STAMFORD – It’s a boilerplate audit that each municipality files with the state every year.
It documents how much money came in, how much went out, and how it was spent.
But Stamford, the state’s most booming city, can’t seem to get its audit together.
The Annual Comprehensive Financial Report for 2022 was due last December. This December it appeared on the Board of Finance agenda for approval.
But, as has happened each month this year, there was nothing for the board to approve.
The 2022 audit isn’t finished.
“Can we assume we’ll see it in January?” the chair, Richard Freedman, asked during this month’s finance board meeting.
Director of Administration Ben Barnes said yes.
But board members have heard that many times.
“The auditor is still waiting for data from the city,” Mary L0u Rinaldi, who heads the board’s Audit Committee, said after the meeting. “The auditor can only go by whatever data a city does, or doesn’t, give them.”
The auditor, RSM, will deliver something more important than an accounting of dollars and cents, Rinaldi said.
It’s the comments – the portion of the report in which the auditor explains the problems with the financial system and how it can be improved, she said. The comments are accompanied by an explanation from city officials for how they will make the improvements.
That will be crucial, said Rinaldi, who has pushed for a completed 2022 audit and looked into Stamford’s history with audits.
Her research showed that the city has been falling behind on its annual financial reports to the state for a dozen years.
In 2011, then-auditor O’Connor Davies Munns & Dobbins wrote that they could not begin the work on time because city employees had not reconciled accounts, and the tax department had not reported information to the controller.
The auditor reported insufficient financial reporting procedures; deficiencies in maintaining financial information; a lack of monthly financial reporting; inadequate staffing in the controller’s office; and a lack of understanding of accounting and reporting practices among employees.
The same auditor found the same problems in 2012.
Rinaldi found no Stamford audits filed with the state for 2013 and 2014.
From 2015 to 2020, the independent auditor was Blum Shapiro & Co., which reported repeated deficiencies in the tax collector’s office, the grants office, and pension fund accounting. The firm reported missing documentation, and that tax collections did not reconcile with amounts recorded.
In 2021, the auditor was CliftonLarsonAllen, which reported the same problems in the tax collector’s office as Blum Shapiro.
Now the 2022 audit is a year late.
So far RSM has reported that the city, which this year collected nearly $650 million in taxes, was not regularly reconciling that revenue with payouts on bills.
“It’s like writing checks without looking at your statement to see what the balance is. If you pay out more than you have, your checks bounce,” Rinaldi said. “The city has not been doing the basic stuff.”
Controller David Yanik and former Director of Administration Sandy Dennies have blamed the troubles on the departures of key employees in the controller’s office; a switch from old HTE computer software to Oracle; and mistakes by a contractor that set up the new computer system.
Barnes replaced Dennies in September.
During the finance board’s December meeting, Barnes said he expects to submit the audit next month, present RSM’s comments, and discuss “corrective actions” to be undertaken by the departments he oversees.
Finance board member J.R. McMullen said the city is on a tricky path, given that the 2023 audit is due in less than two weeks.
“So we’re a year late on the 2022 audit, and we’ll probably be at least six months late on the 2023 audit,” McMullen said. “Is there any hope we will be caught up by 2024?”
Barnes said he expects to have the 2023 audit done by March because the city needs to borrow money after that, and “it would be challenging to borrow money without the audit in place.”
He expects the 2024 audit to be on time, Barnes said.
Online records filed with the Connecticut Office of Policy & Management indicate that, besides Stamford, six other municipalities have not filed their 2022 audits, including Danbury.
Though the state requires all 169 municipalities to file the annual audits, there is no penalty if they don’t, OPM spokesman Chris Collibee said.
“That’s not to say that the credit rating agencies don’t have separate criteria,” Collibee said. “They will flag it.”
The Connecticut Office of Finance flagged it, too. In September
an executive officer from that agency wrote a letter to Stamford Mayor Caroline Simmons on behalf of the Municipal Finance Advisory Commission, which works with cities and towns to improve financial practices. “The lack of timely audit reports is a serious matter and potentially a warning sign of financial challenges,” wrote the officer, Kimberly Kennison.
“It was a stern letter,” Rinaldi said. “Still, I think the state should have penalties, because the audit attests to the financial position of the city for that year. The Board of Finance has made sure that the city’s finances are good. But without that audit report, you can’t prove it.”
Stamford’s longstanding issues in the departments that handle financing have to be corrected, Rinaldi said. She pointed to a problem that arose during the push to complete the 2022 audit – RSM is not getting paid.
“They haven’t been paid in months. I don’t understand how that’s happening,” Rinaldi said. “How do we expect them to help us if we aren’t paying them?”
The city signed a $345,000 contract with RSM to conduct the audit. Because it is so far overdue, the amount the city owes RSM has increased significantly. Rinaldi said it’s an additional $200,000 to $300,000.
“The Board of Finance pays for the audit from our budget. But we don’t have that money in our budget anymore because we expended it,” Rinaldi said. “So the city is going to have to find the $300,000 or so to pay RSM for the extra work.”
Barnes acknowledged that during the meeting.
“We may have to find other funding sources to make sure we can pay RSM,” Barnes said.
Finishing the 2022 audit has proven to be such an ordeal that Barnes’ office hired CliftonLarsonAllen to help RSM. CliftonLarsonAllen’s $75,000 fee was transferred to the controller’s budget from sister departments in the Office of Administration.