Comptroller will discuss plans to close $3 million deficit with Town Board on Thursday

The Southampton Town Board will discuss plans to reconcile a recently discovered $3 million deficit in the municipality’s enterprise fund for beaches, and older capital fund deficits now estimated at $5 million, at a work session scheduled for today, Thursday, April 22.

Earlier this week, Town Supervisor Anna Throne-Holst and Town Comptroller Tamara Wright declined to discuss how they plan to address the deficits, the most recent of which was just unearthed in the enterprise fund. Ms. Wright said she could not speak about the enterprise fund in advance of informing the Town Board on Thursday, and Jen Garvey, Ms. Throne-Holst’s spokeswoman, said the supervisor would most likely reserve comment until after the work session. Ms. Throne-Holst did not return a call before deadline.

Nawrocki Smith LLP, the town’s independent auditor, and Sheehan and Company, the town’s accounting company, are also expected to attend the work session, according to a press release issued by Ms. Throne-Holst’s office.

The town comptroller’s office discovered the approximately $3 million deficit, which is connected to a capital project at Tiana Beach in Hampton Bays, in the enterprise fund for beaches. The Town Board had directed the office to look into the fund in December, the press release states. Ms. Wright said the enterprise funds were long thought to have been riddled with incorrect accounting procedures.

Surpluses in other enterprise funds may end up offsetting the $3 million deficit in the beach improvement fund, Ms. Wright explained last week. She declined at the time to offer details on the deficits and surpluses that could exist, adding that she was hopeful that the deficit in the enterprise fund could end up being only $2 million.

Ms. Wright has explained that the deficit was caused by $2.1 million never being moved from the town’s capital fund to the beach enterprise fund sometime between 2004 and 2007. Also contributing to the deficit was a decision to move $900,000 to the enterprise fund from the capital fund. That money now has to be returned, Ms. Wright explained last week.

She also said that Albrecht, Viggiano, Zureck and Company, P.C. (AVZ) did the accounting on the budget entry associated with the deficit. AVZ previously served as the town’s auditor and also did some accounting work, Ms. Wright said.

Councilman Jim Malone, who is the Town Board’s liaison to the audit advisory committee, said this week that there are two ways to address the deficit in the beach enterprise fund: either transfer money now in the general fund back to the enterprise fund, or bill the work done at Tiana Beach under the general fund.

Mr. Malone, who noted that both options were discussed among advisory committee members, said he prefers the second option. He said that all of the town’s assets, including its transfer stations and beach pavilions, should be accounted for in the general fund. He also emphasized that committee members were quickly briefed on the enterprise fund deficit, and that more information will be shared on Thursday.

Southampton Town Parks and Recreation Department Supervisor Allyn Jackson said the Tiana Beach improvements included replacing 800 feet of derelict bulkheading, re-establishing a swimming and sailing area, and installing a drainage system for the parking lot, among other projects.

The capital fund deficit, created in part by failed transfers and appropriations, is estimated to sit at around $5 million, Ms. Wright has said at public meetings. Last year, when news of the financial crisis made headlines, the deficit was originally thought to be as high as $19 million.

The final numbers on the deficits in the enterprise and capital funds are expected to be disclosed Thursday.

At its regular meeting on Tuesday, April 27, the Town Board is expected to adopt the forensic audit of the capital fund completed by FTI Consulting in Manhattan, Ms. Wright said. The audit was completed in December and the board was waiting on the comptroller’s office to finish a report detailing how they have addressed issues identified in the forensic audit.

Town Board member Nancy Graboski said this week that she does not yet know the exact deficits in the capital and enterprise funds. She said that the audit committee, which she chairs, will discuss the numbers with representatives from the New York State Comptroller’s Office. Narwocki Smith LLP will also be present at the audit committee meeting, which is not open to the public, Ms. Graboski noted.

She explained that the audit committee is responsible for ensuring that all the town’s policies and procedures are in place and followed so that a financial crisis does not happen again.

“It is what it is,” the councilwoman said of the latest $3 million deficit. “We have to go forward the best we can.”