Audit shows financial problems in Hillside

UCL-Hillside municipal2-CHILLSIDE – The annual 2012 audit of Hillside’s finance department by an independent firm produced the usual laundry list of recommendations but it might take the state comptroller’s office stepping in before anything is done about it.

Just days before the election, the township’s financial audit was published along with lengthy recommendations made by certified public accountant Suplee, Clooney & Company of Westfield, as required by state law.

Although every town publishes an annual audit, very few have such a long list of recommendations or so many that focus on how the township mishandles its finances.
Things are so bad, the auditor pointed out, that the township has yet to file a corrective action plan with the state for 2011. A corrective action plan is required by law after an audit determines there are multiple financial management issues that require action. But that is only the tip of the iceberg.

Some of the recommendations made for 2012 by the auditor are repeats of the year before. Included was the township general finance ledgers were not maintained properly or reconciled on a monthly basis. Also stressed was that a detailed analysis of accounts involving payroll be prepared monthly and the manner in which employees were paid be brought into compliance with state law.

Other problems focused on the township having written certification of the availability of funds before awarding contracts in excess of the bid threshold and that grants be “properly appropriated through the budget process.” It also was brought up that before the township committed to spending taxpayer dollars, they needed to ensure there were funds available to cover such expenses.

The good news is the township is actually in better financial shape than they were in 2011. For example, in 2011 the municipality had $35.7 million in assets, but in 2012 that number jumped to $64.6 million. Actual savings or surplus also increased over 2011, going from $3.6 million to $5.8 million.

The auditors report for 2012 came as no surprise to Mayor Joe Menza. In fact, he has heard it all before — for years.
“That’s why the state comptroller’s office was in here auditing our finances for the last year,” said the mayor, explaining the state just completed their own audit two months ago but has not handed over a report as of yet.

“I’m really interested in seeing what they found,” Menza said, pointing out that a few years ago he contacted the comptroller’s office and asked them to step in because there was such a lack of structure.

“The truth is there are no fiscal constraints or controls in place,” he added, noting, for instance, that in the last four years there have been five chief financial officers in the position, which is a “revolving door.”

“Does that make sense,” Menza said, frustration lacing his voice as he explained that the fiscal issues associated with the township have everything to do with the political climate in town.

“That alone has made us structurally deficient,” he said, explaining that if the council president and council members would stay out of the finance officer’s hair, “we wouldn’t have the problem we do with losing these people.”

Menza said he took the step of calling the comptroller’s office because he was “trying to put a lid on the cookie jar.” He admitted these efforts have not succeeded in keeping a CFO in-house for the simple reason that “no one can handle the way things operate in the township.”

“Actually they don’t know who to trust, who to listen to, so they end up quitting,” the mayor said, adding “when you have a council president and council members telling you what to do, who do you listen to?”

“I spent four years trying to keep council members out of the finance department but they still got in there and demanded too much of our CFOs,” Menza said, adding “it’s always an outright war with them.”

Adding to all this is the fact the township does not have a business administrator. Menza said the CFO ends up taking on that role and it becomes overwhelming on top of all the financial work that is required.

“That’s why the state was here. It was my way of bringing light to the issue. I have nothing to hide,” the mayor said.
The CFO revolving door has thrown a wrench in Menza’s ability to keep a lid on things, but this has been going on for the entire four years he has been in office. Although there have been discussions about hiring a fulltime business administrator, nothing has come of it.

Menza believes that bringing a business administrator aboard would alleviate a lot of the financial woes the township continues to face. Periodically members of council have agreed this would be the best solution, but as the mayor put it, “it never seems to happen.”
“They have been putting it off for years,” said the mayor.

In 2009 it looked like Menza would be able to do the impossible and hire a business administrator, but that fell apart when the council sued him over the move. Council members argued that Menza illegally hired a business administrator, attorney and auditor without their consent and then “all hell broke loose,” he said.

In 2009 things went from bad to worse financially so Menza ordered a purchasing freeze because the township owed more money than they actually had on hand. He said he made this particular decision because the township was barely able to make payroll for employees.
“What else could I do?” the mayor had asked rhetorically
in an interview conducted late last week.
There is no doubt Menza has had his hands full as mayor. The friction with council began barely a month after he was elected as a result of a runoff election victory of just eight votes over former councilman Jerome Jewell Jr. and since then Menza said he has had to wage one battle after another, winning most, but not all.
“The truth is we need to get a handle on things and unless we do, our audit will remain like this year after year,” Menza said Friday in an interview.
Although LocalSource contacted the New Jersey Office of the Comptroller, they did not respond prior to press time. However, in the past the comptroller’s office has gone into other towns when the financial management was questionable.

For example in 2009 the comptroller audited Irvington, finding that the “financial management was in disarray.”
Specifically the audit found Irvington’s financial books were out of balance since 2000, with the general ledger off by $59.7 million and an un-reconciled shortage of $2.6 million in the bank balance as opposed to the municipality’s books and records. They also found that this town consistently paid bills late, ending up paying $36,000 in a 13-month period for late charges.

In the midst of this financial crisis Irvington sent 19 employees to a 2007 League of Municipalities conference, but failed to get any documentation for the hotel stays. As a result they overpaid the hotel $2,271. In 2011 the comptroller issued a follow up report about the actions this municipality took to counteract everything that was found. While Irvington had two years to implement many of the 20 recommendations made by the state, Comptroller Matthew Boxer found they had made “some progress” in implementing the recommendations contained in the initial audit report,” but not enough. Of the 21 recommendations, the township managed to implement eight.

The comptroller also went into Washington Borough in Warren County and found that poor management practices led to nearly a fivefold increase in costs for a garage project, and a fire truck effectively steered towards a specific vendor.