A New York State Comptroller's audit of the town of Otselic pointed out several problems with financial reporting and found a conflict of interest.
The report's key findings were as follows: the supervisor did not provide the town board with accurate financial reports; the board did not review the supervisor's financial reports yearly; the required yearly financial reports were not filed to the comptroller's office from 2016 through 2020; a board member had a prohibited interest in the contracts between the town and his auto parts businesses; and the town board did not adopt a code of ethics policy required by law.
The report said Supervisor Marjorie Davis took office in January 2018. It said the prior supervisor did not file the annual reports in 2016 and 2017. It said Davis told the auditors that she didn't have access to the previous supervisor's records and because those two years' reports weren't filed, she couldn't file the 2018 and 2019 financial reports.
The report said auditors reviewed the supervisor's accounting records for accuracy for the December 2018 and 2019 general, highway, water and trust and agency funds. Auditors looked at 22 deposits and interfund transfers "totaling approximately $200,000," 87 canceled check images “totaling approximately $79,500," and six cash withdrawals "totaling $199,000."
They then looked to see if the money was recorded accurately in the supervisor's financial records. The report found that the withdrawals were not recorded in the accounting software, but were deposited in other town accounts. The audit said the supervisor did not record "19 transactions totaling $127,000," in the accounting software of the deposits and transfers, however, "one totaling $25,000 was recorded twice." For the canceled checks the report said, "Aside from minor discrepancies discussed with Town officials, these disbursements were appropriately recorded and for proper Town purposes.”
According to the report, Davis told the auditors that she didn't know the software and was, “trying to obtain training on how to use the software.”
The audit said the town board did not audit or have a public accountant audit the supervisor's financial reports annually. It said board members were unaware that they had to audit the financials of the supervisor yearly and figured they didn't need to, “because the Supervisor submitted financial reports to the Board," monthly.
The comptroller's office made several recommendations to the board and supervisor, including periodically reviewing the supervisor's financial records, auditing the supervisor's financial records annually, correcting errors in the accounting records and maintaining accurate records.
Davis and the town board responded to the audit in a letter dated June 8. It said: “The Board acknowledges that it has not received nor asked for several of the monthly reports recommended. However, the Board has received and reviewed financial reports from the Supervisor at every meeting since the current supervisor took office January 1, 2018.”
The audit also found a conflict of interest with a board member and contracts his businesses received from the town. According to the audit, state law allows up to $750 in contracts between a town employee or board member and the town. The audit said the town board member was president and owned more than 5% of the stock in two automotive supply businesses where the town buys supplies.
According to the audit, one of the businesses made $2,463 in 2019 and $1,132 as of July 31, 2020, while the other business made $1,036 in 2019 and $565 as of July 31, 2020. Auditors reviewed all the invoices submitted by the businesses.
“Although our testing did not reveal any irregularities in pricing, when officials, in their private capacities, conduct business with the municipality for which they serve, the public may question the appropriateness of these transactions," the report said. "Such transactions may create an actual conflict of interest or, at a minimum, the appearance of impropriety.”
The town responded to the conflict of interest in the letter of response, “Town officials agree in theory with the concept of 'conflict of interest.' The reality in small towns is a bit different. In a small town, such as Otselic, conflicts of interest are nearly impossible to avoid.”
The report stated that the town board did not have a code of ethics as required by law. The letter in response did not address that problem.