Penn Yan gets clean opinion in audit

Gwen Chamberlain

When village officials spent three hours on a Saturday morning in January reviewing the draft external audit of village accounting for the fiscal year ending May 31, 2010, they were some of the few local elected officials hearing good news recently.

William Freitag, a partner in the Bollam, Sheedy, Torani & Co., LLP firm,  told village board members, some staff and members of the municipal utilities board, “This village is governed by a pretty proactive management team.”

Freitag’s firm has issued an unqualified opinion, or a “clean” opinion, the highest level of standards for an external audit.

He said his team found no disagreements with village management over accounting practices.

Most of the meeting was spent reviewing the utilities funds, and if there’s any component of the village’s management that might require some kind of action soon, it’s in the electric department.

Pointing out that the village has not increased electric rates for 16 years — since 1998 — Freitag said the village might want to start the rate increase process, depending on figures at the end of this fiscal year.

“This electric utility is one of the stronger ones in the state,” said Freitag, who can draw on statistics from most of the 48 municipal utilities in New York State to make comparisons. His firm has done work for 38 of the municipal utilities in the state and is the accounting firm for a statewide utility organization.

He pointed out that the electric budget has more than 6 1/2 months of operating cash on hand, compared to a statewide average of around three months, and it takes an average of 24 days to collect a bill in Penn Yan, compared to a statewide average of 35 to 40 days.

The cost of electricity went up $57,000, and most other increases in utility operating expenses are related to employee costs. The electric utility’s net income was $28,000.

Taking a global perspective of the village finances, Freitag said the total operating funds of the village generated a net income of $136,000 while total village-wide fund balances decreased by $1 million.

Some adjustments to depreciation figures were made, spreading the costs of fixed assets over a shorter period of time.

The village’s total cash balances were $5.4 million with $3.5 million in reserves for future capital improvements.

Long term debt declined about $660,000.

The water fund lost $122,000 in fiscal year 2010, driven by depreciation expense. Without depreciation, the fund realized income of $160,000.

The sewer fund made $188,000. Without factoring depreciation, the income here would be closer to $520,000.

“Both are very healthy, good fund balances,” Freitag noted, saying the water fund generated positive cash of $119,297 and the sewer fund generated $606,767 in positive cash.

Trustee Wayne Davidson asked if funds could be transferred from water or sewer funds to the general fund. Freitag said yes, but such action might open the village up to a lawsuit from water or sewer customers over possibly subsidizing the village property taxes through such action. He said such lawsuits have been successful in other municipalities.

Two areas triggered comments from Freitag. Because the audit was completed later than expected, it was not filed with the New York State Comptroller’s office within 180 days of the fiscal year end, as is required by state regulations for the fire fighters length of service program.

Freitag also recommended the village obtain control of two accounts used by the village board and Municipal Utilities Board as “sunshine funds.” Small amounts are contributed to the funds each year by members of the two boards. The accounting firm says since the accounts are included in the village’s financial records, the village could be held accountable for activity.

The board agreed to accept the audit.