SCHENECTADY City’s accounting system brings penalty BY KATHLEEN MOORE Gazette Reporter Reach Gazette reporter Kathleen Moore at 395-3120 or moore@dailygazette.com.
The city’s unusual way of filing financial statements led to an unexpected $18,000 bill this week. The city had planned to get a $1 million loan for two fi re trucks, and a bank in California had offered the lowest bid for the loan. But after the City Council approved the contract, First California suddenly cancelled it. Finance Commissioner Ismat Alam said the bank wasn’t happy with the city’s fi nancial statements. The problem? The city doesn’t use GAAP, Generally Accepted Accounting Principles. Instead, it uses another widely accepted system. Lenders prefer GAAP. Auditers have repeatedly noted that the city isn’t using GAAP, but Alam has defended the city by noting that GAAP isn’t required. That’s true, according to the state Comptroller’s Offi ce. GAAP isn’t required — but almost every municipality in the state uses it, spokeswoman Kate Gurnett said via email. She added that GAAP is a good idea. “Generally speaking if you want to go borrow, lenders look for financial statements in GAAP,” she said. For now, the immediate problem has been resolved. Alam was able to negotiate a new contract with another bank, Chase, at a total additional cost of $18,000. The city will be able to buy its fi re trucks, she told the council. But the incident might lead city officials to start using GAAP — which, simply stated, is just a different way of preparing the same numbers. The city says it takes more work to use GAAP, but banks accustomed to dealing with GAAP find it easier to work with because that is what they are used to. “I think if we’re going to lose out in the long run, we have to look into doing it,” said Council President Denise Brucker. “We’d have to do a cost-analysis.” She plans to ask Alam to do the analysis and explain what must be done to comply with GAAP. “The first step is to find out,” she said. Mayor Gary McCarthy said the decision is up to the council. But he said GAAP might not have been the real problem in the loan contract. “I think that bid came in low and they wanted to get out of it,” he said of the bank’s offer of a low interest rate. “The market shifts, gets back up a little bit, so it’s not as attractive to them.” Council members are making a formal complaint and considering legal action against the bank for breaking the contract. “You know, we entered into a contract,” Brucker said. “I don’t know how they can just back out.”
I am sure we are spending more money not following GAAP. It takes more effort to leave stuff out. We don't follow GAAP because we don't want to report all our employee retirement benefits. That's a fact.
Also find it funny how they said the firetrucks are bought by a loan. It is a million dollar lease! Spinners.
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McCarthy is a terrible liar meaning that anyone with half a brain can see it for what it is.
The city isn't complying with GASB 45 either. You'd think that Daily Rag would expose that too except they're more concerned about continuing with the "good time" news here.
Like how good a time the taxpayers will have paying for pumped up pensions in the decade to come.
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