Auditor cites Franklin County Solid Waste
MALONE — Something stinks in Franklin County.
According to a report released Dec. 29 by state comptroller Thomas DiNapoli’s office, the Franklin County Solid Waste Management Authority’s receipts don’t add up 20 percent of the time. The solid waste authority operates transfer stations in Tupper Lake, Lake Clear and Malone, and a landfill in Westville/Constable, less than 2 miles from the Canadian border.
The comptroller’s report found serious problems in record-keeping and oversight of the FCSWA books, which could allow for the misappropriation of funds, but stopped short of saying funds had actually been misappropriated.
The report reads, “For 54 of 265 daily collections reviewed (20 percent) the amount of collections recorded did not agree with the corresponding deposit made.” For example, on one day at the Malone transfer station, collections of $3,705 were recorded, but didn’t show up in the bank account. Auditors reported that FCSWA Director George Eades told them the bank was at fault, and the bank had agreed to reimburse the authority $2,271 — the amount of cash on the deposit slip — but not the remaining $1,434 in missing checks. Since transactions were recorded only with customers’ last names, auditors were unable to find missing checks or get them re-issued.
The audit found that as many as 64 different rates were charged for waste disposal and that many fees were set verbally between Eades and customers. “For example, nine adjustments totaling $4,097 were made to reduce two customers’ accounts based on verbal agreements the Director had with these customers to reward them with discounts for their loyalty through the continued disposal of sludge” at the landfill.
The FCSWA operates as an authority rather than a Franklin County department. Oversight is provided by a board appointed by county legislators; each legislator appoints one board member from his/her district. With a nearly $6 million yearly budget and $7 million in revenues, the authority has around $26 million in total assets [including land]. The Authority’s financial report for 2016 shows that the authority’s net position went from a deficit to a surplus in 2010, and that it has steadily increased revenues ever since.
Franklin County Manager Donna Kissane said the FCSWA audit could negatively affect the bond rating of the county. “The bonds go through us. Franklin County’s role is that it’s connected to us.”
“If we were to borrow, it would affect our interest rates as well,” said Kissane.
Last August, Kissane issued a letter to the solid waste authority listing some of the financial management problems. The letter bases its findings on the reports of independent auditors. At that time, auditors found that the solid waste authority’s bookkeeping could not be relied on to accurately reflect its financial situation.
Auditors found problems of lack of oversight, faulty record-keeping and widely varying user fees — the same problems reported half a year later by the state comptroller’s office. Customers were charged different amounts for the same types of waste, and out-of-county customers were charged less than county residents. The comptroller’s report notes that Eades’ verbal agreements “did not appear to be for appropriate purposes.”
The comptroller found that Eades’ authority to negotiate individual rates with customers “without an independent review and Board approval increases the risk that negotiated rates may be subject to favoritism.”
Out-of-county customers were charged as little as $32 per ton for construction debris, even though the solid waste board had set the fee at $110 per ton, or $105 per ton for more than two tons. Eades defended the practice, saying he “used this and similar pricing strategies so the Authority would receive additional waste and realize additional revenue.”
The comptroller’s report said that without documentation of these agreements, in addition to the Director’s discretionary adjustments to some customers’ accounts, “adjustments may not be consistently applied to all customers, or may be made to customer accounts to conceal the misappropriation of funds.”
Record-keeping problems also lost money. For instance, when the Board raised the fee from $13 to $14 per vehicle, that change never got recorded in the computer system. The error resulted in lost revenues of $17,413.
An audit prepared by R.A. Mercer & Co, CPs, noted that the solid waste authority had a “duties segregation” problem, in that the treasurer/bookkeeper collects all cash, makes all the deposits, handles disbursements, and is also in charge of payroll and assigns all the accounts and passwords in the scale software system. The auditors noted that with a small staff it may not be possible to segregate duties perfectly, but recommended that the Board “implement both protective and detective controls over business operating functions to help reduce the risk of misuse of Authority funds.”
According to DiNapoli’s report, employees at the transfer stations have the power to void out receipts and issue refunds, but it is not clearly or consistently recorded why transactions are voided and what happens to the funds.
Auditors also found that the authority had failed to pay the towns of Constable and Westville host community fees. The solid waste authority underpaid the two towns a combined total of $39,170 for the fiscal years of 2014-15 and 2015-16. But, as noted in the report, “Because the agreement has been in place since March 2009, if similar miscalculations were performed in previous fiscal years, these Towns are likely entitled to additional host community fees.”
The solid waste authority has agreed to repay the monies, adding those to the quarterly payment of fees. Constable town supervisor Richard Onufer said FCSWA has been making the payments. He further said that the amount of the quarterly check is based on a percentage of tipping fees, so they never know ahead of time what amount to expect.