Jan 4, 2025
OBSERVER Photo by M.J. Stafford An audit of the city of Dunkirk’s 2022 finances is full of bad news.
An audit of Dunkirk’s 2022 finances is a portrait of a city careening toward financial disaster.
The city’s accounting practices are substandard, it consistently spends more than it takes in, and its fund balance is in negative territory, according to the audit by the Drescher & Malecki accounting firm. The audit for 2022 is the most recent one available.
The city spent $19,977,095 and received $18,972,076 in revenue, for a shortfall of $1,005,019, in 2022. The number of $20,755,681 was budgeted for both revenues and expenditures.
“Unfavorable variances were realized in state aid and real property taxes,” the audit states. In other words, Dunkirk didn’t get as much as it budgeted in 2022 for those two key sources of revenue.
This was mixed with a combined fund balance deficit of $3,678,906, which was a $2,636,298 increase of the prior year’s shortfall.
A section about subsequent events details how the city wound up doing Revenue Anticipation Notes “to fund ongoing operations.” An Aug. 1, 2023, RAN was for $4,580,000 at a 6% interest rate. That note was liquidated July 26, 2024, one day after the city issued another RAN.
The latest note was for $12,731,300, at 7.5% interest. The note matures July 24.
Dunkirk also got a loan of at least $16 million from the state in 2024 as part of a Fiscal Recovery Act passed by the Legislature. As part of that deal, employees of the state Comptroller’s Office have been visiting City Hall for months to keep an eye on Dunkirk’s finances and accounting.
The 2022 audit, along with audits from previous years, are on the city’s website — though they take a little digging to find. First click the “Government” header, then hit the “Finance and Treasury” subheader under “Departments.” The audits, along with recent city budgets, can be accessed by a link on the left of the Finance And Treasury page that comes up.
The 77-page document has some damning statements about the city’s financial practices starting on page 70.
“The city does not have or does not follow formal policies and procedures documented for critical accounting cycles including journal entries, bank reconciliations, cash receipts and accounts receivable, and capital assets and information technology controls,” reads one such statement. “As a result, journal entries posted to the accounting system and bank reconciliations were not consistently reviewed by an employee independent from the preparer.”
Another result of the accounting issues is that “the city does not have the ability to effectively monitor its cash position or results of operations, making short and long-term financial planning and budgeting incredibly difficult.”
Yet another problem the audit highlights is that the city let budget funds such as water, wastewater and capital projects, borrow from the general fund.
The bad news goes on: “The city appears to have undertaken large-scale capital projects with no apparent funding source, relying on funding from the general fund, which is not available or budgeted.”
The auditors “strongly recommend that the city develop a more realistic budget, increase revenue, and reduce expenditures.” In addition, Dunkirk must improve its monitoring of budgets once they get passed.
Drescher & Malecki’s criticisms of Dunkirk’s financial practices are similar to those the Comptroller’s Office made in two letters it shared with the OBSERVER last year.
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