Babylon Town officials violated municipal law with loans totaling nearly $28 million from the town's residential garbage fund that were used to purchase property for revitalization in Wyandanch, according to a new state audit that the town disputes.
The New York State comptroller's audit found no corruption or fraud but said that mismanagement and poor budgeting by the town board jeopardized town finances. "The board has not taken appropriate actions to maintain the general fund's sound financial condition," auditors wrote.
"We respectfully disagree with their interpretation," said Town Supervisor Rich Schaffer in an interview Monday.
Seventeen loans from the residential garbage fund to the general fund were made from 2008 to 2011. Auditors said that such interfund transfers are common, but that these violated municipal law because they were not authorized by the board, were not repaid by the end of each fiscal year and no interest was paid.
Schaffer said the board didn't authorize each transfer individually, but did authorize the practice of making such transfers when it ratified the town budget and capital plan each year.
The loans have since been repaid with interest, town officials said, and in a written response from Schaffer attached to the audit report, the town rejected some of the audit's most stinging findings as incorrect or outdated. The letter noted that other recent reviews of town finances by independent accountants and major credit rating agencies have found them to be strong.
Auditors focused on the period from 2011 to 2012, but also examined some aspects of the town's financial condition back to 2008, when now-County Executive Steve Bellone was town supervisor.
Bellone spokeswoman Vanessa Baird-Streeter referred a request for comment to the town.
Poor budgeting and consistently wrong estimates of revenues contributed to $8.9 million in operating deficits and unexpended fund balances that diminished from a $6.1 million surplus to a $10.5 million deficit from 2008 through 2011, the audit found.
Auditors found that the town may have wrongly billed $5.7 million in "administrative charges" for the residential and commercial garbage funds in fiscal 2010 and 2011 based on a method that "bears no relationship between the services provided, if any, and the cost of those services." Schaffer wrote that the town would review administrative charges allocated to garbage district funds, but said in an interview that "people are being treated fairly."
The town has 90 days to file a "corrective action plan" with the state detailing changes to be made.
Paul Sabatino, a municipal law expert, former Suffolk chief deputy county executive and Republican, said in an interview Friday that the audit could be problematic for the officials involved, Bellone most of all.
"This is the kind of thing that can exact a significant political penalty," he said. "What jumps off the page is the failure to follow process. They abandoned the rule of law."