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Feb 10, 2010 10:28 AMPublication: The Southampton Press

Southampton Town awaits results of forensic audit and ratings from bond agencies

Feb 10, 2010 10:28 AM

Southampton Town officials have begun implementing the financial improvement recommendations made by a forensic auditor and are expected to adopt a document spelling out those moves at a meeting on February 25.

At the same meeting, the Town Board plans to formally accept a forensic audit covering 2003 to 2008 prepared by FTI Consulting in Manhattan. The consulting firm presented a summary of the forensic audit at a Town Board work session on December 15 and presented a final report to the town on February 10, according to Town Comptroller Tamara Wright.

The forensic audit was authorized after a $19 million discrepancy in the town’s capital budget accounts was unearthed. Ms. Wright announced at a recent work session that the capital budget deficit now totals $5 million, and that there is no money unaccounted for.

Before adopting the forensic audit, the town wants the comptroller’s office to create its own document charting the ways it will conform to the audit’s recommendations for improving financial practices, Ms. Wright said. Once the comptroller’s report is complete, the Town Board is expected to adopt both the plan and the forensic audit together, she said.

“We want the public to know everything the town has done in response to the controls,” Ms. Wright said.

Standard audits typically include a response from the municipality under review. Forensic audits, which delve more deeply into a municipality’s or firm’s books, do not include the response, Ms. Wright noted.

The accounting errors that caused the financial crisis last year and prompted the forensic audit of the years 2003 through 2008 were actually discovered because the town was implementing better financial practices, Ms. Wright said. The town has already started following the better financial procedures FTI will recommend in the audit—including being able to account for each and every capital project’s funds—she said.

Since the town discovered a $19 million variance in the capital line of its budget, the comptroller’s office has been working with the New York State Comptroller’s office to decrease the deficit by looking at bond resolutions for more than 200 projects. That effort resulted in the revised $5 million figure.

In the meantime, late last week Ms. Wright and Town Supervisor Anna Throne-Holst met with the town’s bond rating agencies in Manhattan.

The town’s current bond rating is AAA with Standard & Poors and Aa1 with Moody’s, the comptroller has said. The AAA rating from Standard & Poors is the highest that the agency gives out, and the Aa1 rating from Moody’s is the second-highest rating from that agency. She noted that town has been on a credit watch with both agencies since 2009, and has kept both informed of its financial health.

Ms. Wright declined to comment on how the bond ratings might change in the wake of the financial errors that were discovered last year. She did say, however, said that the meetings with the agencies went well and that she looks forward to hearing from them.

The summary of the forensic audit that was presented to the Town by Brian Ong of FTI Consulting in mid-December acknowledged that there was $20.9 million worth of direct appropriations that were not made to the capital fund. The report states that the “town did not consistently record inter-fund transfers,” or transfer of money between funds.

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