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Politics & Government

Mallozzi Wants Forensic Audit of Capital Projects

The New Canaan Board of Selectmen on Tuesday gave first Selectman Robert Mallozzi the OK to begin the search for an audit firm to investigate unauthorized payments from the town's nonrecurring capital projects account.

 

Following the recent discovery that funds had been spent without proper authorization from the town's nonrecurring capital projects account, First Selectman Robert Mallozzi wants a "forensic audit" of all the town’s capital projects during the previous four years, with a special focus on the Lakeview Avenue Bridge project.

The Board of Selectmen on Tuesday gave Mallozzi the green light to begin the search for an audit firm after the discovery that an unauthorized payment of about $1.5 million was spent from the capital budget for a cost overrun for the bridge project under the previous administration. Earlier in the year current town CFO Dawn Norton discovered that an appropriation for $400,000 for a chiller at East School also did not get proper approval before disbursement.

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During Tuesday's Board of Selectmen meeting, Mallozzi said he fears the audit will turn up additional unauthorized appropriations from the town’s non-recurring capital expenditures account during the previous four years.

“We have to get to the bottom of this,” Mallozzi told his fellow board members during the meeting held in the training room at police headquarters. "I want all of it — I don't want to go through this haphazardly and find out later that we missed something. I think there might be more examples of this out there than less..."

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In a telephone interview Tuesday afternoon Mallozzi said although there is no evidence thus far that any town money was misappropriated — it appears all of it was spent on the approved town projects — he wants an independent auditor to conduct a detailed "line-by-line review" of each project budget and an accounting of how "every penny" was spent, for the purpose of transparency as well as improving town procedures.

The alleged unauthorized transfers took place during the tenure of former First Selectman Jeb Walker and Chief Financial Officer Gary Conrad, who reportedly signed-off on the expenditures even though they had not gone through the proper approvals process. The bridge project was completed in 2009.

"The thing we have to look into is... how many times did the former CFO and first selectman bring things forward and then cut checks without reviews?" Mallozzi said, adding that although the town undergoes an annual audit, as all municipalities do, it doesn't take a detailed look at how projects are handled within the capital budget.

"The capital projects need to be looked at separately," he said, adding that at this point the staff in the Finance Department has exhausted all avenues in attempting to track down where the errors occurred.

Mallozzi wants the firm to review all spending from the capital and nonrecurring account from Dec. 1, 2007 through Dec. 1, 2011.

Last month town officials confirmed, via a , that Conrad had overstepped his authority when he granted Walker a pension greater than what he was supposed to receive under the town’s pension plan. Conrad, who now works as finance director for the Town of Westport, has denied any wrongdoing.

The request for an audit of the capital projects account comes as the town is establishing an Audit Committee that would report to either the Board of Selectmen or Town Council.

Mallozzi said all third party auditing entities would report to that committee once it is established via town charter. Currently the Town Council's Ordinance subcommittee is working on the details, including how many seats the new committee will have and whether it will report to the Board of Selectmen or Town Council.

Mallozzi said although the Town Council last year appointed a special subcommittee to investigate the unauthorized spending on the bridge project, it  "didn't look at the actual transactions... just the town policies..."

Selectwoman Beth Jones, who sat on the Lake Avenue Bridge subcommittee, which was formed last year to conduct a review of an abitration settlement, said "there are a lot of unanswered questions about where the financials went," as well as questions "about who approved what... and how."

"We saw that there were a lot of mistakes made, a lot of sloppiness," Jones said.

A Sept. 2011 draft report from the Lake Avenue Bridge Subcommittee goes into detail about what occurred, concluding that "over the course of the project, procedures were breeched, errors were made, and unwise choices were too common. However, despite this disappointing record, there is no evidence that personal gain or corruption played any part in the proceedings. Instead, a lack of foresight, a lack of control, and lack of communication ruled the day."

The report outlined numerous recommendations for ensuring proper safeguards and improved communication regarding capital projects, some of which have been implemented, including adoption of GASB and GAAP standards; establishment of proper procedures for use of the capital fund; and improved communications protocols between the Board of Selectmen, Board of Finance, Town Council and executive departments.

Mallozzi said he hopes that by having an independent firm conduct a thorough investigation, proper procedures can be put in place to prevent such matters from occurring again, and the town can learn from its mistakes.

Selectman Nick Williams agreed, saying as long as the audit yields a positive outcome for the town, in terms of improving operations, "I'm for it."

The Board of Finance was scheduled to discuss the Lakeview Avenue Bridge project during its meeting on Tuesday evening. The selection of an audit firm as well as funding for the audit must still be approved by the Board of Finance and Town Council.

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