DERBY — The city hasn’t completed a financial audit on time in at least four years, an example of poor fiscal management, according to a letter from the state.
“The City should work with its audit firm to develop a plan to ensure that its annual audits are completed in a timely manner going forward,” Kimberly Kennison, an executive financial officer with the state’s Office of Policy and Management said in a June 3 memo to Mayor Rich Dziekan.
The letter shows Derby was 89 days late in submitting a financial audit in 2017.
Derby missed the 2018 deadline by 110 days.
The government missed the 2019 deadline by 212 days.
The audit due June 30, 2020 has not been handed in, according to Kennison.
“By any measure, the issuance of the annual audit more than one-hundred days past the December 31 annual due date as reflected above does not represent a sound financial practice. We highly recommend that the City identify the reasons why it has failed to file its audit reports in a timely manner and ensure that its plan incorporates policies and procedures to prevent this from reoccurring,” Kennison wrote.
The city’s response is due by June 21.
Kennison and the state are involved with Derby because the city significantly overestimated grant money in several budget cycles, resulting in a budget hole the government solved, in part, by raising taxes.
The murky, confusing problems with Derby’s finances were first discussed in public in May 2019 as members of the Derby Board of Apportionment and Taxation were finalizing the 2019 – 2020 budget.
In terms of the grant goof, the city mistakenly budgeted some $2.3 million in school grant money it was not scheduled to receive.
The problems resulted in a tax increase that year. The city came up with a “recovery plan” that included the restructuring of debt and the sale of city property, along with other measures, to fix the financial mess.
The mayor penned a guest column published June 9 saying his administration inherited the problem and has crawled out of the hole. Click here to read this column.
The June 3 memo from the state comes after the Dziekan administration provided an update on the city’s financial situation to the Municipal Finance Advisory Commission on May 5.
“We’ve been voluntarily and actively participating in meetings with the State’s Municipal Finance Advisory Commission for over a year and they have been satisfied with the City’s progress overall,” Andrew Baklik, the mayor’s chief of staff, said in an email to The Valley Indy. “At the last meeting Interim (finance director) David Taylor was complimented for how far we’ve come.”
Baklik said the tardiness of the annual audit will be an issue to tackle for the city’s new finance director.
The city is still short-staffed in the finance department, Baklik pointed out, an issue the administration is addressing.
“We have already begun work on next year’s audit and have every confidence that under the leadership of new (finance director) Agata Herasimowicz, the audit will be on time for the first time in quite a few years,” he said.
The city has already made a series of recommended changes, Baklik noted.
“The recommended Insurance Reserve Fund was already created last year, so aside from the timeliness of the audit, we are in good shape,” Baklik said. “Not only will a response be provided in writing, but we are also scheduled to meet with them again later this month via teleconference to further discuss.”
The memo also asks the city to provide an updated “corrective action plan” describing how the city is dealing with a series of long-standing accounting issues.
First Ward Alderwoman Barbara DeGennaro raised the letter as a discussion point during the June 10 Board of Aldermen meeting, asking why the city never meets audit deadlines.
Her question touched off a conversation with Dziekan, Baklik, former Mayor Anita Dugatto (who now serves as an Alderwoman) plus Alderman Charles Sampson and Alderwoman Sarah Widomski.
DeGennaro suggested the city may want to get a new accounting firm to conduct the annual audit, something the city might do in the future, Baklik said.
The audio from the conversation is embedded below:
The 2019 correction action plan is embedded below. It describes all the problems with the way Derby’s finances were handled.
2019 Correction Action PLan DERBY by The Valley Indy on Scribd
