audit

Being issued a “clean bill of health” hardly makes for an eye-catching headline when it comes to a city audit. However, city leaders are eager to take some of that good news and reinvest it. 

After presenting the city’s 2022-23 audit Monday evening, Erica Handley, Director at Drescher & Malecki, concluded that city assets and revenues exceeded liabilities by $17, 410,127, with more than $41 million of net investment in capital assets, $13.7 million of restricted funds for specific purposes and another $16.6 million for unrestricted, or unspecified spending funds.

“So at the end of 2023, the general fund total fund balance reached $11.7 million. Again, that increase is about $2.3 million from the prior year,” Handley said during council’s conference session at City Hall. “Overall observations, we do plan to move forward issuing an unmodified opinion, that clean opinion, you did not give any reportable findings, no material weaknesses, no significant deficiencies. Considering that compliance audit we did this year, a whole bunch of more testing, no compliance findings. So nothing to report there.”

This year’s general audit also included a compliance audit triggered by the city’s spending of more than $750,000 of federal funds, she said. 

“We act as an agent of the federal government and test those federal funds for certain compliance requirements,” Handley said. “So the program that we tested was the highway planning program. And we perform a series of tests as dictated to us by the federal government to ensure that those federal expenditures are allowable, that they are in a timely fashion, and the reporting is done correctly. 

“We had no issues with that testing that we did this year,” she said. “But that just is something that is new this year as compared to last year.”

After socking away more than $3.8 million into the city’s unassigned fund balance — a move based on the recommended policy to increase last year’s amount by $768,000 — City Manager Rachael Tabelski has recommended using remaining reserve funds of $2.1 million for future expenses of several city departments.

“The city ended the fiscal year 2022-23 in a good position to move on assignments on balance to reserve accounts for future one-time purchases. I have discussed the following proposals with the audit committee who concur that we have the ability to reserve $2.1 million in funding and still maintain a 20 percent unassigned fund balance, which was approximately $3.8 million,” she said. “While we do have, and you all know, a plethora of competing interests across the city, from parks, trees, recreational facilities, vehicles, etc. I've reviewed the capital and asset plans for each department and the requests that we have received from council and citizens, and recommend the following funding reserve accounts.”

Police Department Reserve: Put $100,000  to replace patrol and detective vehicles on a yearly basis based on a fleet replacement schedule. By allocating this money to the reserve, the city will be able to continue to purchase vehicles and keep up with the rotation, she said, with the oldest patrol car now being 2017 and the oldest detective car a 2009.

City Council committed $120,000 of video lottery terminal funds for two new vehicles in August 2023 for the Neighborhood Enforcement Team.

For the Fire Department Reserve, put $300,000 to make debt payments toward a newly purchased $800,000 pump engine, which was  paid for with a $100,000 USDA grant, and a loan for $665,000, plus $37,000 in reserve funds. 

Council also approved $80,000 of reserve funds to purchase a one-ton pickup chassis or replace a 2012 vehicle for medical and other responses, with an estimated balance of $680,420. 

The reserve money can be used to purchase the pumper, make debt payments or for other needs, including additional police and fire radios at a cost of $375,000, and review the longevity of the ladder truck. 

Put $400,000 into DPW for the equipment reserve plan, which has allowed the city to replace more than 22 pieces of public work equipment valued at $3.6 million and growing to date.

The ice rink would get $150,000 to go toward the purchase of an ice chiller, which has been in need of replacement for the last two years. The city spent ore than $90,000 in refrigerant and other maintenance costs in 2021 and 2022. The price tag for a new chiller is $2.5 million.

Facilities Reserves would get $400,000 as part of the city’s Strategic Plan for the Bureau of Maintenance, fire station and City Centre roof, some having been completed, and other work in progress. This money would also fatten the reserve balance for the future police station, which is to cost an estimated $15.5 million. 

Future sidewalks that are part of the city’s Complete Street Program would get $300,000 to allow for another 5,000 linear feet of sidewalk and handicap-accessible ramps.

Compensated absences are slated for $100,000 to deal with three pending retirements and one-time payouts and $100,000 for retirement reserves for these future expenses.

The city’s municipal parking lots would get $250,000 to address improvements of worn surfaces, including the Alva Place lot that will be paved when the new police facility is constructed, and BOM parking lot will be addressed. 

Over the past decade, the city has “diligently built reserve funds to complete projects and control general fund spending,” Tabelski said in a memo to council. The reserves are built to fund capital projects, purchase trucks, vehicles, infrastructure and facility improvements and cover overages in health and workers’ compensation costs. 

“Building the reserve fund now is extremely important as the city prepares to bond for a new police facility,” she said. 

Although there were no “reportable findings” from the city’s 2021-22 audit, that doesn’t mean the municipality is out of reach from a dangerous situation, Matt Montalbo says.

Cyber security — or a lack thereof — is a “pretty substantial” item for the city’s checklist, Montalbo said during an audit presentation Monday at City Hall.

The world is rife with Internet scams, and no one is immune, he said.

“I want to highlight some pretty substantial challenges that governments are seeing right now, one being related to cyber security risks and the risks of being subjected to a cyber attack,” he said. "So A lot of the associations related to government entities … they partnered together and put out a cybersecurity primer back in February of 2022, just to highlight how significant government entities are being targeted in cyber attacks. They put out a lot of statistics just to educate those charged with governance.

“So we have that in our management letter, as it’s just an additional precaution to look at cyber security risks, and almost kind of do a mock scenario where, if you were subjected to a cyber attack, what processes do you have in place? You know, how prepared are we because, really, the statistics are pretty staggering,” he said. “It’s not a matter of if it's going to happen, it's a matter of when, so be as prepared as possible is what we would recommend.”

That is perhaps no startling news, as cyber attacks have been fairly ubiquitous to our high-tech times.

Still, Montalbo, a certified public accountant with the city’s new auditing company Drescher & Malecki, strongly suggested that the city needs to assess its own cyber risks, related processes, and what measures may need to be taken to bolster the cyber fence to keep predators out.

Batavia may be a small city, but according to governing.com, the amount of data that municipalities deal with has grown exponentially, but smaller entities often operate on a shoestring budget, meaning they rarely have dedicated cybersecurity experts and instead rely on their IT team to ensure security. Not having and investing the required funds to prevent cyber attacks can often leave local municipalities more vulnerable, the site states.

City Manager Rachael Tabelski was not surprised by the warning and auditor’s findings, she said. The city has an ongoing process that includes a system in place for safeguards against cyber crimes, she said.

“The City has NYS training in place for cyber security for employees, and works hard to remain diligent to constant email threats of phishing and other scams,” she said to The Batavian Tuesday. “We work with our independent IT consultant, Alternative Information Systems, for a variety of security functions and monitoring to help keep city assets safe. We are always looking to add new security measures to our IT systems to better protect the city.”

A second area for caution was the influx of pandemic-related monies being given to municipalities, especially “a lot through the stimulus plans out there,” he said.

“So the American Rescue Plan, the Cares Act, there are a lot of new opportunities, but with that comes a lot of challenges, in not only understanding the compliance requirements for these funds, but also tracking and monitoring the statements,” he said. “Just looking at how you're set up to do that, whether you have a grant administration function or the ability to monitor those new fundings as well as the current funding going on.”

City Council previously agreed to add the position of a grant administrator, and the city is in progress with seeking candidates for the job.

Montalbo, who was with senior accountant Erica Handley, shared the city’s financial picture, which included a $1.3 million fund balance increase. For once, the word COVID carried a positive connotation.

“Your fund balance went from about $808 million at this point in 2021 to $9.4 million at the end of 2022. You did have, and we've been seeing these trends across the state, your sales tax come in a little bit higher than anticipated. We saw a little bit of the economic recovery after the COVID years,” he said. “So that bump is pretty consistent with the trends we're seeing statewide. You also were able to have some budgetary savings within your public safety and transportation areas … So that was the main reason for the increase, and your total fund balance being that $9.4 million.”

Photo: New city auditors Matt Montalbo and Erica Handley of Drescher & Malecki present the city's 2021-22 audit report during Monday's conference session at City Hall. Photo by Joanne Beck.

Freed Maxick CPAs representative Christian Townes is expected to review the city school district’s audit during a presentation to the Board of Education this week.

The board’s meeting is set for 6 p.m. Thursday at Batavia High School’s library, 260 State St., Batavia. 

The board is slated to accept and approve the final audited report, basic financial statements, and audited extra classroom activity financial statements ending June 30, 2021. 

Time is allotted for public comments before the audit and several other presentations from district officials: Trisha Finnigan with an operations update; Scott Rozanski with a financial summary report; Kylie Tatarka with a student ex-officio report; and Scott Bischoping with an interim superintendent’s update.

Other orders of business include votes to approve several personnel-related retirements, resignations, leaves of absence, transfers, and new hires; a Memorandum of Agreement between the Batavia Custodial Association and the city school district; and an agreement between the district and Otis Elevator Company for the repair of the middle school elevator.

An inter-municipal agreement between Livonia Central School District and the Batavia district for shared remote/digital learning; and a revised agreement with Mary Cariola Children’s Center will also be up for a vote. 

The board is also expected to discuss and vote on a proposal from Campus Construction Management to conduct a feasibility study on the potential renovation costs of Batavia Middle School. The proposed cost is $3,875 and would include the impact a renovation would have on other district buildings. 

Board meetings may also be viewed online at:  https://www.youtube.com/channel/UC8JI99xyBJt1sGdRzmCW2Kg

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