STAMFORD – They were not the kinds of things elected officials wanted to hear from an auditor who’d just reviewed two years of city property tax collections.
“The city tax collector at the time of this audit could not locate fiscal year 2019 and fiscal year 2020 QDS reports,” the city’s internal auditor, Teresa Viscariello, told the Board of Finance’s Audit Committee last week.
QDS is the software system the city uses to issue tax bills and track collections.
Viscariello told the board about another problem in the tax collector’s office.
“There is a lack of periodic reconciliation,” she said. “I could not identify any daily, weekly or monthly reconciliation procedures.”
Reconciliation is a procedure that compares two sets of records to ensure accounts are accurate. In this case, the report generated by the QDS system should have been reconciled with a tax collector report showing the revenue gathered from property owners.
That it doesn’t happen in the tax collector’s office is “very concerning,” Viscariello said, but there are other concerning things.
“There is a lack of adherence to state statutes regarding retention of records, and city retention policies,” she said.
Retaining records is important because it improves accountability, reduces liability, preserves the history of tax revenue collection, and protects the rights of citizens who might want to see the information, Viscariello wrote in her audit report.
Beyond those deficiencies, Connecticut law requires that tax collectors deliver an annual report to the Board of Finance, “but I did not see anything in regard to that,” Viscariello said.
Another state law mandates that tax collectors refund excess tax payments, which should be reflected in the tax collector’s report, Viscariello said. The report should show who got a refund and why, but that reporting also is inaccurate, she said.
“These were significant findings,” Viscariello said.
Yet the tax collector’s office isn’t the only one with problems. Viscariello said deficiencies also were discovered in the city controller’s office.
“The controller must provide monthly and fiscal year-end property tax collection reports, reconciled from the tax collector’s report to the general ledger, to ensure everything the tax collector collects is properly booked on a timely basis,” she said.
The controller’s office should be segregating employees’ duties as a “best practice,” Viscariello said.
“The employee who posts entries on (the tax collector’s) ledger should not be the same one who posts entries on the general ledger,” she said.
It’s a check-and-balance against errors, Viscariello said.
She summed up her audit findings this way: “We need to adhere to our established policies.”
Board of Finance Chair Richard Freedman said he was astonished to hear what Viscariello reported.
“I just don’t know what to say. It’s shocking,” he said. “We are collecting $650 million in tax revenue and we’re not tying it out to numbers that appear in our budgetary assumptions.”
Board Vice Chair Mary Lou Rinaldi, who heads the Audit Committee, said Viscariello’s report explains something she has been monitoring all year.
“Is it any wonder that we are having problems completing our annual audit, now that we know why we can’t pull data together in a timely fashion?” Rinaldi said.
Late, and even later
The Connecticut Office of Policy & Management requires that, each year, all municipalities file a report prepared by an independent auditor. The purpose of the audit, known as the Comprehensive Annual Financial Report, is to protect taxpayers’ money and ensure that municipalities are fiscally stable.
Stamford’s CAFR was five months late last year and will be at least seven months late this year.
The CAFR for fiscal year 2022 is so late that it is overlapping the initiation of work on the CAFR for fiscal year 2023. That was supposed to begin July 1, the day the new fiscal year began.
“It sounds like … we are not going to have (last year’s) audit until sometime in August. Is that a fair statement?” board member Laura Burwick asked Controller David Yanik.
“I think we will have it before the end of July,” Yanik replied.
“Are we getting started for next year? How behind are we for next year?” Burwick asked.
“We are, a bit,” Yanik said.
“So if we haven’t started the next audit, how delayed will it be?” Burwick asked.
“It’s difficult to say,” Yanik replied.
From that, Freedman said, he has to conclude that the CAFR will be late again next year. He wanted to know what’s causing all the problems. Yanik said some delays are because the city recently implemented a new financial software system, and some are because the controller’s office can use additional qualified employees.
“We are budgeted for one contracted employee; it would be good to have others,” Yanik said.
His office has 19 staff employees, and four or five work on the audit, Yanik said.
“We have one position open because we had a recent resignation. So we are looking for a revenue accountant position to be filled; we have a temp in there now,” Yanik said. “Then we need to fill a project accountant job, which is related to financial reporting.”
Freedman said adding staff won’t fix things.
“This is not a function of not having enough people,” the finance board chairman said. “This is a function of a complete absence of business practices.”
Not ‘getting the basics right’
Yanik said his office “has been frustrated with the timeliness of the preparation of the tax collector’s report. It was a contributing factor to everything getting done on a timely basis.”
Tax Collector Bill Napoletano did not attend the meeting. Rinaldi said he was asked, but said he could not make it.
Finance board members asked Yanik for possible solutions. Yanik said one would be to require the tax collector to “reconcile receipts monthly, and tie it out to the general ledger” so all financial departments can access information on tax revenue collections, which improves their functions.
The tax collector now is required to file a report once a year, but “it’s possible to have the tax collector … provide an interim report based on half-year activity,” Yanik said.
Members of the Board of Representatives’ Fiscal Committee have become concerned about deficiencies in the offices of the tax collector and controller. The committee is scheduled to discuss the situation at its July 24 meeting.
On July 13 Mayor Caroline Simmons emailed Yanik giving him an Aug. 18 deadline to provide a report identifying “areas where the city can improve the audit process and more effectively meet deadlines,” and explaining how to implement Viscariello’s recommendations.
On the same day, Simmons similarly emailed Napoletano, giving him an Aug. 11 deadline for a report on how he will make the fixes outlined by Viscariello.
Rinaldi said during the meeting she is anxious to see recommendations expected to be issued next month by RSM, the independent auditor hired to create the 2022 CAFR.
“I think RSM’s recommendations … will be plentiful. But, more important, I don’t want to see the city’s response be, ‘It will be corrected,’ which is what we’ve heard in the past,” Rinaldi said. “I’m fully expecting a well-thought, detailed plan as to how the city is going to fix whatever RSM finds. That’s a forewarning from me as Audit Committee chair.”
After the meeting Rinaldi, who has driven the push for answers on the audit problems for months, said the situation is “very bad.”
“We were hearing from our auditor, RSM, that this stuff was happening. Now the internal audit shows in minute detail where the problems are,” Rinaldi said. “I was shocked by the extent to which the system is messed up. We are not getting the basics right. It’s been going on for a decade, and the stage is set for us to have problems again next year.”