Suffolk panel OKs up to $200G to probe anonymous allegations

A Suffolk committee Wednesday approved the immediate hiring of outside auditors and attorneys to review anonymous allegations of fiscal irregularities in the county.

County Comptroller John Kennedy said he expects a report from the forensic investigation by the first or second week of October.

“Time is absolutely of the essence,” said Kennedy, just before the unanimous vote of the waiver committee to spend up to $200,000 on the auditing effort. The committee has two county executive appointees and one by the legislature.

Kennedy said he expects contracts with auditors Stone Turn Group and the law firm of Winston & Straub to be signed by week’s end, and said work will begin as soon as Monday.

The auditors and attorneys will question top fiscal officials about their budget proxcedures. Kennedy said he expects their report will give the county “a 100 percent clean bill of health.”

The press for the review comes as the county next month is scheduled to go to the bond market to sell $105 million in one-year borrowing, using delinquent property taxes as collateral, to provide the county with cash flow. The county also will sell $54 million in long term general obligation bonds for various construction projects, Kennedy said.

Kennedy said that while the review does not have to be complete before the bond sale, the county must show rating agencies that “we are making progress” to clear up the issue. He said the county must act to “affirm the validity” of its bond offering statements, which run more than 200 pages and detail the county’s fiscal condition for potential investors.

County officials are responding an anonymous letter in late July sent to all three Wall Street rating firms, Moodys Investors Service, Fitch Ratings and Standard & Poor’s.

Without offering details, the letter alleged “unethical conduct” by the comptroller and budget offices for improperly transferring funds, over-reporting revenues and underestimating expenses.

The letter said the alleged actions amounted to “sustained, institutionalized and creatively planned accounting fraud.”

Kennedy disclosed that the county’s new external auditor, Deloitte and Touche, strongly recommended the outside review and indicated that they would not continue in the role as external auditor without one.

Legis. Robert Trotta (R-Fort Salonga), who attended the waiver committee meeting, questioned the expense, noting that it comes only months after completion of the county’s 2015 year-end audit.

”Why not ask the state comptroller to look at it, without wasting taxpayers’ money?” Trotta said.

Lora Gellerstein, who represented Presiding Officer DuWayne Gregory (D-Amityville) on the panel, asked whether Winston and Straub might have a conflict because they have done work for the county.

County Attorney Dennis Brown acknowledged tghat the firm is a bond counsel for the Suffolk County Industrial Development Agency. But Brown said there is no conflict because the agency is an independent body created by state legislation.