OSC Audit Response

( OSC Audit Response as PDF file )

"Ms. Patricia Lamb McCarthy

Deputy Comptroller, Division of Municipal Affairs

110 State Street

Albany, New York 12236

Re: Report 2002M-63

Dear Ms. McCarthy:

We have received your audit report, referred to above, covering the period January 1, 2000 to August 6, 2001. I have reviewed the report on behalf of the County, discussed its contents with your auditors and with the County’s senior management and offer the following comments and corrective action plan.

First, I congratulate you on the competence and professional demeanor of your auditors. They are typical of the high quality of public servant that, over many years, we have come to expect from the State Comptroller’s Office.

We note that you used a “risk-based” approach, “focusing (your) audit efforts on those areas … having the greatest probability for needing improvement.” Nevertheless, the audit identified only three areas of deficiency, all relatively minor and some, we would argue, that are not deficiencies at all.

We note that of the eight comments in the previous audit (1/1/95-4/16/96), six have been addressed to your satisfaction and do not appear in this audit. The seventh dealt with time and attendance records and those comments were comprehensively addressed by the installation of a new payroll system in 1998, which computerized the accrual and use of leave time and imposed a government-wide discipline in these areas. Your current finding correctly points out that some of our written procedures have been made obsolete by this new system. Although new procedures for this payroll system have been well established and are constantly monitored, we must and will document these revised procedures with amendments to Policies & Procedures Manual.

The eighth comment in the previous audit regarded fixed assets, the County’s control of which your audit finds to be continuingly inadequate. Saratoga County has consistently refused to spend tax money to create the illusion of greater control when it believes its system of physical inventory by departments, accumulated and consolidated in the Treasurer’s office, combined with the close monitoring and control of different types of assets by cognizant departments to be, not only adequate, but superior to many more structured systems. Compliance with GASB 34 will, obviously, affect our approach to fixed assets but we will continue to emphasize substance over form.

With respect to capital projects, your audit alleges that my office did not maintain inception-to-date figures and, thus, could not monitor those projects against project authorizations. You further comment that certain projects, spanning multiple budget years, were inappropriately executed through the general operating fund rather than a capital fund and that other projects, for which capital funds were established, were not closed out in a timely fashion. Generally speaking, none of these comments is correct.

Our financial management system follows the pattern of your Annual Update Document, which elicits capital expenditures on an annual basis, as well as a somewhat artificial “fund balance” at the end of each fiscal year. Nevertheless, we recognize the need to accumulate the total cost and financing sources for each capital project and the Director of Finance does so with supplemental records. Moreover, every capital fund project initiated since 1997 has been established with a budget reflecting the Board of Supervisors’ authorization for that project. Each subsequent fiscal year, that budget is reestablished in the amount of the unused authorization and unrecognized funding. There is no lack of internal control in this area.

It is not the County’s practice to run through its operating funds any capital project which is expected to span multiple fiscal years. The County does, however, routinely run through its operating funds any capital project the completion of which is anticipated within a single fiscal year. That is a reasonable, legal, prudent, and efficient practice and we will continue to do so.

Of the two capital fund projects which the audit identifies as lingering inappropriately, one is for the expansion of reliable water sources in the County. In spite of the considerable length of time since the last transaction, this is still an ongoing and unfinished project of Saratoga County. The other open project, a building renovation, should have been closed some time ago and we will be more vigilant in bringing such projects to closure.

So, we are left with adequate payroll procedures that are inadequately documented and a completed but unclosed capital fund. It doesn’t leave much room for improvement but we’ll try.

Yours truly,

J. Christopher Callaghan

County Treasurer"