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Thursday, September 17, 2015

East Niagara Post earlier ran a story about an exchange Wednesday night at the Lockport Common Council meeting between Mayor Anne McCaffrey and City Treasurer Mike White. That story included the full text of McCaffrey's statement in response to White. East Niagara Post has now obtained the full text of White's statement rebutting findings from the city's director of finance. That statement follows in its entirety:

Finding 1:

A) “We found that the City’s accounting records were in such poor condition that the Council and City Officials were unaware of the severity of the City’s fiscal stress”

  • Contrary to how City Officials want to spin this they knew about this situation for years. There was a recommendation from the independent auditors going back as far 2007 that we needed to have an accounting position reinstated. The Treasurer’s Office had continually warned the Mayor and the Council for years that if they kept spending at this rate and using unrealistic revenue numbers that the State would be here soon. Guess what happened? You know! Last and most important, surprisingly, before the completion of the audit the State did not ask the Treasurer’s Office our opinion but they did speak to Mayor and some Council members and you can just guess what happened next. The current Council President Mr. Kibler actually pulled me aside at the time and said this is not your fault. My how things change! Why would any of those individuals say yes if they didn’t have to? Like former City Treasurer Jim Ashcraft said “They knew”!

B) “The City was unable to prepare an accurate financial statement or maintain an accurate general ledger… the closing of fiscal 2013 was delayed….”

  • The Director of Finance fails to mention that we were working with a limited staff where the Chief Account / Auditor had been performing at least three to four jobs on a daily basis. The independent auditor and the Sate knew this because we were in constant contact with them. We were in agreement with the independent auditor, taking into consideration the lack of help, that we would rather delay and have all the information correct than submit the Annual Update Document with the State that was not complete. I also had several conversations with the State over this time period along with follow up correspondence from my office and agreed that they thought it made more sense to delay the report and have it correct than having to resubmit a second time that would have cost the taxpayers more money. The Director of Finances’ reference to having completed the 2014 report on time in April 2015 fails to mention that there were now two consultant accountants plus my staff and himself to do the job at a price tag of over $250.00 an hour. With those kinds of horses I hope we can get it done on time.

Finding 2:

“The City’s books were not closed in a timely manner.

  • Please refer to the answer I just gave you to answer this one. The Director of Finance seems to take credit for most of the things that were already being handled in his response to correct the situation. It seems like the Director of Finance (Remember reports only to the Mayor) wants to put a feather in his $95,000 a year cap plus benefits at the expense of the other employees that have given their heart and soul every day working with limited resources and are thankful they have a job. Further, the lack of this Administration’s desire to communicate with its entire workforce leaves a deep void that just should not be.

Finding 3:

“The City’s accounting records are in such poor condition and City Officials did not know the issue”

  • Really Scott! They didn’t know. If that is so why did City officials, led by the current Clerk who was Council President at the time, implement an eleventh hour budgetary fix due to lack of proper planning  by taking refuse collection out of the budget because they knew they had no money. Also, people seem to forget that over those same years they spent down the entire fund balance. In 2008 we had our bond rating increased because our office had been trying to hold things together financially without the support of the Administration. I presented a memo to the Finance Committee suggesting the City implement a fund balance policy. It fell on deaf ears because then they would not be able to balance the budget. Before the last meeting a reporter pulled me aside and asked if I was going to rebut the Director of Finance. I said to the reporter I have no idea of what you are talking about. The reporter smiled because that person realized that, once again I had not been made part of the conversation. This presentation was meant to humiliate me and my office once again in a last ditch effort because the primary election was the following week. The reporter then said to me, after figuring out that they tried to pull another fast one, “Hey Mike, looks like election season to me”! How profound.

B)”The Treasurer does not routinely prepare cash-flow analysis. Without cash-flow projections, the Council and City Officials were unaware of the magnitude of the City’s shortfall.”

  • The City Treasurer’s Office has always prepared cash flow analysis. As a matter of fact the Deputy Treasurer has done this for the last twenty five years. We actually identified the shortfall and would routinely make the Council and Mayor’s aware of this. I remember my staff and I taking a slow burn and being upset when the Mayor gave credit to Lumdens and Mc Cormick for finding the shortfall when we revealed it before they even analyzed it. Keep in mind that when the State analyzed it they had one to two people in here for six months. I would have loved to have that luxury at the time. We disagreed with some of their projections because we understand what comes in and when it does better than anyone. When we asked the State for a copy of their excel spread sheet to justify their numbers we were turned down. We could not understand why. The Director of Finance experienced this as well when he called the State. He shared that with me and my Deputy so why didn’t he share this with the public in his report. My office will continue doing our own cash flow analysis even though the Director of Finance says he has a handle on it. Experience tells me that when you are dealing with someone that knows everything about a thirty million dollar corporation after six months on the job we get a little nervous. Not knowing what will happen in the future and the result of the upcoming election we must continue to run the Treasurer’s Office as independently as possible.

Finding 4:

“We estimate that the City will realize operating deficits in all funds. These operating deficits occurred because City Officials did not include realistic estimates in the 2013 adopted budget”

  • I cannot agree more with this finding.  That year the Council and Mayor along with their consultant budget director adopted a budget that was over a million dollars short primarily based on the assumption that they would successfully negotiate all five union contracts. That’s right I said assumptions. This is a huge red flag!This ladies and gentleman is one of the big reasons a City falls under the banner of fiscal stress. I received a call from one of my Directors of the New York State Association of Municipal Finance Officers and was asked Mike how did they do that. Sadly my answer they just did it. Wow! The Director of Finance takes credit in his response for implementing a better budget process but that is not totally true. Before his arrival the Chief Account / Auditor sat down with all the Department Heads in 2014 and completely revamped the system and managed that budget on a daily basis probably better than it has been done in twenty plus years. By the way, my staff used to monitor and cover lines in the budget that were overdrawn by payroll being processed on a bi-weekly basis. Currently the retirement buyout line is overdrawn by approximately $1,500, and has been since mid August. The Director of Finance should probably take a look at this as he is the person who gets the report when the payroll is processed.  It’s really sad folks, particularly for the moral of the employees when you read in the paper that they are to blame as well. After all who is in charge of the department heads? Very interesting, the Director of Finance blames, once again the Treasurer, the Chief Account and now we’re adding the Department Heads but not once ever mentions the Council or the Mayors.  

Finding 5:

“In 2013 the City significantly overspent its approved budget in the General Fund… The City’s  Sewer Fund was also over budget…”

  • As mentioned above in Finding 4 the Chief Accountant / Auditor, at the request of the Finance Chairman Mr. Genewick , provided monthly reports  to the Finance Committee in great detail. There were never any questions and we had always voiced our concern with spending money that was not there and when the lines were light asking us to find the money. It doesn’t work that way folks and this is not anything new. Also in 2013 and the subsequent year 2014 when the lines were over budget we would not approve and have the Mayor’s sign off if they insisted on the expenditure.

Finding 6:

“Financial information for Community Development has not been maintained on the City’s general ledger nor is it reconciled. “

  • This has been an area of concern for quite some time. The, taken way out of context, supposed bank accounts that no one knows about sit right there in that office. When I questioned one of the consultants about the three accounts I was told they were only aware of one and that was a result of a reporting error that has since been corrected by the auditors. The bottom line is that the Chief Accountant and I were continuously requesting information from the previous Director of that Department and had a heck of a time receiving it. At times we even asked the Administration, both past and present, to try and help us move this process along. It did have a big impact on the deficit. Hopefully this will be addressed with the new Department Head. I must point out that there are other Departments that do have their own bank accounts. For example, there is one in the Clerk’s Office and one in the Police Department. Each any every year the Police Chief will ask for us to audit this for him and we honor his request.

Finding 7:

“Department heads are able to approve certain purchases without obtaining proper bidding as required by the City’s procurement policies and General Municipal Law”

  • Director of Finance says that he and staff accountant now review to ensure conformity. This has also been performed by the Chief Accountant and me so it is nothing new. The only way the system will be 100 percent is by the implementation of centralized purchasing. That will involve additional manpower to achieve this to sustain a reliable set up of checks and balances.

Finding 8:

“The collection of revenues that were pledged to pay the Revenue Anticipation Note was not aside in a separate account.”

  • The money was originally put in this account based on a recommendation by our independent auditor. It was an unprecedented, very complex transaction where we had full discussion with the State concerning its posting. Is has been adjusted and everything is fine.

Finding 9:

“The City was not timely in its’ preparation of bank reconciliations for the year 2013”

  • That is 100 percent correct and this is purely a result of being understaffed and had been going  for over two years without anyone in that position. Imagine what it was like for that person going back and making sense of a situation like that. One of the temporary consultants was approached by Mr. Kibler and was asked how can this be? That person’s response was you were in the banking business for a long time. You know that you cannot perform bank reconciliations if the information is not posted into the system. I rest my case. It is important to note that during that time my Deputy and I made sure that every penny of the City’s money was accounted for. I would never wish that task on anyone.

Finding 10:

“We noted that some of the City’s capital projects cash balances were negative, which means that one project was using the funding of another… it was identified that capital projects were being completed regardless of whether or not the funding had been secured.”

  • Headline Buffalo News: Lockport Lost Track of Hundreds of Thousands of Dollars, City Officials Admit. It goes on to say some Lockport residents have wondered why the City almost ran out of money last year. The reason, according to Finance Director Scott Schrader: They lost it and forgot they had it. Sorry but not enough information was provided by the Director of Finance when he made this statement. So here we have this so poorly explained missing $800,000 or money just sitting around that nobody knew about. However, I find it hard to believe knowing the depth of the audits conducted by the State Comptroller’s Office and our independent auditors the Bonadio Group that they missed $800,000 being in the wrong place.   Don’t you find it unusual that I knew, my Deputy knew, Mary Smith knew, Chief Account Ruth Ohol knew, the State knew and even our independent auditor knew about it. As a matter of fact they called our Office when the story hit the papers. They called to say that what was reported in the paper was not what they saw when they audited the books and prepared the financial statements. Isn’t it ironic that the new finance man found this and the perception was given that no one else knew anything about it? By the way Mrs. Smith called him to task on this and I do not believe he had a solid answer for her. In addition, the Director of Finance accused this Office of fuzzy math. So I had Mary Smith check over the numbers that were posted in the resolution to adjust the capitals that was adopted two weeks ago after I looked at them. Low and behold his numbers did not add up to the figures he was given by her. You might want to check that and rescind and adopt a corrected resolution.  Ladies and gentleman if you want to keep hearing the independent voice of the Treasurer’s Office then you need to vote no on the referendum to change the duties this November. We should be working together not playing politics at the expense of the taxpayers.

Finding 11:

The City did not have significant cash to give from General Funds, it borrowed from the HRA Plan, and expected to repay the HRA Plan with 2014 taxes.”

  • At time there was a knee jerk reaction to become “Self Insured” for health insurance purposes. Doing so required us to come up with a large sum of money, the $200,000 the Finance Director spoke about in the paper. The only place we had that sort of money was in the HRA Account. So the money was advanced from HRA to make the required deposit with the processor. So when the money was returned to the HRA account you created a hole in the following year’s cash flow. Then the budget was not adjusted to account for that money. The Treasurer’s Office would not have made that deposit if it had not been directed to do so by the Mayor upon request from the Clerk.

Finding 12:

“We noted that the City does not have a formal cash collection policy or policy for collections at the department level”

  • This will be my final comment on what was presented to the public two weeks ago. This policy is something we all agree is needed to ensure that checks and balances are in place. Most of the departments have been complying with this except for one that I am aware of. That would be the Marina that is overseen by the Director of Finance. The monies that were given to you on August 26 were not turned in until yesterday. Maybe we can set an example and pay a little bit closer attention to that in the future.

In closing instead of standing up here defending my office and the rest employees wouldn’t it have made more sense to work together in the best interest of the citizens? Communication has been nonexistent. They changed the charter without your OK. They hired a staff accountant without my knowledge so he turned as red as a tomato and apologized for not telling me. He did however share the hiring with one of the consultants. The Director of Finance sat in my office and told me this financial mess was not my fault then said the opposite in the Buffalo News. He came to my office and said the Mayor and Council admitted they make a mistake by taking away more of my help. He then asked how long have you been without help and I said last fall before the budget was adopted. He said he wanted to help me. I could not help but think first of all why is the Director of Finance getting involved in a personnel matter and why now? Then it hit me. My Office recently had a grievance filed against it for me trying to post payments so people know their checks will clear. They were right to protest and that is exactly one of the reasons you are being picketed here tonight.  I know that many of you have voiced that it is sometimes hard to get a hold of someone in the City. If you want you can call my cell at 504-7324. We can’t forget that we work for you. Thank you. Stay tuned!


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