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Audit: Keene kept inaccurate financial records

A sign outside of the Keene Town Hall is seen here Sept. 6, 2019. (Enterprise file photo — Elizabeth Izzo)

KEENE — The town of Keene did not keep accurate accounting records, properly prepare its bank reconciliations or provide timely financial reports at town council meetings throughout a period of two years, hindering the town council’s ability to provide “adequate oversight of financial operations and be aware of the town’s true financial condition,” an audit from New York state Comptroller Thomas DiNapoli’s office revealed.

The town government is the entity that suffers the most from its inaccurate accounting records and bypassed financial procedures, the report said.

“The supervisor and board’s lack of reviews and oversight resulted in accounting records being incomplete, inaccurate, untimely and unreliable,” the report reads. “Without reliable accounting records, the board’s ability to manage the town’s financial condition and make sound financial decisions is limited.”

A previous audit covering January 2009 to September 2010 found that the Keene government had 23 active bank accounts, some of which were opened without then-Supervisor Bill Ferebee’s knowledge, and $261,530 worth of payments were put into the wrong accounts. At the time of the audit, reconciliations were out of date by almost three years, since late 2007.

During an audit period of Jan. 1, 2022 to Dec. 31, 2023, Keene town Supervisor Joe Pete Wilson Jr. “did not maintain complete, accurate and timely accounting records,” according to the report. Though the town council-appointed clerk to the supervisor handles most day-to-day financial operations in Keene, the comptroller’s office considers any town accounting shortcomings to be the responsibility of the supervisor, as the supervisor is the chief fiscal officer of a town government.

During the audit period, two people served as clerk to the supervisor. Ashley LeClair was the clerk for the majority of the audit period and Cindy Caner took over the position on Dec. 4, 2023 for the 2024 fiscal year. Wilson was the supervisor for the entire audit period. He was appointed to finish an unexpired supervisor term in 2016 and subsequently elected in 2017 and 2021.

The town council also fell short in its duties, the report said, as it failed to audit or contract a professional to audit the supervisor’s accounting records, as required by law.

In a combined audit response letter and corrective action plan, the town council agreed to hire an accountant and bookkeeping consultant and provide more regular accounting updates at board meetings, among other changes.

The report is viewable at tinyurl.com/xuseb6t2.

Inaccurate records

Several of Keene’s financial records were deemed inaccurate by the comptroller’s office in the report, including balance sheets of various funds, asset and liability accounts and journal entries.

In 2022, eight of 29 asset and liability accounts were inaccurate. In 2023, it was 13 of 32. Of these 21 inaccurate accounts, 11 were overstated by $681,158 total and 10 were understated by $137,408 total.

The audit also found that, in 2022, Wilson and LeClair maintained 23 separate funds with balance sheets. Seventeen of those 23 funds were found to contain transactions that should’ve been accounted for in a different fund. In 2023, this number was 11 out of 16 funds.

The report cites an example of LeClair managing six separate funds in 2022 and 2023 to account for capital reserves — water district 2, highway, buildings, shuttle bus, bike park and safety path — when the reserves should have instead been maintained in the operating funds that correlate to their sources of financing: water district 2, highway fund and general fund.

Wilson and LeClair maintained separate funds on the advice of a consultant who said it would be “easier to account for the use of funds and unspent funds” via separate funds, the report said.

“Journal entries made between these funds and the operating funds did not accurately capture the transactions,” the report said. “Separate funds were not necessary to adequately account for the various sources of funds.”

Journal entries are records of transactions that ledgers and reports are subsequently based on. After reviewing 20 journal entries, the comptroller’s office determined that six, or 30%, were not properly recorded or supported, and eight, or 40%, were not recorded in a timely manner. None of the journal entries were independently reviewed or approved.

For example, the journal entry that amends the 2023 budget to account for overspent accounts, which ultimately increased appropriations by $54,642, was not recorded until Jan. 22 of this year — after the end of the fiscal year. Typically, the report said, these adjustments are made throughout the same fiscal year.

Reconciliations

Keene’s reconciliations — a summary of financial activity that reconciles a bank account with financial records — largely went ignored during the audit period. The comptroller’s office said 133 reconciliations should’ve been done throughout the audit period; Instead, 15 were prepared. Of those 15, 12 were found to be inaccurate, six were never provided to the town council and nine were provided to the town council on an average of 80 days after the end of the month.

“Bank reconciliations were not prepared for investment accounts and library accounts and generally only prepared for the town’s checking accounts,” the report said.

After preparing all 133 reconciliations, the comptroller’s office found that in 55, or 41%, the adjusted bank balances did not agree with the general cash ledger balances. The adjusted bank balance exceeded the general cash ledger in amounts ranging from $44,073 to $300,716.

Reports and audits

Town supervisors, as chief fiscal officers, are required to give their town council different reports about the town’s financial standing. They must give the council a monthly report of all money received and disbursed throughout the month — including reconciliations — as well as a budget status report, or a comparison of current revenues and expenditures to the annual budget’s estimates.

The audit found that Wilson provided 19 of 23 possible monthly reports to the board, but only three out of 23 possible budget status reports. Eighteen of the 19 monthly reports were “not considered timely” and reconciliations were not provided.

“(Wilson) said he was not aware that budget status reports should be provided to the board monthly,” the report said. “In addition, the supervisor did not have an explanation for the reports that were not provided.”

According to the audit report, Wilson told the comptroller’s office that the monthly reports weren’t on time because he was investigating the discrepancies in reconciliations before providing the report to the board.

Town supervisors are also required to file an annual financial report with the comptroller’s office at the end of the financial year. Keene’s 2022 AFR was inaccurate — revenues and expenditures for the funds listed in accounting records disagreed with balances in the AFR. For example, general fund expenditures were $26,987 more than accounting records stated, while highway fund expenditures were $20,621 less.

Other amounts went unreported, such as $6,366 in expenditures and $10,933 in building capital reserve revenues.

The town council is required to audit a supervisor’s accounting records annually, either on its own or by contracting an independent public accountant. Keene’s town council failed to do so in 2022.

“(Wilson) told us he was unaware of the annual accounting requirement of his records,” the report said. “(Wilson) and a board member also told us they believed the monthly reports to the board were sufficient. Had the board performed the annual audit, the deficiencies found during our audit could have been identified and corrected sooner.”

Recommendations and response

The comptroller’s office recommended that Wilson should more closely oversee his clerk’s work, provide regular monthly reports and the requisite budget status reports. They additionally recommended that, together, Wilson and the board need to ensure completion and accuracy of accounting records, including fund transactions, journal entries, reconciliations and the AFR. It also recommended that the board should audit Wilson’s records annually, as required by law.

In a written response to the audit, Wilson and the town council accepted the audit and proposed a corrective action plan.

“It is important to note that this audit found that all the monies of the town of Keene were accounted for, spent with proper approvals and disbursed appropriately. The issues identified by the audit were matters of accounting procedure,” the letter reads.

The comptroller’s office disagreed with this statement, writing in a footnote that the audit only studied if records were accurate, not if funds were accounted for or spent properly.

“Officials cannot use the audit’s results to draw such conclusions,” the comptroller’s report said.

The town council’s letter went on to disagree with the comptroller’s statement that the 2022 AFR was inaccurate, saying that the AFR was accepted through the comptroller’s office at the time.

In a footnote, the audit report said that acceptance of an AFR does not include comparison to supporting records, which is what the audit referred to when calling the AFR inaccurate.

In the town council’s corrective action plan, Wilson agreed to provide a monthly operating statement at town council meetings, hire an accountant to regularly review town accounts and prepare the 2024 AFR, hire a bookkeeping consultant for training, increase use of supporting documentation and scale down the amount of funds the town uses.

Starting at $4.75/week.

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