Any present day board member who was in office during this period ...more
By William Rodney (561), southampton on Oct 27, 09 9:52 AM
Although I now view the situation from afar and will probably take some heat for sticking my nose where it no longer belongs, I believe North Sea Citizen is correct. The accounting, spending and taxing problems which have plagued the town for the past decade are more directly related to the qualifications for office of the individuals holding these seats than any nefarious conduct or improper motivation. The Town of Southampton is a lot different than it was in the 50's, 60's, and 70's and the ...more
By Doug Penny (64), Lexington, Virginia on Oct 27, 09 12:03 PM
I think North Sea Citizen and Doug Penny are right. The problem is that the level of complexity has increased. But I think the solution for both Southampton and Easthampton is to change their form of government to one in which an elected board hires a professional town manager to run things. It is disrespectful to the towns to think that well intentioned amateurs can, with a litle stuyding or time on the job, master these difficult jobs.
It is a profession folks, so bring on the professionals ...more
By Sag (54), Sag harbor on Oct 27, 09 2:17 PM
When is the grand jury convening on this? At the very least it merits a grand jury report that is the product of sworn testimony from those directly involved. If there are no indictments, there could still be civil liability.

Making someone raise their hand, and take an oath is powerful medicine. Just ask Scooter Libby what happens if you don't cooperate with the prosecutor in the grand jury.
By Publius (358), Westhampton Beach on Oct 27, 09 3:41 PM
TurkeyBridge says in reference to Sally Pope talking of the Highway Department:

and has uncovered Highway Department favoritism that left our roads unpaved.

Can you please post something that lends credibility to this statement?
By But I'm a blank! (1283), Hampton Bays on Oct 27, 09 6:55 PM
Sure. Check out the 2/26/09 Southampton Press editorial, "The Wrong Reasons". It explains how, under Sally Pope's questioning, long-time Republican Highway Superintendent Bill Masterson admitted that he released certain favored paving contractors (and Masterson campaign contributors)from their contractual obligations to pave Town roads, because the price of asphalt to them had spiked, without obtaining any concessions whatever for the Town in exchange. Expressly acknowledging Ms. Pope's role, ...more
By Turkey Bridge (1979), Quiogue on Oct 27, 09 11:23 PM
Ask old timers, be they GOP or Democrat, no one recalls the corrupton, control or
ego driven reign of any monarch in Southampton like Nuzzi and Kabot. And tax their increases? The worst increases ... the envy of any liberal Democrat ... they would love 'em .... keeping these two promises voters more tax hikes in 2010.

Kabot needs to experience her own lay off ... like the 50 Southampton Town employees who lost jobs in 2009 !!!!
By JimmyKBond (156), Hampton Bays on Oct 27, 09 10:32 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By JimmyKBond (156), Hampton Bays on Oct 27, 09 10:32 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By JimmyKBond (156), Hampton Bays on Oct 27, 09 10:32 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By JimmyKBond (156), Hampton Bays on Oct 27, 09 10:32 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By JimmyKBond (156), Hampton Bays on Oct 27, 09 10:32 PM