by Ted Carroll, Guest Columnist
I’d like to reduce everyone’s property taxes. Interested?
It’s said where there’s smoke there’s fire and how true this sometimes is. City Hall’s years long reluctance to even acknowledge a well documented case of high profile big political donations coupled with an apparent stark underassessment leads one to naturally ask how much more of this is there and what kind of money are we talking about. Well it could be small or it could be big, so big that now that city officials can see what we’re up to with our lawful public records requests we may never get the full set of records or they’ll be redacted to death. But there is another way to skin the cat, as some like to say, and that is to ask our outside accounting pro’s to do their jobs. I used to be one, and I actually worked on the City of Rye’s own annual audit, so I’ll explain –
The Boring Stuff:
Municipalities who issue public debt must engage an independent certified public accounting firm to ‘opine’ at least annually on the fairness and accuracy of their financial statements under generally accepted accounting principals. Rye has a new independent auditor now after the last one repeatedly and mysteriously missed internal control weaknesses hiding an internal control circumvention that led to what we currently believe was the city’s longest and largest fraud.
In independent auditing you look to prove or disprove the reliability of a system of financial controls so that you can render an overall opinion on the fairness of the amounts recorded in financial statements that you did not create, and do not own. To do this you attempt confirm certain balances and transactions with outside independent parties (including banks, vendors and debtors) and you perform tests of the underlying financial records by selecting items for review based on materiality, critical function, random selection or other reasons.
If you’re aware through credible accounts of any possible questionable areas of material under or overstatement of expenses or revenue then you are duty bound under generally accepted auditing standards to select these areas for examination and testing to either prove or disprove the thesis. In auditing, a supposed ‘isolated incident’ is not that unless testing proves it to be so.
Affidavit of Final Costs:
When you construct or remodel a home in Rye the building department requires you file for a permit, and make a preliminary estimate and payment against your final permit fee based on your expected total project costs. The rate is $17 per every $1000 of costs and at the end of the work, and after the building inspector approves the work, you supply a final statement of your actual costs and pay any difference using the same rate structure. And here is the key control weakness; in Rye you don’t have to provide any proof whatsoever that the costs you’re claiming are your actual costs. So if you’re willing to sign the ‘oath’ on our Affidavit of Final Costs and be untruthful you can save a lot of money and the city is out that lot of money. Everyone living here for even a few years knows the local building industry has been on a rampage recently and the permit fees revenue line item in the city financial statements is not immaterial.
Designing the Test:
The best test to ascertain accuracy and fairness of a revenue item is to request and require independent outside confirmation of that item. In this case that would be building contracts, invoices and other 3rd party proof that the final amount attested to by the permit holder is correct. These will be simple to get as the permit holder had to collect and summarize these bills anyway to develop the single final cost figure provided on their Affidavit to the city. I’d start with recent bigger projects where the financial impact on the city is the biggest. And I’d select that same example of stark apparent underassessment and underreported final construction costs from the big political donor to put at least that matter to rest one way or another. However you design the test it has to provide assurance to the public at large that the system is not being gamed, and honest residents are not being taken advantage of and paying higher taxes because of those who might cheat a little, or cheat a lot.
My Offer to Help:
Our new independent outside auditor seems like a good, solid firm. I’d be pleased to volunteer to work with them and help design the Affidavit test and help set its scope for an initial review. I’ll even bring to the meeting my own copious records required to prove my own home construction costs to the penny to the satisfaction of the Rye City assessor. The whole process shouldn’t take long, and my office in midtown Manhattan happens to be on the very same block as theirs.
Who could possibly object?
Ted Carroll was recently awarded a property assessment reduction by one court, then had it taken away by another, has made no recent political donations, is a lifelong Rye resident, a Certified Public Accountant, and a partner at Noson Lawen Partners, a media industry private equity firm.
See some of Carroll’s other 2016 MyRye.com commentaries here: