TO: Victoria Fabella, Clerk of the Ulster County Legislature
FROM: Michael P. Hein, Ulster County Executive
DATE: December 20, 2013
RE: Resolution No. 297 Dated December 10, 2013
Pursuant to Ulster County Charter Section C-12, I am returning Resolution No. 297, Dated December 19, 2013 with my veto.
Resolution No. 297 contains the Legislature’s approval of a contract for services in connection with the County’s annual financial audit which is required by the Charter to be performed by an independent auditor.
The same auditing firm was previously awarded by the Legislature the contract (Contract# C12-00226) for the 2013 budget analysis. Therefore, by performing the official audit of the County’s 2013 books and records, the same firm will have analyzed the proposed budget, made estimates and recommendations concerning it, provided opinions as to its financial soundness; and then audited the books and records of the County which necessarily must be based on the 2013 Budget. As part of the annual financial audit the firm will be required to evaluate budget estimates and projections, some of which may have been changed due to its role as budget analyst. This means the firm will be evaluating its own work product which is contrary to the most basic tenets of sound internal controls.
My Administration is committed to delivering the highest standards of professional conduct as we serve the great people of Ulster County. The aforementioned dual role has the unfortunate potential to foster a conflict of interest and lends itself to the appearance of impropriety. Furthermore, accounting standards require independence in mind as well as in appearance. Government Auditing Standards, as published by the U.S. General Accounting Office, clearly state “Audit Organizations should not audit their own work or provide nonaudit services in situations where the nonaudit services are significant/material to the subject matter of the audits.” Performing the budget analysis, a nonaudit service, and then subsequently auditing the County’s books and records at year end is contrary to this unambiguous professional accounting directive.
Engaging different firms to perform the budget analysis and annual financial audit helps promote integrity in the process, improves government transparency and avoids the appearance of impropriety or potential conflict of interest. If the same firm is selected to perform these dual functions it would be the first time under our new charter form of government that the County Legislature awarded contracts for both the budget analysis and the annual financial audit to the same firm.
I have great respect for the Ulster County Audit Committee’s responsibility to select an official auditor, and as such, I do not make this decision lightly. It is important to note, there is no suggestion that the accounting firm named in the contract does not have the ability to conduct a thorough, professional audit, and it is only because of its prior engagement to conduct the budget analysis that I have vetoed Resolution No. 297. The role of the County Executive must be one which aligns with the best interest of the citizens of Ulster County to foster and advocate good government and avoid even the appearance of impropriety.
The 2014 Ulster County Budget was adopted in a unanimous bipartisan vote of the County Legislature and contains the largest decrease in government spending in the history of the County while simultaneously continuing to provide essential services to our residents. A transformational budget such as this, as well as the people of Ulster County, deserves a truly independent audit, free of even the appearance of conflict, to ensure that now, and in the future, government accountability remains at the highest possible level which is why it is essential a precedent is not set concerning the 2013 Budget, and we continue to uphold the highest standards.