Audit finds $3.3M deficit in Islip Town capital fund

A long-anticipated state audit has confirmed a $3.3 million deficit in Islip Town's capital projects fund -- and uncovered an unrelated cash shortage of $12,250 in the town clerk's office, which the state comptroller has referred to the Suffolk district attorney's office for investigation.

The capital projects fund deficit, discovered by the town's comptroller in 2008, stems from a series of projects in 1989 and the early 1990s, when town officials, using accounting practices that violated state law, routinely spent the entire authorized cost of a project even though they had not financed it fully, according to excerpts of the audit obtained by Newsday.

The audit is scheduled to be released Monday.

Regarding the $12,250 shortage, the report faults Town Clerk Regina Duffy and her predecessor, Joan Johnson, for "failure to maintain accountability for cash receipts, properly segregate duties, safeguard cash, reconcile bank accounts, properly deposit moneys, and present accurate financial reports to the Supervisor."

The district attorney's office did not respond to requests for comment.

Shortages in 2007 and  '08
The comptroller found $8,700 in unaccounted receipts from 2007, when Johnson held the position, and $3,550 from the period of January to August 2008, for which Duffy was responsible.

Duffy, in a phone interview, said that when she took office, a clerk typist was responsible for tallying all incoming cash, depositing it in the bank and keeping records on deposits.

"One person had total control of the money. It was kind of, no checks and balances," she said. "That has changed. I have three people now checking."

Before hiring the account clerk, Duffy said, she reconciled receipts herself. "I was trying to do the best I could but I wasn't thorough enough."

Islip Supervisor Phil Nolan requested the audit in 2008 after the town comptroller discovered a $3.1 million deficit that had rolled over from year to year for decades in Islip's capital projects account.

Reviewing town records from 1989 to 2008, the state comptroller confirmed the town's findings and placed the figure at $3.3 million.

Accounting errors cited
According to the audit, the deficit was created by sloppy record-keeping and illegal accounting practices.

The town placed money for all capital projects in a single bank account. When the bank account ran low on cash, the board simply issued new debt, the report said.

"As a result, Town officials used moneys intended for one capital project to finance projects that had already depleted their available cash balances," in violation of the state's Local Finance Law, the audit said.

Frank Jones, who was supervisor from 1986 to 1993, has said bonds were the responsibility of the town comptroller.

Winston Feurtado, town comptroller at the time, died in 2006. In 1992, he told Newsday that as a cost-saving measure Islip sold bonds only when needed and that he hadn't knowingly broken the law.

As recently as 2007, town officials improperly used $37,100 from one project to finance another, the audit said.

Nolan, who took office in November 2006, said: "We inherited a mess. I'm sure there were errors in '07. We didn't eradicate everything inappropriate on Day One. I'm very proud of what we've done here. Not one of these issues is of my making. When we discover it, we correct it."