Audit Criticizes County Investments, Payroll
Chautauqua County’s investment program and salary and fringe benefit payments are facing criticism from the New York State Comptroller’s Office.
An audit released last month reviewed county investments along with payroll and benefits from January 2013 to January 2016. In the audit, it was found that the finance director at the time, Susan Marsh, didn’t always invest funds in accordance with the county’s investment policy and general municipal law.
Further, the audit found salary payments to 23 elected officials and 94 management employees weren’t all calculated accurately. In addition, three elected officials weren’t supposed to receive pay for unused vacation time totaling $14,875 during 2013 and 2014.
Within the report, the comptroller’s office states the director’s investment practices brought loss on the sale of certain investments. Between January 2013 and September 2015, 81 securities were purchased which cost $67.2 million. During that time, 43 securities were sold with net proceeds, including monthly repayments of principal, totaling $51.4 million. The county realized gains totaling $697,499 on 17 sales and losses totaling $788,770 on 25 sales, bringing a total net loss of $91,271. In addition, one bond was sold at cost and four bonds were held by the county until they matured, the report states.
The comptroller’s office detailed losses on 13 bonds that were sold before maturity, including nine GMNA bonds for a loss of $246,410; two bonds issued by New York State public authorities for a loss of $221,544 and two U.S. Treasury securities totaling $27,727.
The comptroller’s office questioned the county for purchasing and then selling the obligations rather than holding them until maturity. The audit also jabbed the legislature for not requiring the director to provide sufficient information regarding investments, which “diminishes its ability to provide proper oversight of the investment program.”
“In the current market environment, if not held until maturity, the county could end up selling certain securities at a loss if it needed cash to finance current expenditures. In that case, the county could have less cash available to fund current expenditures and the legislature could be forced to raise taxes.”
In response, County Executive Vince Horrigan noted inaccuracies and wrote that 46 securities were sold with a net gain of $148,344. Horrigan also wrote that investments brought a return of $4.6 million when the interest received while held in the portfolio is included.
The comptroller recommended the legislature provide adequate oversight of the investment program and amend investment policy to require prior approval by the County Attorney regarding legality of all future investments. The office also recommended the finance director comply with the primary objectives of the county’s investment policy and prepare reports containing sufficient detail on the purchase and sale of individual investments.
SALARY AND FRINGE BENEFIT PAYMENTS
Salary payments to elected officials and management employees weren’t accurately calculated, according to the comptroller’s office. Twenty-three elected officials and 94 management employees were overpaid, which totaled around $26,400 in 2015 as they received one day of pay in excess of their approved salary amount. Without corrective action, the comptroller’s office says the county will likely overpay them an estimated $27,000 in the 2016 fiscal year.
In addition, three elected officials, the county executive, county clerk and county sheriff, weren’t supposed to receive pay for unused vacation time, which totaled $14,875. Elected officials are allowed to take as much or as little time off as they please and still be entitled to receive full compensation set for their office. However, they don’t earn vacation time.
Within the report, the comptroller’s office hit the county for having no written policies discussing how the rate of pay should be calculated on an annual basis.
“The lack of written policies coupled with the lack of adequate monitoring of the payroll process has resulted in officials and employees receiving pay in excess of their authorized amounts,” the report states.
In response to salary overpays, the county said the practice of converting the annual salary designation to a bi-weekly rate has been constant and unabated for decades. Salaries for management employees and elected officials have been consistently paid in this manner over time and the additional one or two days of pay when it occurs have been expensed to the county. The established past practice wasn’t an unintended payroll error, Horrigan wrote. However, the county will reduce the remaining bi-weekly salary payments to management and elected officials by an amount sufficient to assure the 2016 salary paid is no greater than the designated annual salary amount.
As for elected officials receiving pay for unused vacation, language within a local law permits the practice. However, legislators are excluded as the local law reads. The comptroller’s office recommended the county cease allowing elected officials to accrue and be paid for vacation leave and recover salary and benefit overpayments.
Following the report, initial responses were made by the county and comptroller’s office. Next, the county will need to send an official response. The response will likely be reviewed with legislators on the Administrative Services and Audit and Control committees.