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Voices got loud and fingers were pointed at this month’s meeting of the Stamford Board of Finance.
At issue, once again, was the state-mandated annual financial audit.
It’s four months overdue. It was late last year, too.
Mary Lou Rinaldi, chair of the finance board’s Audit Committee, wasn’t having it when Controller David Yanik chastised the city’s contracted accounting firm, RSM, saying, “We know they know the urgency … but … we haven’t gotten a draft from them as yet.”
Rinaldi told Yanik that she’s “pretty much had it” with excuses for why the Annual Comprehensive Financial Report was not delivered to the Connecticut Office of Policy & Management on Jan. 31 as required. State law requires that every town hire an independent auditor to examine its books each year to ensure financial health.
“I have been in contact with the auditors right along, and to blame them for the fact that the city can’t get its act together is just unconscionable,” Rinaldi said. “Last year it was May or June before we got our audit done. One year is an aberration; two years is a trend.”
To say the audit is incomplete because this is the city’s first year using RSM “doesn’t ring true,” Rinaldi said, because the audit also was late in 2022, when the city used the same accounting firm it’d had for years. RSM accountants told her multiple times that Yanik’s office was not delivering the information needed to conduct the audit, Rinaldi said.
“We’re supposed to be the financial engine of the state and we can’t even get our audit done,” Rinaldi said. “It’s an embarrassment.”
She wasn’t accepting excuses, either, from Yanik’s boss, Director of Administration Sandy Dennies, who said the problem is “a marketplace issue” – a nationwide shortage of public accountants.
“That was the problem last year and it’s following us again this year,” Dennies told the board.
A low count of accountants
There is a shortage, according to a May 6 article posted online by the Society for Human Resource Management. A “declining number of people entering and staying in the accounting field is posing a significant challenge for public and private organizations,” according to SHRM.
Between 2020 and 2022, more than 300,000 U.S. accountants and auditors left their jobs, the article states. Not only are Baby Boomers retiring, but accountants aged 25 to 54 are leaving the profession for related jobs with smaller workloads and higher pay, it states.
Still, most of Connecticut’s 169 municipalities – 138 – have filed their annual audits, according to the state OPM’s Electronic Audit Reporting System.
“Both firms, last year and this year, do not have enough accountants to finish our audit,” Dennies said.
“That’s not true,” Rinaldi shot back. “The city was not ready since the beginning. The city was not giving them audit-ready things to review. Let’s stop blaming other people.”
Board of Finance Chair Richard Freedman interrupted, asking Dennies, “When is it going to be finished?”
“I’m hoping we will be able to finish by the time I leave,” said the retiring Dennies, whose last day is May 31.
“So you’re saying we will have a final audit by the end of the month?” Freedman asked.
“I am very much working toward that,” Dennies replied.
“What happens if it’s not done by the time you leave?” Freedman asked.
“We can’t sell bonds until our audit is complete – we would be impugned by the rating agencies if we did not have it completed,” Dennies said.
‘We have to get it right’
Bonds are debt securities issued by cities to finance capital projects such as building schools and repairing roads and sewers. Stamford has begun setting up financing for its 20-year, $1.5 billion plan to fix and rebuild its aging schools.
Last year’s audit delay had the city “racing to the May deadline to be able to go out to bond,” Dennies said, but “this year we are not considering going out to bond until much later in the year.”
Finance board member Dennis Mahoney said he finds it “peculiar” that the city can’t get the audit done.
“I understand there’s a national hiring issue with accountants but we need to … focus in on this right out of the box next year,” Mahoney said. “We have an awful lot of capital coming up and … we have to get it right.”
Dennies acknowledged that Yanik’s office did not submit all the required information to RSM by the Dec. 31 deadline. Part of the reason, she said, is that accounting firms usually begin their work in May, but last year RSM’s contract was not signed until September.
Finance board member Laura Burwick said that doesn’t explain why the audit was late “two years in a row.”
“It appears as though there have been a lot of things on the city side that we have not been able to deliver,” Burwick said. “The same information goes into the audit every year. I know the numbers change, but we should basically have a template that says these are the things we need. Then we stick things into the template and it goes to the auditor.”
It can work that way, Dennies said, but this year the city switched to a new financial reporting system and software.
Because of that, “this is an exceptionally difficult year, and it will be followed by a more difficult next year,” because part of the information auditors will need will be recorded in the old system and part will be in the new system.
Switching to a new system was “not insignificant,” Yanik said. “We did not have extra staff to deal with it,” he said.
Audits should be automatic
That didn’t elicit sympathy from finance board member J.R. McMullen.
“You knew it was coming for a year,” McMullen said.
Freedman, the board chair, addressed Dennies.
“What I find so frustrating about this whole thing is that audits are just supposed to get done. They’re done every year,” Freedman said. “We have a lot of serious issues in this city – this board deals with them, you deal with them, the mayor deals with them. This board has dedicated an inordinate amount of time talking about something that … shouldn’t have taken any time at all.”
Dennies again cited RSM.
“If the auditors had had extra staff to allow us to move forward on Jan. 1, we would have been done already,” Dennies said.
“But you weren’t ready” on Jan. 1, Freedman said. “That’s the problem.”
And, McMullen said, “the auditors are not supposed to have extra staff. They’re supposed to run efficiently. That’s how they make money. They’re not supposed to have 20 percent more people than they need. They have what they need so they can meet the commitments that they made.”
Burwick reiterated the board’s frustration, given that work on the audit for the next fiscal year, which begins July 1, should be starting now.
“This is a city with a $650 million budget, a triple-A rated city,” she said. “It’s inexcusable that we don’t have an audit completed at this point.”
Another board member, Geoff Alswanger, summed it up.
“This was a goal of the board. I don’t know if it was the goal of the city administration to have an on-time audit. Excuses don’t win ball games,” Alswanger said. “Obviously this will be a topic we revisit as we get into the next audit. Whatever needs to be done to get next year’s audit done on time, we have to do.”
RSM, with U.S. headquarters in Chicago, is the sixth-largest accounting firm in the world, according to industry reports. A message left Wednesday at RSM’s Stamford office on Elm Street was not returned.