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Audit rips Lake Placid village

December 30, 2010
By CHRIS KNIGHT, Enterprise Senior Staff Writer

LAKE PLACID - State Comptroller Thomas DiNapoli released a scathing audit of the village's finances Wednesday that recommends local officials pursue criminal charges against the village clerk.

Auditors found village department heads and employees received $111,058 in unauthorized payments for unused leave time - vacation, sick, etc. - during the audit period of August 2008 to October 2009.

In particular, village clerk Kathryn "Kook" McKillip collected $22,774 in payments for leave time she had not earned, the audit found.

Article Photos

State Comptroller Thomas DiNapoli: “Lake Placid has to get its fiscal house in order and fast.”
(Photo provided)

DiNapoli, in a press release, said "woefully inadequate oversight of the village's financial operations" was to blame.

"A disregard for fiscal monitoring cost Lake Placid taxpayers more than $110,000," DiNapoli said. "Lake Placid has to get its fiscal house in order and fast."

Village Mayor Craig Randall, in a letter accompanying the 34-page audit, said the current village board has taken steps to "change the culture and business practices of the village." He attributed the problems to prior village administrations.

Randall and two fellow Republican village board members took office in April 2009, eight months into the 14-month audit period.


No oversight

The audit report says internal controls over village payroll functions were inadequate and, in some cases, non-existent. The lack of comprehensive written policies and procedures allowed McKillip to take "advantage of the weaknesses in the internal control structure of the village," the audit says.

McKillip became responsible for all village payroll functions following the March 2008 resignation of treasurer Karen Huttlinger. McKillip's payroll responsibilities were performed with no oversight, and other village officials didn't review and certify final payrolls, the audit found.

No non-union village employee is authorized to receive end-of-fiscal-year payments for unused leave time, per the village's personnel policy, but two of the five village worker unions are allowed unused leave payouts in their contracts.

Auditors found McKillip received 21 unauthorized payments, totaling $38,003 for 1,384 hours of accumulated leave time from July 2004 to December 2009. McKillip did not even earn leave accruals to support $22,774 of the $38,003 in inappropriate payments, the report says.

Auditors recommended the village board "notify law enforcement authorities of the improper payments to the clerk so that appropriate action can be taken."

The audit also found seven village department heads received $40,111 in payments for accumulated leave time, which they were not entitled to receive under the village personnel manual, from January 2007 to October 2009. Six other employees received unauthorized payments of $14,971 for the buyout of leave time during the 2008-09 fiscal year, the report states.

Part of the problem, auditors said, was that McKillip didn't maintain accurate leave accrual balances for all village employees and instead relied on each department's records. In addition, auditors found McKillip and five other employees were maintaining their own leave accrual records with no managerial oversight.

Village taxpayers also paid $18,262 in unnecessary health and dental insurance payments, which were handled by McKillip with no oversight. Auditors found the village paid out $11,698 in health insurance payments for former employees whose coverage wasn't terminated, but should have been, when they stopped working for the village - one was on the village plan for 143 days after leaving. Another $6,275 in dental insurance payments were made to retirees who were no longer eligible for coverage.

Among other things, the audit says the village underbilled some water and sewer customers by $9,177 and overbilled other water and sewer customers by $4,993.

Village officials were also cited for failing to comply with competitive bidding requirements and for not properly auditing claims before they were paid.

Auditors also found $13,142 in payments for inappropriate purchases, such as $1,358 for a retirement party for an outgoing village justice in 2008, even though the village had been told in a prior audit that spending taxpayer money on such parties is inappropriate.


Village response

McKillip was out of the office Wednesday. Her listed telephone number was not in service, and the Enterprise was unable to reach her for comment.

Randall said the village board has already taken steps to address the problems by changing policies and procedures, installing new accounting software and establishing an accounting department with Treasurer Peggy Mousaw in charge of payroll, billing, accounts receivable and cash receipts. Village officials also plan to bring in an independent auditing firm to help address the comptroller's findings.

"I think it's fair to say that the candy jar this report refers to has long since been removed," Randall told the Enterprise Wednesday. "The policies and procedures of this village have taken a great deal of our time, and we have reinstalled significant checks and balances."

Randall's written response to DiNapoli outlines the "underlying historical causes" of the problems. In particular, he said, the prior village board, "often appeared dysfunctional and its oversight responsibility may have been largely overlooked due to overwhelming day-to-day issues." Randall also noted that McKillip "was in no way trained or prepared for this additional work with no prior work experience in human resources or municipal accounting."

Asked if he was laying blame for the audit on the past administration, Randall said it may stretch back even further.

"I look back to the last state comptroller's audit, which was issued in 2000, and some of the same issues that we're dealing with today were reflected in that report," he said. "I think it's fair to say these were issues that plagued the village that have never been fully addressed."

Trustee Zay Curtis said the village basically had been operating like it did in the 1950s.

"As the village grew and got more complicated, and as accountability became more demanding and the rules became more sophisticated, the village didn't come along," he said. "Basically, what we've been doing for the past year is, put it in the modern world."

Trustee David Jones, the only member of the current village board whose tenure stretches into the period covered by the audit, admitted that the prior board was "lax" in its oversight.

"You don't know how I've been agonizing over this," he said. "I take a lot of responsibility for that because I'm the only one that's been there through the change in administrations. We entrusted a lot of the finances of the village to Kook because we had absolutely no one else to do that."

Former village Mayor Jamie Rogers told the Enterprise that he had no idea that McKillip was paying herself for leave time she hadn't accrued, though he admitted it was his responsibility to oversee her work. Although village policy prevented department heads from receiving bulk payments for unused leave time, Rogers said the village felt it was OK to pay them for their unused time because they were already doing so for some employees.

"Even though you're treating department heads the same way you treat your employees, you're not following your policies and procedures," he said. "But if you have department heads who are entitled to six or eight weeks of leave, you don't want a department head out of the office for two months."

Rogers said his board realized the village's financial oversight needed to be improved, but he said they struggled to do so because of a lack of resources - a problem that he said plagues many small local governments.

"I really believe the four people that served with me tried to do what they thought was best for their community and their government," Rogers said. "What I keep coming back to is the fact that I believe local governments don't have the resources and capacities to put good oversight and internal controls in place."


Criminal case?

Auditors said they planned to refer their findings to the Essex County District Attorney's Office, but DA Kristy Sprague said in an e-mail Wednesday that she wasn't aware of the audit or any criminal investigation stemming from it.

Randall, Curtis and Jones declined to comment on the possibility that McKillip could face criminal charges, noting that she hasn't been found guilty of anything. Randall said he is comfortable with McKillip continuing to work for the village, for the time being. He said he has spoken to her about the audit's findings.

"I think it's fair to say my clerk does not acknowledge any wrongdoing here," Randall said.

Asked if the village will try to recoup the inappropriate payments to village employees, Randall said that hasn't been decided.

Curtis said it could be difficult because the practice had been going on for many years.

"It was going on through three different mayors and three different boards, and a payout happened every year at the same time, and it was in some cases signed by the mayor," he said. "So, how do you go back and say they did something wrong? I don't think you can, and I'm not sure you should. We have some lines we need to draw. But that's not mitigating what's in (the audit). What's in here is serious, very serious."


Contact Chris Knight at 891-2600 ext. 24 or



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