Saturday, August 31, 2013

Supervisor Langley's Advertiser Letter

East Greenbush’s Finances Remain Highly Stressed

Since taking office in 2012, I have attempted to lead the town board majority toward embracing an attitude of fiscal austerity where the town’s budget is concerned, especially in the area of spending.  I’ve encouraged a reduction in staffing, where appropriate, and have refused to backfill several positions in the department of public works which, alone, would have saved the town almost a quarter of a million dollars a year; however, as the expression goes, “you can lead a mule to water, but you can’t make it drink.”

These repeated savings could have been applied toward reducing the town’s inter-fund debt of over $2 million, which was incurred prior to my administration.  If applied toward the debt, which resulted from faulty fiscal gimmicks years ago, it could have been paid off in approximately half the time that it will now take.

Although I have done my level best to cooperate with the town board majority, my advice on fiscal prudence has apparently fallen on deaf ears as evidenced by the recent reports from numerous fiscal analysts who continue to warn the public of the precarious state of the town’s finances.  This includes the town’s current junk-bond status and the danger of bankruptcy.

Indeed, the failed fiscal practices of the past persist by the town board majority which has controlled our budgets for nearly three years.  This was underscored by the town’s recent financial audit by the State Comptroller, which found East Greenbush to be significantly stressed.

Currently, I am pushing hard to complete the independent, outside audit that I initiated last year.  Unfortunately, because of the poor condition of the town’s fiscal records going back to 2009, the town has had to hire another accounting firm to re-establish correct financial information so that the auditing firm can complete its work for the town.

The residents of East Greenbush deserve the truth about their town’s finances.  The willingness of the board majority to distort the true picture is a prime example of how East Greenbush got itself into such dire financial straights in the first place.

~Keith A. Langley, East Greenbush Town Supervisor

Sunday, August 18, 2013

Some History on "Detroit East"

An Anonymous Blogger has been doing some homework on the Town's financial condition and has submitted the following for the edification of the Town's pocketbooks.  Everybody REALLY needs to put their thinking caps on and read this: 

"Maybe the recent media reports about East Greenbush following Detroit into bankruptcy have you wondering, "How could this be happening? Why haven't I heard anything before now?" Truth be told, this situation did not emerge from a vacuum, nor should you be surprised. What we're seeing is merely the bitter end to many years of foolish money games the town has played with our tax dollars. 

Would you believe that the accounting firm we contracted with in April of 2011 still can't come up with a successful audit of our 2010 books? Would you believe that we recently had to contract with the Town's old accounting firm to help the new accounting firm get a handle on what happened three years ago? Would you believe that the cost for this audit is now up to more than $70,000 between the two firms? Why? Because, as documented by the State Comptroller's audit, a private UHY LLP accounting audit, a Moody's Investor Services bond rating report, a Standard and Poor's bond rating report, and FAMI's (Fiscal Advisers and Marketing, Inc.) report...the people we pay to run our town have been squandering the money on themselves, their friends, and on bankrupt or non-existent policies. See, the game is rigged. The left wing of Town politics is in bed with Albany and the State; the right wing is in bed with Troy and the County. Unfortunately, the County is also in bed with the State. That leaves East Greenbush taxpayers sleeping on the floor because the politicians know that you probably aren't going to make a big deal about it. Or are you? See, we deserve better. We're a nice town and a nice place to live. What follows are merely a few telling snippets of truth about who we are, as seen by professional outsiders and unprofessional insiders. In all honesty, there seem to be precious few "good guys" in any of this. But you decide...

Town Board Resolution 31-2010, dated 1/13/10, really got the ball rolling after a series of politically damaging and embarrassing financial revelations and rumors. The resolution authorized Scott, Stackrow P.C. to perform a 2009 audit of the Town's books and put all this rumor-mongering behind us.  All council members voted yes. Scott, Stackrow subsequently must have voted NO on the project, however, because it wasn't until June that we suckered another firm into trying to clean up our financial mess. 

We got off to another false start with Resolution 40-2010, February 2010. Too bad it was tabled because it would have contracted BST Valuation and Litigation Advisers, LLC to prepare our 2009 AUD, or Annual Update Document, and begin phase 1 of a forensic audit to determine exactly where our money was going. It never happened. The Town Board was afraid of what would happen if you knew. It should not have been tabled, especially since February 2010 would be the last meeting of a full 5-member Town Board for the remainder of the year. By the following month a Democrat "double-dipper" lawsuit had prevailed, and council members Cristo and Danaher were no longer able to serve on the Town Board.  Resolution 51-2010 that same night authorized BST to prepare just the AUD, with no forensic audit involved. In other words, "Tell the State what we have to under the law, but keep the truth under wraps." We just reported a bunch of numbers and hoped for the best. We're still paying for that failed hope. See OSC's audit results below.

Also in early 2010, after having our bond rating fall into "junk bond" status, the Town engaged Fiscal Advisers and Marketing, Inc., a private financial advisement company, to give us a snapshot of where we'd been, where we are, and where we need to be. As part of their background information they included the Moody's downgrade report, pointing in particular to a ridiculous statement we made to the Moody's analysts: "The most concerning factor for the Moody's analysts was the Town's absence of a plan to stabilize operations... The Town stated that its only plan was to 'wait for the economy to turn around.'" That's the best we could come up with? 
 Our budgets- pitiful: "When comparing the 2008 budget to the actual results, we found that the Town was over $808,000 off in the budget projections. Revenues came in $178,000 below budget and expenditures came in $630,000 above budget. The result is that the General Fund deficit doubled to $1.68 million." Close enough for government work, yes? "The Town must reverse the damage that has been done to General Fund operations, and the Town's creditworthiness." Their first recommendation? Get an independent accounting firm to prepare our annual financial statements. Well, we tried that, but our records are so fouled that two and a half years later we're still waiting to see what happened, and we've had to bring in a second accounting firm to help us make sense of it all. And no, they're not doing it for free. We're paying about $30,000 more than expected for this independent audit. As for the nine other recommendations? I doubt we've managed to do two of them.

Resolution 99-2010 of May 2010's "rump board," brought by council member Matters and seconded by council member O'Brien, authorized the Town to contact the State Comptroller's office to get a legal opinion on the practice of questionable payments to town officials above and beyond their authorized salary (stipends, sick leave incentives, longevity pay). OSC did their review and condemned all three practices, but almost $200,000 of your money was effectively stolen by then. Sorry.

In June of 2010 we authorized an accounting firm, UHY LLP, to conduct an audit of the Town's 2009's financial statement. See the sickening results below.

Resolution 138-2010 of August, 2010 should perk your ears up. That's when the rump board voted to contract with a bankruptcy attorney! That's right, we consulted with special bankruptcy counsel Cristian Dribusch at $250/hour for a fee not to exceed a reasonable percentage of our "exposure." Seems our weenie was already showing back then, so the recent WNYT story is actually old news. Former Supervisor McCabe brought this bankruptcy-talk motion to the floor, and all three members of the rump board voted YES: let's talk about going bankrupt!

The September 2010 meeting saw the "Proud to be in East Greenbush" award go to Becker's Farm. If only Becker's could have planted the seed of fiscal responsibility in our Town Board members. Becker's is a successful, profitable business. We could learn how to run a town from them.

Resolution 161-2010, October 2010, saw the creation of an Ethics Board to update the Town's antiquated 1974 Ethics Law. The new Town Board carefully chose and empowered the members of the Ethics Board to craft an updated law, and almost three years later the Town Board continues to ignore the draft law presented to them, causing the chair of that Ethics Board to resign in protest last year. Are you beginning to see the pattern here?

Resolution 172-2010 in November, 2010 saw the newly constituted 5 member board accept the results of that UHY LLP audit and agree to make the report available to the public. Conveniently for some, this came just AFTER the elections so the voters didn't have a chance to know how bad things were: "Significant accounting and reconciliation entries are required to adjust the December 31, 2009 Annual Update Document... There is no systematic method of ensuring that timely and complete monthly reconciliation and closing procedures take place. Accounts receivable, accounts payable, compensated absences,  payroll and others were not reconciled on a systematic basis. This could result in significant errors in the financial records and financial statements  as well as allow irregularities, including fraud, to exist and continue without being identified promptly... No supervisory review of accounting transactions and month end reconciliations is performed.  This allows errors to exist within the books of account, and without subsequent correction they could continue to grow in magnitude." Are you beginning to see the pattern here?

Resolution 185-2010, December 2010, saw the new Board abolish the year old Finance Committee and replace it with a Citizens Fiscal Advisory Committee. The Finance Committee was peopled with people asking too many hard questions.  The CFAC was far more amenable to keeping things calm and quiet. Looming bankruptcy and bad financial reports didn't phase the CFAC nearly as much as they did the Finance Committee. Are you beginning to see the pattern here?

With Resolution 81-2011, April 2011, we contracted with Toski, Schaefer, and Co., P.C. to audit our books for 2010, 2011 and 2012. They are still not done- the books are either too mucked up to make sense of or too obviously corrupt for Toski to want to issue a report yet. Hence Resolution 67-2013, dated 5/15/13, authorized the Town to hire a Wojeski & Company (a firm that had handled our "audits" and annual State reports in the past) Certified Public Accountant at a 20% discounted rate of $104/hour to help Toski complete their 2010 audit. Not wanting to ruffle any feathers, both Councilperson Mangold and  Supervisor Langley went on record to state that none of these problems were a reflection on former comptroller Kate Bennett. Said Mr. Langley: "It is an accounting process that has to be worked through." See? It's nobody's fault! It's just a numbers thing! Are you beginning to see the pattern here?

In November 2012, conveniently just after the elections again, the State Comptroller's office released the results of its 1/1/10 - 10/31/11 town audit. The report was bleak:  "Due to the poor condition of the Town's records, we were unable to determine the exact amount of the fund deficit as of December 31, 2009. To get an estimate of the Town's financial position, we started with the unaudited fund deficit amounts for the general and highway funds that were reported to OSC on the 2009 AUD.... (In other words, things were so bad they didn't know where to start, so they started with what we sent to them for 2009, but we know from the private audit of 2009 that what we reported was garbage! It didn't even include our fuel usage, which added up to about $400,000 the previous year! ) ...Over the last several years, the Town has experienced significant signs of fiscal stress and deteriorating financial condition. The Town's accounting records were not accurate and, therefore, did not provide Town officials with the information necessary to evaluate the financial position of the Town's general and highway funds. Due to the poor condition of the Town's accounting records, Town officials could not determine with any degree of certainty what the Town's fund balances were at the end of the 2010 fiscal year or for most of 2011." The Comptroller and Supervisor were both singled out, by title, as responsible. Page 16 actually states that the town should consult legal counsel and recoup the $39,000 in illegal sick leave incentives and longevity payments made to the Receiver of Taxes and the former Supervisor. Councilman Malone recently went on television to state that it would not be cost effective to go after this money. 

So there you have it. This is why a respected economist and contributor to The Wall Street Journal pointed to East Greenbush as one of the top 20 municipalities in the nation he expects to see join Detroit in declaring bankruptcy. At least now you'll know why your house won't sell and your taxes are going up next year. Maybe you'll want to contact your Supervisor or other Town Board member to discuss these things? You're footing the bill, after all, again and again and again."

Saturday, August 17, 2013

The Ethics Code Issue

It's time for us to review the issues of the Ethics Code, in view of the fact that on Wednesday's Board Agenda is the replacement of the Ethics Board's Draft with a draft from Malone, Mangold and O'Brien.  Here's Jack Conway's letter of resignation from the Ethics Board from last October in response to the refusal of the Board majority to deal with the issue.  It's a great summary of the issues involved.

                                                                                                "October 26, 2012

Members of the Town Board of the Town of East Greenbush:

This letter is my resignation from the Town of East Greenbush’s Board of Ethics.  I appreciate the opportunity to have served on this board but I can no longer continue in this capacity.  It has been more than two years since I was appointed and more than sixteen months since the Board of Ethics recommended a new Code of Ethics but there is still no new Code in place and the Town Board now seems uninterested in pushing the matter to a reasonable conclusion.  I realize there is pressing town business but there has been ample time to address the question of ethics which is clearly not a priority for this board.

The Board of Ethics was empowered and I was appointed in October 2010.  By January 2011 we had a full board that immediately set to the task of producing a new Code of Ethics. The local law that established the original Code was passed in 1974 but a Board of Ethics was not constituted until 2010.  Meeting twice monthly in order to expedite what we considered to be an urgent matter, the Board of Ethics submitted a draft of a new Code to the Town Board in June 2011.  This draft was the result of careful study of other Codes and a series of rigorous deliberations by the five members of the Board of Ethics in public meetings that included valuable and substantive input from members of the public.  We felt, and I still feel, that the draft produced by the Board of Ethics offered a guide for ethical conduct of which residents of the town could be proud.  Critical aspects of this draft were rejected by the Town Board.

The primary purpose of a Code of Ethics is to ensure the public that every decision made by its municipal officials is made in the public interest and not for the benefit of an individual, family, private business, political party or other faction.  Above all else, it is supposed to eliminate both the appearance and reality of conflicts of interest.  The requirement for annual financial disclosure, strongly recommended by the Board of Ethics, was eliminated by the majority on the Town Board, an act that seriously undermined the Code’s ability to protect the public interest and monitor potential conflicts of interest.  More distressingly, the elimination of financial disclosure was done for the convenience of sitting members of the Town Board who chose to place their own interest above that of town residents.  The Town Board also objected to provisions that would govern the ability of employees to appear before the town after they leave municipal service, and certain provisions in the Nepotism section that affected the hiring of relatives of members of the Town Board.  Taken together, these changes transformed a draft Code that would protect the public interest into a guide for the kind of insider politics that a Code of Ethics is expected to prohibit.  In good conscience I cannot endorse or condone this approach.

There is a fundamental conflict of interest in having the Town Board write the Code of Ethics that is supposed to regulate the conduct of its own members.  The Association of Towns has published a series of suggestions for increasing the independence of municipal boards of ethics and I would encourage the town to adopt these.  They include passing a local law removing the requirement that one member of the Board of Ethics must be a municipal official, the establishment of a three-person independent panel that would select the members of the Board of Ethics, and the acceptance by the Town Board of the Code proposed by the Board of Ethics pending the opinion of the Town Attorney that all of its provision are legal and do not contradict provisions of State or local law.  Such an approach would assure the public that its interests are protected and will not be subverted for partisan political advantage.

I would like to thank Ginny O’Brien for appointing me to this board.  It was an honor and a privilege to serve with Jim Breig, Justine Spada, Joseph Slater and Dave Youmans.  Each of them has done a rigorous, professional job and continues to serve with distinction.  When you decide on my replacement, I will work with that person in any way that might help get them up to speed.  Every town needs a strong commitment to ensure the ethical conduct of elected and appointed municipal officials and I will continue to advocate for such a commitment here in East Greenbush.

                                                                                                John J. Conway, Ph.D

Tuesday, August 13, 2013

Halfmoon and East Greenbush

Take a look at the link to the Sunday TU story on Halfmoon.  It is particularly interesting as it relates to the consequences of an outdated Ethics Code.  And it's a wonderful vignette as to "how things work" in municipal politics:

And here's the link to the TU Ethics story:

And there's an important Editorial in the TU today which touches on disclosure and why it is important for public officials.  Here's the link: