Purpose of Audit

The purpose of our audit was to review the City’s financial management system for the period January 1, 2010, through February 29, 2012.

Background

The City of Mechanicville is located in Saratoga County and has approximately 5,200 residents. The City government is organized under a City Council, which comprises five elected Commissioners, one of whom is the Mayor. The City finances these services mainly through real property taxes, State aid, and fees charged to residents.

Key Findings

• Due to the poor condition of the City’s financial records and reports, City officials were unable to determine the City’s true financial condition. The extremely poor state of the City’s financial records precluded a determination of the City’s true financial condition.
• The Council failed to establish the policies and internal control procedures needed to implement, manage and monitor the City’s financial management system. Even after years of unfiled financial reports, lack of information about current financial condition and un-reconciled bank accounts, the Council did not take action to correct the City’s financial information. Furthermore, the Council did not review and act upon what financial information was provided such as quarterly operating statements showing over expended appropriation accounts.
• The Commissioner has proposed, and the Council has adopted, unrealistic budgets over the past several years. Because of the Council’s failure to fulfill its oversight responsibilities over the course of several years, City finances could be under fiscal stress and the Council would not know it.

Key Recommendations

• Develop a plan to correct the financial recordkeeping deficiencies and determine the correct balances in the accounting records. Ensure the City’s accounting records are accurate, maintained timely, and contain sufficient detail to support cash and other general ledger balances. File the City’s AUD with OSC by May 1 each year. On a monthly basis, reconcile bank statements to cash balances per the accounting records, and post all transactions to the records. Review monthly reports and take appropriate action to avoid additional financial problems.
• Develop a formal Budget Policy that sets forth procedures to guide City officials in preparing a reasonable budget with realistic estimates.
• Adopt budgets that are structurally balanced and that contain realistic estimates. Develop short-term and long-term steps to alleviate the apparent fiscal stress in certain City funds.