Babylon Town adds loan rules after audit criticism

The Babylon Town Board has adopted rules that will give it more oversight of loans from one town fund to another, an action spurred by a state audit that criticized the town’s financial management.

The town previously had no written policy for the practice, which spokesman Kevin Bonner said in an email was typically employed when the town was responding to unforeseen developments.

“Interfund loans are standard practice for all local governments, and enable the Town to ensure uninterrupted services, especially during crises like superstorm Sandy, without burdening taxpayers with unnecessary debt,” he wrote in an email.

Under the new rules enacted last week, loans greater than $2 million will require Town Board approval, while those for less can be authorized by the comptroller or another designated official.

The state comptroller’s 2013 audit took no position on the loans but found the town did not follow proper procedure when it made almost $28 million in cash advances from the residential garbage fund to the general fund between 2008 and 2011, failing to secure board authorization, repay in a timely manner and pay interest.
In 2013, the town’s general fund made four loans totaling $1.47 million to other town funds, mostly for payment of miscellaneous bills, Bonner said. The loans have been repaid.

While the town disputed some parts of the audit report, Bonner said more policy changes could be announced in February, when the board releases a mandatory “corrective action plan” in response to the state comptroller’s recommendations.