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May 6, 2008 5:47 AMPublication: The East Hampton Press

East Hampton still unclear on financial future

May 6, 2008 5:47 AM

A week after members of the Town Board spent an afternoon going over the town’s fiscal situation with auditors—without Supervisor Bill McGintee, who had a meeting elsewhere—some board members say they are still unsure of the extent of the town’s financial crisis and how it can be addressed in future budgets.

With the preliminary results of an audit of the town’s finances in 2007 showing the deficit climbing above $8 million, board members say they are now waiting for Supervisor McGintee to bring them suggestions to ensure the deficit does not continue to grow through 2008.

Mr. McGintee outlined some spending cuts that he would like to see made in the 2008 budget at the board’s work session on Tuesday. He recommended some $750,000 in cuts from the general fund.

But at least one board member said this week the town should seek professional financial guidance. Councilwoman Pat Mansir proposed on Tuesday that the town hire a new team of municipal finance specialists to help the board grasp exactly what the monetary shortfall is and how it might be remedied, she said this week. The public, she added, has developed a “general distrust” of the town’s budget office and its auditing firm, Albrecht, Viggiano, Zureck and Company, or AVZ, and fresh faces should be brought in.

“I think it is unfair to the public to have the people who let us get into this problem guiding our understanding of it,” Ms. Mansir said of AVZ and the budget office in an interview on Monday.

She said she has a list of five legal firms that specialize in municipal finance and wanted to set up interviews with them. “I think we need to ask them what they can do for us in terms of analysis and recommendations for fixing this.”

Other board members, including Supervisor Bill McGintee, said that the town should rely on AVZ and auditors from the state comptroller’s office, who are in Town Hall, in the midst of a review of the town’s finances.

“I think the state auditors are going to give us the information and guidance that we need,” Councilman Pete Hammerle said on Monday. “I don’t think we need to go hiring anyone—spending more money.”

On Tuesday, Councilman Hammerle said he was heartened by some of Supervisor McGintee’s suggestions for spending cuts that he proposed on Tuesday (see sidebar). Mr. Hammerle reiterated his desire to see the Town Board try to tackle the problem on its own.

“We do have a plan of attack,” Mr. Hammerle said. “I am confident we can do it.

Councilman Brad Loewen agreed.

“The people out there cost a lot,” he said. “Sometimes the better deal is in-house.”

The state auditors expect to submit their report by the end of the year, Supervisor McGintee said, but Ms. Mansir said that is too long to wait to address a problem that she feels too many in Town Hall still don’t fully understand.

“Even with the numbers in front of us, I still found it complicated,” Ms. Mansir said on Monday. “There’s so many numbers out there, I’m still not convinced that the [deficit] is $8.5 million. I heard the number $12 million and the number $9 million in that meeting and then I went to them afterward and they told me $10 million.”

Accountants Tom Ruggerio and Stephen Antaki, of AVZ, met with the board last Tuesday, April 30, at the request of Councilwoman Julia Prince. Going over the 2007 audit’s preliminary results, the accountants told the board that employee benefit costs, mostly medical, were more than $4 million under-funded in the budget and that led to vast overspending.

The AVZ accountants said the shortfall appears to have been caused—at least in part—by a misunderstanding among board members during the budget preparation process as to exactly how much they needed to cover benefits in 2007.

“Everything we saw made it look like we were going to be fine,” Mr. Hammerle said. “That certainly has to be part of the discussion, looking at the budget coming up. I think we’re better funded [in 2008] as compared to last year because we increased it by a couple million dollars.”

Supervisor McGintee said that, in addition to the mistakes in the funding of benefits, skyrocketing medical costs have made it difficult to keep up. The town’s self-insurance policy leaves it exposed to higher costs in years when more employees suffer medical problems, he added.

He has proposed switching town employees to an insurance plan that he argues will save the town more than $1.5 million a year in medical costs. The employees union has said such a switch would violate their contract.

Accounting mistakes in the budget office and a long-standing lack of controls on purchasing practices, Mr. Ruggerio told board members last week, have led to other budget overruns that exacerbated the problem of overspending the benefits account. He pointed to purchase orders being given out and checks being cut even when the town’s accounting system showed that the specific fund the purchase was coming from did not have sufficient funds available.

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