New Britain Council Committee Approves Creation of Audit Committee

The New Britain City Council’s Committee on Administration, Finance and Law has voted to approve a proposal to create a new Council Audit Subcommittee. The Council’s Majority Leader, Ald. John McNamara (D-4), one of the co-sponsors of the proposal said that, “government works best when we have checks and balances between the executive and legislative branch.”

Saying that state law makes independent audits a function the municipal legislative branch, Ald. McNamara said that the Council should be involved in the selection of the independent auditor for the city’s finances.

The Council’s President Pro-Tempore, Ald. Francisco Santiago (D-5), also co-sponsored the proposal.

The Administration, Finance and Law Committee struck one part of the proposal that would have provided that the Audit Subcommittee would be responsible to, “provide general oversight of finance department functions, including compliance with applicable laws and regulations relating to financial controls, and other related matters.” McNamara agreed that the provision could be dropped, after objections to it from the city’s Corporation Counsel’s office.

The proposal now heads to the full Council, potentially for final approval, at its meeting on January 10th.

The city of New Britain’s long-overdue audit report, for the budget year that ended on June 30, 2022, was filed by the city in December, nearly a year late.

The report was dated as filed one day before the City Council meeting at which Mayor Erin Stewart (R) told the Council it would be “available” in January. While the form filed with its audit report by the city with the state Office of Policy and Management appears to indicate that the City Council was, “made aware of findings and recommendations resulting from the audit,” while the Council had not been informed. The audit report has since been posted to the city’s website.

The auditors’ report cites deficiencies and a jump in taxpayer debt.

The audit report notes that the city’s taxpayer debt jumped by 11% between the 2021 and 2022 budget years, from $292.5 million to $325.1 million, an increase of $32.6 million.

That the report was nearly a year late was one of the deficiencies noted by the auditors. The auditors reported that, “The City did not comply with the Municipal and State Single Auditing Act and Uniform Guidance Reporting Requirements,” noting that state law requires that the city’s audit report be filed within six months of the end of the budget year.

The lateness of the previous year’s report now raises the concern that the report on the budget year that ended in June of this year will be late as well. That report is due this month.

The auditors also said they found a, “Material Weakness in Internal Control over Financial Reporting,” because, “The City’s bank reconciliations were not completed for over a year after the end of the fiscal year.”

The reason for that deficiency was stated as, “Shortage in staffing within the finance department and lack of a formal financial close process.” But documentation from the city included in the audit report appears to indicate that this problem was not new. That document notes that auditors also found that the, “City’s bank reconciliations were not completed timely,” during the 2021 fiscal year, and conceded that it was, “not fully corrected.”

The city’s responses to the auditor’s findings on the deficient bank reconciliation included changes in job descriptions and cross-training to allow more staff to do the bank reconciliations, and that a, “A spreadsheet containing all the different bank accounts has been created to track where each monthly bank reconciliation is…”

On the late audit, the city said it happened because of, “the loss of higher level staff in calendar year 2022 and in this case the Deputy Finance Director, who handled fiscal year end close.” The city said its action to address the problem includes that, “a formal policy will be drafted and distributed to the Finance Staff to ensure each fund’s year end balances are analyzed in a timely manner and can be corrected appropriately.”

In October, the New Britain Progressive broke the news about a stern letter from the state Office of Policy and Management, on September 12, 2023, with the subject, “Noncompliance with the Municipal and State Single Auditing Act,” because of, “Outstanding and Late FY 2022 Audit Reports.”