EAGLE – A state audit of the town’s wind power revenues found several deficiencies, while simultaneously offering commendations.
The State Comptroller’s Office found the town has used the revenues reasonably. But the Town Board didn’t ensure the funds were properly reviewed for accuracy.
The oversight resulted in a $356,000 underpayment by Noble Environmental Power over a five-year period. The town quickly collected the shortfall, and is taking steps for better monitoring.
“Everything is open,” said Supervisor Joseph Kushner on Monday. “No money is missing. We’ve got the letter, our intent of correction, and we’re very pleased. (The audit) is what it is.”
The audit examined the town’s wind power planning and revenues from Jan. 1, 2013, to April 8, 2014. Its scope was then extended to Jan. 1, 2006, for background and perspective.
The audit found specifically that the board didn’t oversee Kushner adequately or ensure the town’s wind power revenues were properly reviewed. The board also didn’t audit Kushner’s records as required, leading them to be unaware of the $356,000 shortfall.
“Further, the board did not have a comprehensive multi-year financial and capital plan in place to adequately address wind power revenue use and the town’s long-term operational and capital needs,” the audit reads. “Finally, the board did not properly establish its reserve funds. As a result, town officials cannot ensure that the current and future use of wind power revenue will be in the best interest of town residents.”
Kushner said Monday that the current board members weren’t serving when the shortfall began. He said it was the result of errors NEP staff made when calculating rate-of-inflation on the company’s payments to the town.
He said he takes responsiblity, and it shouldn’t be directed at the Town Board.
The audit likewise praised the town for how it has employed the money – a rarity in a state audit.
Eagle is host to 93 NEP turbines. Auditors found that the town received nearly $7.4 million in wind power-related revenues during the eight-year period.
The town receives about $1 million in such funding annually. It allocated about $745,000 to fund its 2014 general and highway fund operations. No property taxes have been levied for those purposes since 2006.
The town has also used about $95,000 of its wind power revenues annually since 2009 to provide free curbside garbage pickup to its residents. The town’s general fund balance has likewise increased more than 14 times, from $167,000 in 2007 to $2.4 million as of Jan. 1.
“We commend town officials for their reasonable uses of these significant operating fund revenues,” the audit reads.
Findings also included:
— The problems cited arose from town officials failing to properly review wind power revenues, to ensure that the amounts received were accurate, and complied with the contract terms, the audit reads.
“When we brought this to the attention of town officials, the supervisor took immediate action to notify and request payment from the company,” the auditors said. “The company acknowledged the underpayments and agreed to pay the town once a mutually acceptable payment plan can be reached with town officials.”
The town received $397,000 on June 30, with the additional income stemming from inflation adjustments.
Kushner said the income’s being used for extra highway improvements, including Cooley, McElroy and Eagle roads, along with West Main Street.
He said additional work may be done on Wing Street and Washburn Road.
— Auditors found no evidence in the town’s minutes or elsewhere that the board annually audited, or provided for an audit of, the supervisor’s books and records as required.
Board members said they didn’t provide an audit of those records from Jan. 1, 2007, to Dec. 31, 2013.
“The board’s failure to review key financial reports and perform required annual audits diminishes its ability to effectively monitor the town’s financial operations, and could result in errors or irregularities occurring and remaining undetected and uncorrected,” the audit reads.
— Although the town’s wind power revenues allowed it to eliminate property taxes and increase fund balance, the town hadn’t developed a comprehensive multi-year financial and capital plan.
There also wasn’t a mechanism in place – such as a road condition survey or fleet replacement schedule – to address the town’s long-term operational and capital needs adequately.
A plan of that type could include funding future capital needs, and provide a way to solicit public input and establish practical goals to manage fiscal changes over time, auditors said.
But the sheer amount of income the town is receiving has placed it in an unusual quandry.
Kushner said Monday that the funds were such that the town was able to complete its five-year plan within two years, and faces the challenge of determining further plans beyond that.
— Despite the absence of a comprehensive multi-year financial and capital plan, the board took action to establish and fund certain reserves.
The board has acted annually since January 2008 to approve resolutions funding its reserves, the audit reads. It also increased the funding of its “wind turbine tax relief reserve fund” from $1 million to $1.75 million this past January.
The town also funded two separate “capital improvement reserve funds” at the time.
But the tax relief reserve fund was not properly established, and the town has no authority to accumulate funds in that manner, unless a contingency and tax stabilization reserve fund is established properly by a board resolution, and maintained in compliance with state statutes, auditors said.
Such reserves can only be funded to an amount equal to 10 percent of the town’s total general fund and highway fund budget. The measure must also be subject to permissive referendum.
“As of January 2014 the amount reserved exceeded the statutory maximum by more than $1.6 million, more than 18 times the legal limit,” the audit reads. “By not complying with General Municipal Law requirements, the public was not afforded the opportunity to voice its opinion regarding the accumulation of funds for this purpose.”
Town officials have said that because Eagle receives significantly more wind power revenue than needed to fund its operations, and they would like to establish a reserve, to ensure the tax relief currently provided to residents can continue, in the event the revenues cease unexpectedly, or when the contract terms require, the audit reads.
Special state legislation would be needed.
“To address the current statutory limitations on funding a contingency and tax stabilization reserve, town officials are seeking special legislation from the New York State Legislature,” auditors said. “We commend town officials for taking steps to ensure that the town’s growing fund balance will be properly accounted for in a reserve that has been legally established and has a clearly defined purpose.”
— In a written response in the audit, Kushner thanked the Comptroller’s Office, saying the auditor did an excellent job with the audit, and explaining the steps needed to correct the issues cited.
The town agrees with the findings, he said.
Besides noting that the outstanding money has been paid, he said the town has established a special committee to review all future payments.
Although the town board receives a monthly, 10-page financial statement, the supervisor will provide additional information as described by Comptroller’s Office guidelines, Kushner said.
The extra information will include journal entries and other information needed to ensure complete transparency.
Kushner said the board is working on a five-year financial and capital plan. It will likewise audit the supervisor’s books annually, hiring a public accountant to help if necessary.
To ensure its reserves are established and funded in accordance with state statutes, the town is actively seeking a special municipal law allowing it to do so, with the help of the State Comptroller and State Senator Patrick Gallivan’s offices, Kushner said.
“A special local law was introduced to our state government,” he wrote. “In July, this municipal law was unanimously passed by the Senate. However, the law did not leave a committee in the State Assembly. As a result, the Town of Eagle’s special municipal law will be reintroduced in January 2015.”