Audit shows general fund not balanced

BFTownHall

BEACON FALLS — Auditors reviewing the town’s finances from the 2012-13 fiscal year have found that the general fund is out of balance by about $800,000.

“With respect to the general fund, we do have some significant issues that we’re working towards addressing. One of them is the fact that the opening trial balance did not balance by approximately $560,000. And all the prior auditor’s adjustments were not recorded. That obviously has an impact on the ending balance,” Mahoney Sable & Company Senior Manager Mike VanDeventer told the Board of Finance during its meeting earlier this month.

The town hired the Glastonbury-based Mahoney Sable & Company to perform the town’s annual audit this year. This is the first time the town has worked with Mahoney & Sable.

VanDeventer said the town is not short the money, but the general ledger does not balance.

In addition to the $560,000, VanDeventer said the expenditure control within the general ledger is off by approximately $200,000. The liability accounts also do not balance by about $38,000.

“We haven’t identified what’s causing that difference, but that is obviously an issue that needs to be solved before we can move forward with the audit,” VanDeventer said.

VanDeventer said these mistakes could have happened because the previous auditor used one-sided entries, which means the auditor recorded the money the town spent but not the money it received.

First Selectman Christopher Bielik said the previous financial software the town was using until this fiscal year was one of the reasons for the current imbalance.

“The new system will not allow one-sided entries the way the old system did and should cut back on the amounts of mistakes that are made,” Bielik said.

Mike Zemaitis, the town’s previous auditor, had informed the town last year that the balances did not line up, Bielik said. However, the town was not informed of the extent of the problem.

VanDeventer explained the numbers are off by so much because the issues have been compounded over the years. Any problem with the general fund will flow to the next year, if it is not corrected.

The board questioned why these mistakes weren’t picked up earlier since the errors were cumulative over the years.

“It could be as simple as [the previous auditor] not recording the adjustments in prior years, or recording a half of the adjustments,” VanDeventer said.

Board of Finance Vice Chairman Jack Levine asked when the last time the bank ledger was reconciled to the general fund.

VanDeventer said it hadn’t been reconciled in the time he has seen.

Levine expressed concerns there could be the potential for theft since the figures don’t add up.

“If you can’t balance the general fund, and your trial balance is off $560,000, how do we know that money hasn’t been taken? How do we know that,” Levine asked.

VanDeventer said there have been no indications of illegal activities in the audit so far.

“Obviously the risk is increased to the extent that you don’t have those reconciliation procedures in place. We have not identified any wrong doing in connection with our testing to this point. But certainly it lends itself to the risk of fraud,” VanDeventer said.

Levine was also concerned about how the town could tell that it has not overspent its legal budget since none of the reports are correct.

“How can anybody manage this because these reports don’t add up,” Levine asked.

Levine also questioned the long-term implications of the budget being unbalanced. He said it won’t be good for the town if the books are unbalanced when it tries to acquire new bonds in March.

VanDeventer said he is trying to finish the audit quickly and make sure everything measures up correctly for the town. He hoped to have the audit finished by the beginning of February and present a finished report to the board on Feb. 11.

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