Otsego SWCD Back On Track after NYS Comptroller Audit

By DARLA M. YOUNGS
OTSEGO COUNTY

Following an in-depth audit conducted by New York State Comptroller Thomas P. DiNapoli’s office, the Otsego County Soil and Water Conservation District and its governing board “have been strengthened in ways that are exemplary for any type of organization,” SWCD Board Chair Margaret Kennedy said in a telephone interview on Monday, April 8.

“We are right where we need to be,” Kennedy added with assurance.

Kennedy, one of two members of the Otsego County Board of Representatives serving on the SWCD board, explained that the OSC audit released last month was a performance audit, intended to examine policies, procedures, and internal controls, and to identify areas in need of improvement.

“The Board of Directors (Board) did not effectively manage grants or ensure that authorized disbursements were supported and for appropriate District purposes,” the OSC report reads under the section titled Key Findings. “As a result, District officials made overpayments, unsupported payments and unnecessary payments at taxpayers’ expense.”

Specifically, the comptroller’s office found that during the initial audit period—January 1, 2017 through July 31, 2022—district officials:

• Overpaid landowners totaling $174,950.00 for six grants resulting in an inappropriate use of local taxpayer money.
• Made 49 disbursements totaling $145,876 without adequate support (out of 63 disbursements reviewed totaling $154,080.00).
• Paid $11,630 in unnecessary payments, including excess tree purchases, late fees, interest, unused cell phone accounts, sales tax and lease payments for a copier that had been replaced.
• Paid employees for unsupported leave payments totaling $8,860.00 and an unallowed payment totaling $1,192.00.

According to the comptroller’s report, the audit period was extended through December 31, 2022 to calculate unnecessary expenditures and through May 23, 2023 to review grant disbursements and closeouts.

A read through the Otsego County Soil and Water Conservation District board meeting minutes beginning in 2021 shows that on April 16 of that year, Brian Steinmuller, assistant director of New York State Agriculture and Markets, was present at the board meeting to discuss concerns about grant reporting and closeouts.

The minutes state that Steinmuller was “here today to stress the fact that grant projects need to get done in the field and office properly.” Administration of the grant is just as important as the field component of the grant, Steinmuller said.

The April 16 minutes go on to report that Steinmuller had e-mailed then-District Manager Jordan Clements on March 12 “expressing concern about past due closeouts, 19 months overdue.” Steinmuller said he would pull in another coordinator from Ag and Markets and alerted the board that auditors at the state level would be getting involved.

“At this point, NYS Ag and Markets could deem Otsego SWCD as an irresponsible vendor for state programs,” Steinmuller is reported in the minutes as saying. “Every step the district takes to get these projects done will make sure they can continue to provide services to the farmers,” the minutes read.

The minutes show that SWCD board members Meg Kennedy and Ed Lentz immediately questioned Steinmuller with regard to assistance with grant reporting benchmarks and checklists, and ways in which to reprove the district’s worthiness as a responsible vendor.

Lentz commented then that part of the problem seemed to be the complexity of partnering with Natural Resources Conservation Service, a federal agency that shares office space with SWCD and works with SWCD staff on a number of conservation programs and projects that help people reduce soil erosion, enhance water supplies, improve water quality, increase wildlife habitat, and reduce damage caused by floods and other natural disasters.

Clements also referred to communication issues with NRCS, and is quoted in the minutes as saying, “These are good projects my staff and I have done, and I’m embarrassed this is happening.” Clements resigned from his position as district manager in June 2022.

Steinmuller said that he did not feel state and federal partnering on grants was the root cause here. After much discussion, Steinmuller explained that, at that point in time, things were “in our internal auditors’ hands. We have offered a plan for repayment. It will require OSC [Office of the State Comptroller] approval.”

On a positive note, Steinmuller commented that any district that has gone through an OSC audit “has come out better in the end.”

Both SWCD and NRCS provide important services to the residents of Otsego County. New York’s 58 county Soil and Water Conservation Districts offer programs and services to conserve, enhance, and protect soil and water resources across the state. NRCS helps producers, soil and water conservation districts, and other partners protect and conserve natural resources on private lands throughout the United States, with approximately 2,300 service centers in communities nationwide.

While the complexities of state and federal agencies working together may have muddied the waters, reading through the SWCD board meeting minutes makes one wonder if some of SWCD’s difficulties may be yet another fallout from the COVID-19 pandemic. In 2020, it appears that many of the board members were forced to meet virtually rather than in person, and in August of 2020, then-District Manager Clements and other staff members experienced issues with daycare and shortened school days which required them to work from home two days a week.

When asked whether or not she thought the pandemic may have exacerbated issues at SWCD, Kennedy said, “It is possible [social distancing] kept the board from being as involved as they could have been.”

The minutes also show that, from November 2017 to January 2021, there was relatively little change in the composition of the SWCD Board of Directors, which may also have contributed to the oversight problems, in that there were few fresh eyes reviewing the materials and processes during the period in question.

Kennedy did not disagree, though she was quick to praise her fellow board members and SWCD staff for taking immediate action following the April 16 heads-up from Steinmuller—getting materials to the auditors in a timely fashion and working to make things right.

“The board members were so cooperative. When we realized the extent of the issues, and the extent of the challenges ahead, the board attitude was ‘let’s get going to fix this, tell us what to do next,’” Kennedy said.

Once fully aware of the problems and knowing that things had to change, the board met twice monthly in 2022 and partway into 2023 to address the various issues, Kennedy said. And, with assistance from the state and former District Manager Scott Fickbohm, board members have taken all available trainings within the last 16 months.

Kennedy described officials from Ag and Markets and the OSC as being very helpful before, during, and after the audit process.

The June 13, 2022 SWCD board meeting minutes make it clear that board members were examining the district’s shortcomings in order to move forward: “The board discussed how the problems with district finances developed. The main reasons were: a district secretary who was unqualified and unable to perform the functions of the job; a subsequent district secretary who, while very capable, also lacked the requisite experience; a district manager who did not engage in the management of district finances or properly oversee the work of the district secretaries; and a complacent board of directors that did not provide adequate oversight of grants management and that did not put in place policies and procedures that might have prevented overpayments and other problems.”

Despite this, Kennedy said it is very difficult to assess blame for what went wrong.

“Many of the SWCD contracts are multi-year, with lots of moving parts. Engineers, other federal partners, various funding packages, et cetera,” she explained.

Staff turnover may also have impacted the effectiveness of the district.

Key overarching recommendations in the Comptroller’s March report were:

• Ensure grant disbursements are approved before payment to avoid overpayments to landowners.
• Perform a thorough claims audit to ensure disbursements are supported and for appropriate and necessary District purposes.
• Maintain accurate leave records and periodically review leave accrual balances.

The report also specifies 16 recommendations for the Board to implement, from establishing separate bank accounts for each grant to ensuring that grant disbursements are properly supported and approved before payment to adequately segregating payroll duties and/or establishing compensating controls to provide oversight of the payroll process.

A letter to Regional Chief Ann Singer of the OSC dated March 11, 2024—signed by Kennedy—said board directors agreed with all draft findings and recommendations.

“This audit process has allowed us to strengthen our policies and procedures, establishing a firm foundation for future success with grant-funded projects and general operations,” the letter reads.

Kennedy goes on to list each of the OSC’s 16 recommendations and outlines the board’s Corrective Action Plan in response to those recommendations. As per OSC requirements, the CAP is posted on otsegosoilandwater.com for public review.

Meanwhile, things are moving right along at SWCD under new leadership.

District Manager Christos Galanopoulos provided the following recap of SWCD services:

“The Otsego County SWCD engages the local community in a variety of ways, either via financial help, technical assistance, community outreach or a combination of the previously mentioned [strategies].

“On the financial side, the Otsego SWCD can offer farmers a Comprehensive Nutrient Management Plan, which may lead to installation of stream exclusion fences, manure storage facilities and runoff management abatement. The technical side has the SWCD employees advising both farmers and non-farming landowners on the best course of action for water- and soil-related issues on their property, along with the installation of mitigation practices such as riparian buffers.

“On the outreach end of [things], the Otsego SWCD conducts the annual Envirothon as well as the tree sale, which is quite popular with county citizens, while maintaining a minor presence in the Earth Day events, the county fair and any other local festival during the summer.

“As for [current] projects, we are looking forward to implementing our Manure Storage Facility grant that we were awarded last year through the Agricultural Nonpoint Source Abatement Program via the New York State Department of Ag & Markets, which will aid in keeping the Unadilla River clean and viable for fishing and other recreation activities,” Galanopoulos explained in an e-mail on Tuesday, April 9.