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HomeMy WebLinkAboutComptroller Report groton-town-2022-113-1REPORT OF EXAMINATION | 2022M-113 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY DECEMBER 2022 Town of Groton Long-Term Planning Contents Report Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Long-Term Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 How Does a Board Establish Long-Term Capital and Financial Plans? 2 The Board Did Not Establish Long-Term Capital and Financial Plans 2 What Do We Recommend? 5 Appendix A – Response From Town Officials . . . . . . . . . . . . . 6 Appendix B – Audit Methodology and Standards . . . . . . . . . . . 7 Appendix C – Resources and Services . . . . . . . . . . . . . . . . . 9 Office of the New York State Comptroller 1 Report Highlights Audit Objective Determine whether the Town of Groton (Town) officials established long-term capital and financial plans to address the Town’s Highway Department equipment needs Key Findings Town officials did not establish long-term capital and financial plans to address the Town’s Highway Department equipment needs As a result: l 17 of the 24 pieces of major highway equipment (71 percent) were at or beyond their optimal usable life l Out of 17 pieces of major highway equipment reviewed, five trucks accounted for $81,250 (76 percent) of total repair costs during the audit period If equipment is in need of repair on a regular basis, services to taxpayers may not be provided timely and adequately Key Recommendations l Develop long-term capital and financial plans to replace highway capital assets in a timely manner l Consider funding reserves for the highway capital equipment needs l Provide the Board with written recommendations as to what highway machinery, tools, implements and equipment should be purchased Town officials agreed with our findings and indicated they plan to initiate corrective action Background The Town is located in Tompkins County and includes the Village of Groton within its borders An elected five-member Town Board (Board), which is composed of the Town Supervisor (Supervisor) and four Board members, is responsible for the general management of operations and finances including adopting the annual budget and managing long-term capital and financial plans An elected Highway Superintendent (Superintendent) is primarily responsible for the maintenance and repair of Town roads and highway equipment The current Highway Superintendent’s term began on January 1, 2022 Audit Period January 1, 2021 – February 28, 2022 We extended our audit period through August 9, 2022, to review the equipment replacement plan presented to the Board Town of Groton Quick Facts Pieces of Major Highway Equipment 24 2022 Highway Town- Wide Appropriations $944,401 2022 Highway Town- Outside-Village Appropriations $709,000 Population 5,746 2 Office of the New York State Comptroller How Does a Board Establish Long-Term Capital and Financial Plans? A town board is responsible for making financial decisions that are in the best interest of the town and its taxpayers and residents This includes planning for the future and setting long-term capital and financial priorities and goals Capital plans should have a clear mission to maintain and improve a town’s capital assets over time The plan must balance capital priorities with fiscal constraints It should be as comprehensive as possible, encompassing all major public assets that have a significant usable life It should also establish parameters for how capital assets will be financed Finally, it should be flexible enough to respond to new needs and deal with emergencies Highway superintendents are required to annually provide to the town board on or before September 30th a written inventory list of all machinery, tools and equipment, indicating the value of each item and estimated cost of all necessary repairs Highway superintendents are also required to provide to the town board written recommendations as to what machinery, tools and equipment should be purchased and the probable cost The town board can establish reserve funds for the future acquisition and repair of capital assets Balances of reserve funds should be monitored to ensure funds remain for planned expenditures The New York State Department of Transportation (NYSDOT) developed an optimal usable life document which provides an estimated optimal usable life, in years, as well as an estimated replacement value for each type and class of vehicle and equipment that are generally used by highway departments Town boards and highway superintendents can use this document to help determine when replacement of assets could be expected The Board Did Not Establish Long-Term Capital and Financial Plans The Board did not develop or establish long-term capital and financial plans The Town’s Highway Department has 24 pieces of major highway equipment, with 17 at or beyond their usable life by an average of 6 3 years (Figure 1) Long-Term Planning Office of the New York State Comptroller 3 Due to the aging of the major highway equipment, the cost of repairs to these assets have increased We analyzed the repair costs for all 17 pieces of major highway equipment requiring repair1 during our audit period to determine the total cost of repairing these pieces of equipment During our audit period, the Town incurred repair costs totaled $106,700, and five trucks accounted for 76 percent of all repair costs reviewed (Figure 2) Three of these five trucks were over their optimal usable life Figure 1: Age of Major Highway Equipment at or Beyond Usable Life Type (Quantity) Years Age NYSDOT Usable Life Over Usable Life Large Dump Trucks (4) 17 12 5 17 12 5 15 12 3 15 12 3 Small Dump Truck (1)11 9 2 Stake Truck (1)15 10 5 Pickup 4x2 (1)7 6 1 Pickup (2)11 8 3 8 8 0 Grader (1)34 20 14 Roller (1)32 15 17 Loader (2)18 10 8 11 10 1 Tractor (2)33 10 23 12 10 2 Chipper (1)15 10 5 Mower (1)25 15 10 Figure 2: Five Vehicles with the Highest Repair Costs in Audit Period Truck #Production Year Age Total Repairs 22 2007 15 $29,050 21 2007 15 27,600 25 2016 6 11,000 19 2005 17 7,300 24 2012 10 6,300 Total Repair Costs $81,250 1 We deducted routine maintenance expenditures (i e , oil changes, brake replacement and tire replacement) from the repair costs 4 Office of the New York State Comptroller Based on discussions with the Superintendent and Supervisor, the replacement costs for the assets over their usable life may total up to $2 3 million Although the Board has no formal long-term capital or financial plans in place, it established a highway capital reserve fund with a balance of $194,075 as of December 31, 2021 that could be used towards replacing these assets The Superintendent told us the entire balance of the highway capital reserve fund will be used to cover the cost of a vehicle the Town has ordered but not yet received The current Superintendent regularly attended Board meetings to discuss the age and condition of vehicles and equipment Town officials also told us they are aware that the highway equipment is aging, that repair costs are increasing and the time to receive new equipment once an order is placed is increasing due to extended manufacturing times On August 9, 2022, the Superintendent provided the Board with a formal major equipment replacement plan which recommends the Town reserve $241,000 annually for the replacement of vehicles and large equipment However, the replacement plan did not include all machinery, tools and equipment In addition, at the Superintendent’s reserve funding rate, it could take approximately 10 years to replace the equipment that is over its optimal usable life, as of the end of our fieldwork Furthermore, as additional equipment exceeds its usable life in the future, the current annual recommendation may increase As a result of a lack of planning and not establishing adequate plans and reserves, costs to taxpayers may increase and prevent the Town from providing adequate services if equipment starts to fail on a regular and consistent basis Without written long-term plans, it is difficult for the Board to properly manage and fund the replacement of Highway Department vehicles and equipment A multiyear capital plan helps manage these investments by scheduling expenditures over a number of years and by creating a financing plan to meet those Town expenditures Town officials did not prepare cost-benefit analyses to determine whether it was more cost effective to repair or replace specific vehicles and equipment Without newer Highway Department vehicles and equipment, Town officials may be spending more than necessary on equipment repair Furthermore, in the event of a failure of multiple pieces of equipment, the Town may not be able to provide the necessary services to residents or may face significant unfunded future expenditures We provided Town officials with the Capital Assets2 and Multiyear Capital Planning3 Local Government Management Guides 2 https://www.osc.state.ny.us/files/local-government/publications/pdf/capital-assets.pdf 3 http://www osc state ny us/localgov/pubs/lgmg/capital_planning pdf Office of the New York State Comptroller 5 What Do We Recommend? The Board should: 1 Develop long-term capital and financial plans to help ensure financial resources are available to replace highway capital assets in a timely manner 2 Consider funding capital reserves as part of the Town’s long-term planning efforts to set aside funds formally and legally for identified future Highway Department expenditures The Superintendent should: 3 Annually provide the Board with a written inventory list of all machinery, tools and equipment, indicating the value of each item, estimated cost of all necessary repairs and recommendations for which items should be purchased and the probable cost 4 Develop procedures to analyze whether it is more cost effective to repair or replace specific vehicles and equipment 6 Office of the New York State Comptroller Appendix A: Response From Town Officials Office of the New York State Comptroller 7 Appendix B: Audit Methodology and Standards We conducted this audit pursuant to Article V, Section 1 of the State Constitution and the State Comptroller’s authority as set forth in Article 3 of the New York State General Municipal Law To achieve the audit objective and obtain valid audit evidence, our audit procedures included the following: l We interviewed Town officials to gain an understanding of the Town’s financial operations and long-term capital plans l We interviewed Town officials and employees to gain an understanding of the highway operations We also reviewed Town policies and procedures, the Town’s asset listing and toured the highway facility to view major highway equipment that the Town owns We verified the age of the equipment by reviewing the Town’s insurance listing, and we verified the condition of the equipment during our visual inspection and interviews with highway employees l We compared the production year of the major highway equipment to the NYSDOT optimal usable life guidelines to determine the remaining usable life of the equipment We also used the replacement cost estimates to determine an estimated replacement cost of all major equipment l We obtained the Superintendent’s proposed financial plan and reviewed the estimated replacement costs for reasonableness by comparing the estimated replacement costs from the NYSDOT optimal usable life document, adjusted for inflation, to the Superintendent’s proposed financial plan l We reviewed the Board meeting minutes to determine whether the Board established a Highway Department capital reserve fund for vehicle and equipment replacement l We reviewed the Town’s annual financial reports to determine capital reserve fund balances and other available fund balances that could be used to finance long-term Highway Department vehicle and equipment replacement l We obtained the Town mechanic’s parts and labor expense reports, repair log reports and outside vendor repair invoices to calculate the Town’s repair costs for all 17 pieces of major highway equipment in need of non-routine repairs during our audit period We reviewed the five vehicles with the highest repair costs and deducted routine maintenance expenditures (i e , oil changes, brake replacement and tire replacement) to calculate the total cost of repairing these vehicles We conducted this performance audit in accordance with generally accepted government auditing standards (GAGAS) Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective 8 Office of the New York State Comptroller Unless otherwise indicated in this report, samples for testing were selected based on professional judgment, as it was not the intent to project the results onto the entire population Where applicable, information is presented concerning the value and/or size of the relevant population and the sample selected for examination The Board has the responsibility to initiate corrective action A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to Section 35 of General Municipal Law For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report We encourage the Board to make the CAP available for public review in the Town Clerk’s office Office of the New York State Comptroller 9 Appendix C: Resources and Services Regional Office Directory www osc state ny us/files/local-government/pdf/regional-directory pdf Cost-Saving Ideas – Resources, advice and assistance on cost-saving ideas www osc state ny us/local-government/publications Fiscal Stress Monitoring – Resources for local government officials experiencing fiscal problems www osc state ny us/local-government/fiscal-monitoring Local Government Management Guides – Series of publications that include technical information and suggested practices for local government management www osc state ny us/local-government/publications Planning and Budgeting Guides – Resources for developing multiyear financial, capital, strategic and other plans www osc state ny us/local-government/resources/planning-resources Protecting Sensitive Data and Other Local Government Assets – A non-technical cybersecurity guide for local government leaders www osc state ny us/files/local-government/publications/pdf/cyber-security-guide pdf Required Reporting – Information and resources for reports and forms that are filed with the Office of the State Comptroller www osc state ny us/local-government/required-reporting Research Reports/Publications – Reports on major policy issues facing local governments and State policy-makers www osc state ny us/local-government/publications Training – Resources for local government officials on in-person and online training opportunities on a wide range of topics www osc state ny us/local-government/academy Like us on Facebook at facebook com/nyscomptroller Follow us on Twitter @nyscomptroller Contact Office of the New York State Comptroller Division of Local Government and School Accountability 110 State Street, 12th Floor, Albany, New York 12236 Tel: (518) 474-4037 • Fax: (518) 486-6479 • Email: localgov@osc ny gov www osc state ny us/local-government Local Government and School Accountability Help Line: (866) 321-8503 BINGHAMTON REGIONAL OFFICE – Ann C Singer, Chief of Municipal Audits State Office Building, Suite 1702 • 44 Hawley Street • Binghamton, New York 13901-4417 Tel (607) 721-8306 • Fax (607) 721-8313 • Email: Muni-Binghamton@osc ny gov Serving: Broome, Chemung, Chenango, Cortland, Delaware, Otsego, Schoharie, Tioga, Tompkins counties