Audit a ‘Very Painful Lesson for’ Stamford, as Cost Nears $1 Million

Stamford Government Center (CT Examiner)

Share

TwitterFacebookCopy LinkPrintEmail

STAMFORD – The city’s state-mandated annual audit for fiscal 2022 was supposed to cost $345,000.

But the audit, which was a year late, now could cost $965,000.

Director of Administration Ben Barnes appeared before the Board of Finance at its February meeting to request the difference. 

The city had anticipated that its outside auditor would spend 2,100 hours compiling the report, Barnes told the board. But the firm, RSM, spent 5,773 hours.

The 2022 audit was botched beyond belief, finance board members said.

Taxpayers are left holding the bag, said Mary Lou Rinaldi, the board’s vice chair.

“This is a very painful lesson for the city,” Rinaldi said. “If we learn nothing else from this, we have to look at the competence of the city employees who are responsible for doing this work. The city was just not audit ready. There were problems with the data city employees were providing to the auditor.”

The chair, Richard Freedman, called it unbelievable. Independent auditors, who towns must hire by state law to produce Annual Comprehensive Financial Reports, typically need about 2,000 hours to complete Stamford’s report, Freedman said. But, because of poor financial reporting in city departments, this one took far more than that number of hours.

“And we’re paying very expensive people,’ Freedman said. “We agreed to the rate, and I’m sure they’re worth what they bill, but we’re paying them for work that should not have been done by expensive people billing by the hour. It should have been done by city employees who are on the payroll. This is, ultimately, the price of incompetence. And it’s shocking.”

Board member Geoff Alswanger said he’s anticipating a discussion about Barnes’ plans for the departments under his supervision. Barnes took the post in September, after the audit mess began and his predecessor retired. Longtime city Controller David Yanik has announced that he will retire March 1. 

“I look forward to talking with Director Barnes about the wholesale reorganization of this group, because we need to up-skill and do things very differently,” Alswanger said.

“Me, too,” Barnes replied.

The city, however, faces an audit logjam.

The fiscal 2022 audit was due in December 2022. But it wasn’t finished until December 2023, the same month the fiscal 2023 audit was due. 

Barnes said he hopes to have the 2023 audit done by June 30, 

and expects to have the 2024 audit complete by the time it is due this coming December.

The city’s contract with RSM includes producing the 2023 and 2024 audits.

Barnes said that, so far, RSM has billed his office $762,250 for the 2022 audit, or $417,250 more than the $345,000 that was contracted. 

Barnes appeared before the board to request the $417,250 shortfall. But he asked for more than that.

Barnes said he needs another $200,000 to cover still more billable hours the city may owe RSM for the 2022 audit. He and RSM are in the middle of negotiating that amount, Barnes said. If it’s determined that the city owes RSM the full $200,000, the total bill for the 2022 audit will be just under $1 million.

There are other wrinkles.

Barnes told the finance board he doesn’t have all the money needed to pay RSM for the 2023 audit, which is underway but already two months late. He and his staff have identified most of the shortfall in department accounts from which money can be transferred, he said.

“I’m a little concerned that if we have to accept additional billings of any significant quantity, it may become more difficult” to pay for the 2023 audit, Barnes said. “But we are comfortable that we have already identified $150,000 … and as we get further into the year, we may be able to identify” further transfers.

He thinks he will have enough money in the coming fiscal year, which begins July 1, to cover the cost of the 2024 audit, Barnes said. He expects to conduct that audit between August and December, when it is due.

So, from December 2023 to December 2024, “we will be delivering three audits in one calendar year,” Barnes said.

It all began with the massive delay in producing the 2022 audit.

The retiring controller, Yanik, and the former director of administration, Sandy Dennies, have blamed it on the departures of key employees; a switch from old HTE computer software to Oracle; and mistakes by a contractor that set up the new computer system. 

Late audits, however, had been happening for a dozen years, and independent firms hired to conduct them have reported that city departments did not have the needed information prepared because of sloppy financial practices.

RSM auditors wrote in their 2022 report that the city “does not have accurate financial information upon which to base management decisions,” and that “lack of proper reporting” jeopardizes state and federal grant awards.

According to RSM, city employees were not following financial reporting procedures; failed to maintain financial information; failed to file monthly or quarterly reports; and showed a lack of understanding of accounting and reporting practices.

The city, which most recently collected nearly $650 million in taxes, was not regularly reconciling that revenue with payouts on its bills, RSM reported.

Barnes has said that failure to file an annual audit can impede a city’s ability to borrow money.


Angela Carella

For 36 years prior to joining the Connecticut Examiner, Angela Carella was a beat reporter, investigative reporter, editor and columnist for the Stamford Advocate. Carella reports on Stamford and Fairfield County. T: 203 722 6811.

a.carella@ctexaminer.com