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Dateline DECEMBER 2007: 
City Audits, a “Grinch” Before Holidays

In a holiday spirit, this update starts on the cheerier note of the relief Ventnor taxpayers might feel about the two lots put up for auction on November 15, 2007 at the Commission meeting.  Vincent Cannuscio bid $355,000 to acquire the lot next to his JoJo’s establishment with rumored plans for expansion of his business on the drawing boards.   Michael and Cheryl Schwartz bid $141,000 to successfully acquire 6 N. Hillside for their son, as the Commissioners’ reductions to the Redevelopment Zone lifted some of the confusion which has beset our Ventnor neighbors who suffered anxiety in that part of town. 

Video of the November 15, 2007 Commission meeting can be found at this link, where the 21 video segments are listed in a pinned post at the www.VENTNOReVOICE.com Forums.

The minimum bids were lowered and realistically set.  The absence of bidders in September suggested distressing signs of decay might be with us longer, as the town’s residents hope for a more vibrant Ventnor in all sections.   Calculations show that 6 N. Hillside Ave. produced  an estimated “net loss” of about $55,000 to city taxpayers in absolute dollars (dollar outgo + lost property taxes from years of public ownership), and the successful bid was $72,600 below the assessed ($213,000) value of the land. 

The taxpayer loss/gain is still uncertain about the other lots. There were soil-remediation costs for work performed (and photographed) just before the saleW♥V renewed an OPRA request to get a better financial understanding about the city’s handling of those lots, which were beset by problems, including a heavy round of litigation with lawsuits arising from the city’s acquisition (two litigations) and later failed sales-at-auction (pending litigation) of the Ventnor Avenue lots. 

Further discoveries about City of Ventnor audits, sadly, brought out a taxpayer’s “inner Grinch” this time of year.  City of Ventnor’s fiscal management problems go back to earlier in the year, when on March 22nd, a Special Emergency Meeting of the Commission was called to deal with a fiscal crisis.   In hindsight, it was a sign of the deficient* financial recordkeeping that audits, which this year took until August 17, 2007 to complete, revealed. 

[*Audit Report: “[the] general ledger… was not maintained in a format whereby financial statements and other financial information, without material misstatement, could be generated.”   *More Audit: Voluminous audit adjusting journal entries and extensive analyses were required in order to reconcile the general ledger with supporting bank account reconciliations, subsidiary records, and documents.]

As the Current Fund was spent into a $1,216,673.23 deficit by 12/31/06, the city’s financial operations appear to have failed to provide any early warning system. Competently maintained books and records might have signaled trouble, prompting spending cutbacks wherever possible.  The town’s fiscal issues might even be said to go further back, if one started paying attention to steadily declining end-of-year bank balances from 12/31/04 through 12/31/06.  Normal flows providing cash cushions appear to have been eroding over time.   

The 2005 and 2006 Bowman & Co. Audits were disclosed through citizen investigation and provoked some discussion at October 18th and November 1st Commission meetings.   Then, Audits that went back further were sought and reviewed, provoking even more discussion at the November 15th Commission meeting.  Later, a Letter to the Editor about Ventnor’s fiscal mismanagement problems was given top-of-page accommodation by the Downbeach Current.   (A more easily-readable version is linked here.)   That Letter was in response to an earlier defense of the town’s fiscal management, mounted by City Administrator Andrew McCrosson, in an interview with a reporter after the November 15th meeting.

LEAD Technologies Inc. V1.01
At this website, taxpayers are treated like adults and provided the information that allows them to form their own conclusions.  Pages from the actual Audits are provided as links at very bottom, for download and review. The chart immediately below has been prepared using details from City of Ventnor audits.  In each year, Bowman & Co. would cite what are called “Reportable Conditions” and note that they violated relevant accounting standards and/or New Jersey laws (either Statutes at NJSA or Administrative Code at NJAC).  The auditors assigned each deficiency a number.

For example, a number such as 1999-1 would tie into an actual finding of a shortcoming noted by the auditors for the year ended 12/31/99.   The failure to maintain a balanced General Ledger typically led each year at the XXXX-1 position.   What W♥V did was simple: provide an abbreviated description of the specific violation, and find where that description appeared as a numbered finding over a span of years.  What the chart above shows is that from 1998 through the end of 2006, Ventnor’s auditors found a total of 72 “Reportable Conditions” which fell into 27 categories and ranged in number from a “low” of 5 such findings in several years, to a high of 12 in 1999.  Most recently, there were 9 in Fiscal Year 2005 and 8 in FY2006. 

What the red-ink “Reportable Conditions” numbers show are instances where the same problem persisted, year after year.  It’s like a teacher (auditor) giving students (the CFO and city officials) a chance to take a make-over exam, only to find that the material tested still hasn’t been learned by the following year.  Or the next.

The City was cited for failures to maintain a balanced General Ledger every year from 1998 through the end of 2006.  It may have been cited prior to 1998, but a span of eight years to “get it right” seemed an adequate measurement period. 

Cash receipts at the golf driving range were found to lack any “internal accounting controls” to account for them, in every year since 1998.  Although Mayor Kreischer reassured those at the Commission meetings in November that no money was ever missing, the fact of the matter is that the Auditors are saying in “accounting language” that, for lack of records, they don’t know.  So how can anyone else know what happened to the cash? 

Historic Grant funds were jeopardized in some years.  Why?  Because the finance official in charge of Ventnor’s “public trust” tax dollars failed to file mandated quarterly reports.

Excerpts from the relevant Audit years noted at the bottom can be downloaded for those who wish to review the language from the Bowman & Co. report.  Further, a faithful cut and paste of wording from the Ventnor 2005 and Ventnor 2006 audits and the August 2007 Audit Letter were already posted in the Forums and can be reviewed by clicking the linked text above.  

There is a point deserving of mention, as concerns the “relevant standards” for municipal audits in New Jersey.  Mavens for detail can read up about it by clicking here.  Regulatory standards and legal mandates of NJAC and NJSA do apply, as does the need to have no “material misstatements”, or “material weaknesses” cited, and so also the need to keep records that don’t force an auditor to issue a “qualified statement.” There were infractions of these requirements as Ventnor handled its financial accounting over the years which were reviewed. 

The Body Politic relies on the money pumped into it from taxes as its lifeblood.  The “heart” of any City Hall needs to oxygenate it with accountability, and circulate it carefully with spending that serves the needs of all the cells (citizens) that rely on it to deliver the essentials (basic city services).  Downloads of the Audit Findings are linked below (Word Documents):  

Ventnor Audit by Bowman & Co. of 1999

Ventnor Audit by Bowman & Co. of 2000

Ventnor Audit by Bowman & Co. of 2001

Ventnor Audit by Bowman & Co. of 2002

Ventnor Audit by Bowman & Co. of 2003

Ventnor Audit by Bowman & Co. of 2004