DA Hoovler Announces Release of Grand Jury Report Critical of City of Newburgh Money Handling Procedures

November 1, 2017

Orange County District Attorney David M. Hoovler announced that the Orange County Grand Jury has issued a report which makes specific recommendations as to how the City of Newburgh can better safeguard municipal funds. The Grand Jury’s investigation, which was initiated by District Attorney Hoovler, followed an investigation which ultimately led to the prosecution of then-City Comptroller John Aber, who pled guilty to Grand Larceny in the Fourth Degree, for stealing $9,570 in City funds. During the course of the initial investigation into Mr. Aber’s thefts, officials uncovered a general lack of oversight and procedures within the City of Newburgh. The District Attorney’s Office was aided by the New York State Comptroller’s Office during the investigation into Aber’s thefts, as well as in the grand jury investigation which resulted in the issuing of this report.

The Grand Jury Report summarizes the events and lack of procedures that allowed Mr. Aber’s thefts from the City to go virtually undetected. The Grand Jury found a glaring lack of oversight built into the structure of the City of Newburgh government, specifically in the City of Newburgh Comptroller’s Office. The lack of oversight and the careless fiscal procedures that were in place throughout Mr. Aber’s tenure led to a culture of unaccountability. The absence of checks and balances created the conditions that permitted Aber to take cash from the City’s coffers almost at will.

The report notes that in 2012, the State Comptroller’s Office audited the City’s financial operations for the period between January 2010 and June 2011. The State Comptroller specifically examined whether the City Council provided adequate oversight to ensure the City’s financial stability and what, if any, opportunities existed for City officials to maximize non-property tax revenues. The audit results and recommendations were detailed in a written report which was given to City officials. Shockingly, the Grand Jury’s report notes that to date those recommendations have not been fully implemented, and may have contributed to Aber’s ability to steal money from the City.

As a result of its ongoing financial troubles, the City of Newburgh continues to be under state oversight by the New York State Comptroller’s Office. This is the second time in the past three decades that the City has been under such fiscal oversight. It is exceedingly rare for a municipality to be under state financial monitoring, much less twice in a relatively short time period. A Grand Jury witness from the New York State Comptroller’s Office could only recall one other municipality in the entire state that has been under State oversight twice.

The report details other deficiencies in the way the City of Newburgh is operated, such as failing to retain officials like the Police Chief, the City Manager, and the City Comptroller. The contentious nature of City politics is demonstrated by what occurs at the monthly public hearings conducted by the City Council. The report notes that historically, public comment sessions during those hearings have resulted in the need for police presence to maintain order. At some point, the City of Newburgh Police Department implemented a proactive plan to have police officers who are trained as crisis negotiators to be present for council meetings.

The report focuses on the City Comptroller’s Office. The report notes that since 2007, there have been a total of eight different City Comptrollers, which has led to constantly changing policies and procedures. Approximately three percent of the City’s $44 million annual budget is derived from funds that the City collects in cash from various sources, including the boat launch, miscellaneous petty cash collection, and parking meters, and the City did not have procedures in place to adequately account for how that cash was handled.

The report notes that City officials have not kept track of how many parking meters it has, or where they are located. Moreover, the City has no clear schedule as to when money is collected from those parking meters, or how the money is to be handled or deposited in City bank accounts. The report notes that the City spent approximately $30,000 on parking meters in 2013 which have never been put into service.

The Grand Jury urged the City to adopt the recommendations made by the State Comptroller’s Office in the 2012 Report. Those recommendations are as follows:

1.​The Council should require the City Manager and the Comptroller to maintain complete, accurate, and reliable financial records and prepare periodic and timely reports for the Council to use to assess the City’s financial position and make informed financial decisions.

2.​City officials should ensure that the Annual Update Document continues to be filed with the State Comptroller’s Office in a timely manner.

3.​City officials should identify training needs and ensure that key personnel receive the appropriate and necessary training.

4.​The Council should continue to closely monitor financial operations and take appropriate actions to maintain the City’s financial stability. Appropriate actions would include: appropriating only available unexpended surplus funds, maintaining documentation to support tax levy increases, preparing cash flow analyses to determine the necessary amount of short- and long-term debt to issue, and completing long-term financial plans that include the Comptroller’s input.

5.​City officials should establish an ordinance that equitably covers the costs the City incurs to monitor non-owner occupied rental properties.

6.​City officials should establish policies and procedures which detail the responsibilities and actions to be taken to ensure all revenue is collected, monitored and analyzed.

In addition, the Grand Jury further recommended that:

7.​The City must work to stop the high turnover rate of employees in the City Comptroller’s Office and other key positions such as the City Manager and Police Chief. The Grand Jury has significant concerns that the lack of oversight and stability in the Comptroller’s Office can have equally negative effects in the Police Department.

8.​The City Council should provide sufficient authority to the department heads—i.e. the City Manager, the Comptroller, and the Chief of Police—to permit those officials to implement certain measures without the requirement of a full Council session and vote. The department heads have expertise in their particular field and have been entrusted with leading their specific area of city government. They should therefore be given the tools they need to make operational decisions without unnecessary delay.

9.​Increase the City Manager’s oversight over all cash collection within city government, including consistent reporting from the Comptroller to the City Manager to help identify trends in cash flow and plan accordingly. Such measures will help reduce the possibility that missing cash will go undetected.

10.​Increase training opportunities for staff at the Comptroller’s Office on evolving best practices for government financing.

11.​Institute periodic internal audits of the City’s finances, either through internal auditors or through an independent audit committee.

12.​Limit the number of City employees who have access to the area of the Comptroller’s Office in which cash/coins are stored pending deposit. The City should institute tighter accountability measures to insure only a few, responsible, identified officials have access to area where cash/coins are stored. Such measures could include electronic card access to offices or safes in which cash is stored, depending upon the financial feasibility of installing such a system.

13.​Since the IT Department has access to virtually all areas of the City government, both physically and electronically, the head of the IT Department should report directly to the City Manager instead of to the Comptroller.

14.​Continue to build on the improvements made by Comptroller Kathryn Mack in reducing the amount of cash collected by the City, where possible, e.g., continue using the cashless automatic meter machine at the boat launch.

15.​Where cash collection is unavoidable, there should be separate, identified City employees responsible for the collection, counting, reporting and depositing of those funds.

16.​Determine exactly how many total parking meters are located throughout the City.

17.​Work collaboratively with the City Council and the DPW to determine where to immediately install the three new parking meters, which are now sitting in the DPW building.

18.​Establish a protocol for reporting and monitoring damaged or missing meters, and ensure that the DPW Superintendent, Comptroller, and City Manager receive regular reports. This would eliminate situations in which missing or stolen meters go unnoticed and unreported, until they happen to be discovered by a concerned citizen or the Police Department.

19.​Establish a protocol for how meters are replaced and where they are replaced. Eliminate the ability of an individual DPW employee to unilaterally determine which meters will be fixed or moved and when.

20.​Establish written procedures for the regular collection of coins by designated members of the DPW Traffic Department at regular times.

21.​Institute regular reporting through which the Comptroller provides the City Manager with updated and accurate monthly reports of deposits of coins collected from the meters. The Comptroller and City Manger should carefully review these reports in order to gain an understanding of how much revenue is generated from certain areas of the City. This will help in future determinations as to where electronic meters would best be placed. A careful routine review may help identify any missing funds and will increase the overall oversight of the handling of cash by City employees.

22.​Explore the feasibility of utilizing a police escort during the collection from meters so that the coins can be transported to the bank for immediate deposit. Alternatively, work to reduce the amount of time the coins sit in the Comptroller’s Office so that the coins are deposited within 24 hours of collection.

23.​Create the position of Parking Enforcement Officer that has operational supervision over the collection of coins from meters as well as replacement of existing, nonfunctional meters.

24.​Have clear internal controls and a segregation of duties for employees who collect cash and those who make the deposits. Have accurate records of what cash is deposited. Ensure that these controls are being implemented by having adequate oversight and by the making of periodic reports.

25.​Create a reporting system through which City employees can anonymously report concerns about cash-handling practices without fear of professional repercussions.

District Attorney Hoovler thanked the City of Newburgh Police Department and the New York State Comptroller’s Office for their assistance in both the investigation into John Aber’s thefts as well as in the grand jury investigation which led to this report being issued.

“It is distressing that City officials never fully implemented the practical recommendations that were contained in the report issued by the State Comptroller’s Office in 2012,” said District Attorney Hoovler. “The residents of Newburgh deserve to have their public officials safeguard municipal funds so that they can be used to benefit City residents and not be stolen or wasted. I thank the State Comptroller’s Office for all of their assistance in this investigation. As noted in the Grand Jury’s report, the City of Newburgh has suffered by the frequent turn-over of municipal officials including the Police Chief, the City Manager, and the City Comptroller. I urge City officials to carefully consider all of the Grand Jury’s recommendations, and to implement those which will safeguard City funds as soon as possible.”

“Poor controls and lack of oversight are an invitation to fraud. The Grand Jury’s report details lapses which permitted the City Comptroller to defraud taxpayers and offers essential recommendations for moving forward,” said State Comptroller Thomas P. DiNapoli. “I thank District Attorney Hoovler for his continuing partnership in fighting public corruption.”