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State Audit Highly Critical of Newburgh's "Inadequate Oversight"

  State Comptroller Thomas DiNapoli’s office released an audit of the City of Newburgh’s financial oversight that said officials failed to accurately track the city’s budget which led to millions of dollars in shortfalls and a higher than necessary tax hike for its residents.

The audit, released on Thursday, said that the city, after failing to account for a $1.3 million deficit, passed an unbalanced budget in 2010 that created a new $ 6 million cash deficit which was closed the following year with a 41 percent tax levy increase.

State auditors blamed inaccurate financial records and the failure to address poor recordkeeping practices for hindering the city’s ability to monitor financial operations. In fact, the state officials said the city’s financial position was “essentially unknown” to the city council for five years.

The audit found Newburgh paid more than $570,000 in interest charges for borrowing than it did not need; no revenue was collected by the city through its non-owner occupied rental property registry in 2011, although code enforcement for those properties cost $453,000; and officials did not establish policies and procedures for the enforcement of utilities gross receipt tax and franchise fees, and as a result, the city failed to collect all the revenue to which it was entitled.

The audit made a series of recommendations including requiring the city manager and comptroller to maintain complete, accurate, and reliable financial records and prepare periodic timely reports for the city council to use to assess the city’s financial position; identify new sources of non-property tax revenue to help pay for the services provides by the city; and establishing written policies to analyze, monitor and enforce the collection of cable service franchise fees and utility gross receipts taxes.

City Manager Richard Herbek, meanwhile, in an August 14 letter to the comptroller’s office, said the report is “a grave injustice” to current city council and appointed officials, staff and residents “who have made many personal and financial sacrifices.”

He said the state does the city “a major disservice” by not stating Newburgh’s progress and renewed commitment to city government and he called for the report to be amended to reflect the progress made to date. He said that since 2009, the city made several accomplishments “when the city was a week away from declaring bankruptcy.”

Herbek said the recommendations by the state auditors are “miniscule given the amount of financial stress under which the city has been operating.”

He said that “perhaps the most disturbing” omission in the report is that it failed to mention the city adopted a balanced budget for 2012 under the two percent property tax cap despite massive sales tax decline, cuts in state aid, and the annual increase in pension liability and health insurance payments.

In a statement released late on Thursday, Herbek said the comptroller’s office offered “valuable recommendations, a few of which we have taken steps to implement.” They include revising the rental dwelling registry to provide for an adequate fee schedule to cover the cost of inspections.