Federal auditors will examine Southampton Town's 2007 financial books

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Town Councilwoman Sally Pope is calling for a state audit. BRIAN BOSSETTA

Auditors from the Internal Revenue Service will set up shop in Southampton Town Hall on Tuesday to begin analyzing the town’s finances, though their piqued interest has nothing to do with the discrepancy with the town’s capital budget, according to Town Supervisor Linda Kabot.

Ms. Kabot said the federal audit, which is expected to require that auditors spend at least a week at Town Hall, will analyze the town’s 2007 finances. The supervisor said the audit will most likely turn up instances of employees filing both W-2 and 1099 tax return forms—which would violate federal law. In other words, some independent contractors may have also been getting paid as town employees.

According to a U.S. Department of Treasury letter sent to the town, dated February 5, some of the records and books the town must have available for review are: all payroll journals and records, charts of accounts, general ledgers, cash disbursement journals, W-2 forms and an explanation for the issuing of the 1099s, and copies of contracts with each independent contractor used in 2007. Additionally, the auditors want a list of all vehicles owned by the town with a list of all employees assigned to those vehicles, a list of fringe benefits to all employees and a vendor listing file with a summary of payments received by those vendors in 2007.

“We’re getting what they call a random audit, but I believe the 1099 scrutiny is linked back to the town vehicle policy,” Ms. Kabot said. “But, let them look.”

Though she was told the town was “selected at random” for the audit, Ms. Kabot said she suspected that the extra scrutiny was prompted by the Town Board’s decision in December 2007 to tighten its controls over the utilization of town-owned vehicles after allegations of abuse surfaced. Under the revised policy, some two dozen town officials are no longer permitted to take home their town-issued vehicles after work.

In another auditing matter, the Town Board on Tuesday unanimously adopted a resolution first proposed by Town Councilwoman Sally Pope calling for a state audit of the municipality’s financial books. Auditors from the New York State Comptroller’s office will now be brought in to conduct a “risk analysis” of the town’s finances, which is the first step in the state’s auditing process.

“I want them to look into the $7.5 million deficit in our operational budget, and the $19 million discrepancy in the capital budget,” Ms. Pope said this week.

Ms. Kabot has insisted there is only a $250,000 discrepancy in the capital budget, though Town Board members have said they are still waiting for the results of an internal review of town records to prove that.

According to Ms. Pope, the state will first perform a risk analysis to determine if the municipality is eligible for a complete state accounting, which is a free service for the taxpayers of the town being audited. The first-term councilwoman said she began calling for a state audit during her campaign and wants officials in Albany to look at the town’s operational and capital books.

The state usually conducts an audit of a town’s financial records when the risk analysis uncovers fraud, mismanagement, or inadequate record keeping, Ms. Pope said.

“You can certainly make the case for mismanagement and bad record keeping,” she said.

Ms. Pope said she chose to go ahead with her resolution after speaking with representatives from the state comptroller’s office during the annual Association of Towns of the State of New York Conference last week in Manhattan. During the two-day event, Ms. Pope attended budget and auditing workshops, she said.

“I was able to listen to the governor and Senator [Charles] Schumer, and I had the chance to speak with elected officials from other towns,” Ms. Pope said. “It was a great learning experience.”

The board also adopted another resolution introduced by Ms. Pope that directs the supervisor’s office to provide department heads with monthly budget reports that show actual spending for a given month versus what is allocated in the budget.

“If someone wants to know what we are spending on roads that month, I want them to be able to walk in and see that report,” she said. She added that the town’s current fiscal condition is having a negative effect on the public’s trust. “I want the auditors to come in and question the numbers, not just accept them,” she said.