Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 1 of 8 U.S. Department of Justice United States Attorney Southern District of New York United State Courthouse 300 Quarropas Street White Plains, New York 10601 April 7, 2017 Hon. Cathy Seibel United States District Judge 300 Quarropas Street White Plains, NY 10601 Re: United States v. St. Lawrence 16 Cr. 259 (CS) Dear Judge Seibel: We write to respond to the Court's request for authority supporting the Government's positions regarding the Ambulance Fund transfer issue and to respond to the defendant's April 5 letter brief on the medium issue. See March 30, 2017 Pretrial Conference at 118 (requesting authority regarding Ambulance Fund issue); April 3, 2017 Pretrial Conference at 68 (requesting supplemental briefing on medium issue). I. The Ambulance Fund Transfers The transfers from the Ambulance Fund to the General Fund were part of the defendant's scheme to defraud investors. The transfers made the General Fund balance appear higher than it actually was, thereby making the Town appear more creditworthy than it actually was. The Town's financial statements, which incorporated those inflated General Fund balances, were provided to investors in the Town's and RLDC's bonds. These transfers never should have happened because they were part of the fraud scheme and because they were improper under New York law. New York law, which controls municipal finances in the state, is relevant both because it provides the applicable law and because the defendant represented to the Town's auditors each year during the audits of the Town's financial statements that he and the Town were "responsible for compliance with the laws . . . applicable to us" and that he had "no knowledge of any fraud or suspected fraud affecting the" Town. Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 2 of 8 Section 9-a of New York's General Municipal Law provides in relevant part that "[m]oneys temporarily advanced pursuant to this section shall be repaid to the fund from which they were advanced as soon as available but in no event later than the close of the fiscal year in which the advance was made." This requirement of repayment of money advanced from one fund to another applies regardless of whether the funds at issue have different tax bases. 1 This language alone makes the defendant's permanent transfers of money from the Ambulance Fund to the General Fund improper under New York law. More broadly, Section 9-a sets forth the mechanism by which transfers may be made between funds. With some inapplicable exceptions, no other statute authorizes transfers between funds. It would make no sense for New York's legislature to impose time limits on loans between funds and to require interest payments on temporary transfers between funds with different tax bases while permitting permanent transfers, with no payment of interest, between funds, especially between funds with different tax bases. Such an interpretation would fly in the face of the requirement, applied by New York's highest court to New York statutes, that a court "must interpret a statute so as to avoid an 'unreasonable or absurd' application of the law." People v. Garson, 6 N.Y.3d 604, 614 (2006), quoting People v. Santi, 3 N.Y.3d 234, 244 (2004) and Williams v. Williams, 23 N.Y.2d 592, 599 (1969); People v. Kramer, 92 N.Y.2d 529, 539 (1998)(court may consider whether one reading of a statute "might produce absurd and fundamentally unfair results"). The defendant's transfers from the Ambulance Fund to the General Fund are also improper under New York law because they are inconsistent with his statutory duties under the Town Law. Section 125 of New York's Town Law prohibits a town supervisor from "draw[ing] upon one fund or appropriation account to pay a claim chargeable to another." Paying claims "chargeable to another," however, was the very purpose of the transfers to the General Fund because the General Fund's balance would have been negative without the transfers and, in many instances, the General Fund would not have had sufficient cash on hand to pay its expenses as they arose. 1 Under Section 9-a, a difference in the tax bases between transferor and transferee funds results only in a requirement that the transferee fund pay interest to the transferor fund. 2 Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 3 of 8 The impropriety of the defendant's transfers from the Ambulance Fund to the General Fund is exacerbated by the fact that the two funds have different tax bases and, contrary to Section 9-a, no interest was paid by the transferee fund to the transferor fund. New York's Court of Appeals has repeatedly referred to "tax base" as the total assessed value of properties on which a tax is actually imposed. For example, in Pyramid Co. of Watertown v. Tibbets, 76 N.Y.2d 148 (1990), a property owner challenged an assessor's denial of a partial exemption for a $22 million improvement to a single commercial property that had previously been assessed at $3 million. The Court of Appeals affirmed the lower courts' holdings that the property owner was entitled to the exemption and noted that "[a]s a result of the construction and the $25,000,000 full assessment, the municipalities' tax base will increase from $3,000,000 to $14,000,000 ($3,000,000 + 50% 2 of $22,000,000) . . .. Far from losing anything, [the taxing authority] will gain substantial new revenues from the development." Id. at 154 (emphasis added). Similarly, in Legion of Christ, Inc. v. Town of Mount Pleasant, 1 N.Y.3d 406 (2004), a town had denied a tax exemption on a parcel of undeveloped property owned by a religious organization because its ordinance required properties, other than actual houses of worship, owned by religious organizations to be developed for religious activity in order to receive an exemption. The Court of Appeals held that the church's good faith plan to develop the property was sufficient but warned that: As years pass, the taxpayer may reasonably be required to show some concrete act toward developing or otherwise improving the property to carry out the tax exempt purpose. Property must not be allowed to lie idle indefinitely at the expense of the locality and its citizens. This 'landbanking' has the effect of diminishing the tax base of a locality and increasing the tax burden for schools and other municipal operations. Thus, the Court recognized that the exemption of this property lowered the tax base by removing its assessed value from the 2 The reference to "50%" is to the amount of the exemption. 150. 3 Id. at Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 4 of 8 taxable rolls. Id. at 412-13 (emphasis added) 3; see Colella v. Board of Assessors of County of Nassau, 95 N.Y.2d 401, 409 (2000)(erroneous grant of religious use tax exemption on a single property would have only "an insignificant impact upon the tax base of Nassau County"); Long Island Lighting Co. v. Board of Assessors of County of Nassau, 81 N.Y.2d 1029, 1031)(purpose of statute granting tax exemption to commercial improvements was to "attract new commercial and industrial developments to the area, thereby broadening the communities' tax base or employment opportunities for their citizens"). This interpretation of the term "tax base" carries out the intent of New York's legislature, as is apparent from its passage of Section 9-a, to protect taxpayers from having their tax revenue raided to support other funds funded by a different group of taxpayers. To permit otherwise for the irrelevant reason that the General Fund and the Ambulance Fund cover the same geographical area, 4 as the defendant insists should be the case, would achieve an "unreasonable or absurd application of the law" or the kind of "fundamentally unfair result[]" rejected by the New York Court of Appeals in Garson and the other cases cited above. Not surprisingly, the New York State Comptroller, who heads the agency directly charged with regulating municipal finances in New York, has repeatedly said that transfers between funds with different tax bases are not permitted unless the transfers comply with Section 9-a. The State Comptroller directly addressed this issue in a handbook it publishes for municipal officials in the same factual context as that presented here: If a water district covers the entire town outside any village(s), may moneys be transferred to it from the town outside village general fund? 3 Legion of Christ also serves as authority for the point that a tax exemption lowers a tax base because it removes a property's value, or a portion of its value, from the taxable rolls. 4 We should note that the Ambulance Fund and the General Fund have not always been geographically coterminous, as a group of homes within the Town's geographic area was apparently excluded from Ambulance Fund taxation until that error was corrected in recent years. 4 Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 5 of 8 No. There is no provision in New York State law that permits a transfer between such a special district fund and an operating fund. Office of the New York State Comptroller, Information for Town Officials, at 47 (attached hereto as Ex. 1 and also available at osc.state.ny.us/localgov/pubs/townoff/ito.pdf). Ramapo's Ambulance Fund, like the hypothetical water district fund above, is a special district fund. Further, the Comptroller's hypothetical question and answer belie the defendant's claim that transfers from the Ambulance Fund to the General Fund are permissible because they overlap geographically. The hypothetical water fund above covered the entire town outside its villages -- just as the town outside village general fund does -- but, according to the Comptroller, transfers between those two hypothetical coterminous funds are inappropriate. No provision in New York State law permits transfers between the Ramapo's Ambulance Fund and Ramapo's General Fund. Instead, as the Comptroller notes, "[w]hen a transfer is made between funds supported by different tax or assessment bases, the repayment of the advance must include an amount reasonably estimated to be the additional amount that would have been earned on the investment of the moneys in the fund making the advance had the advance not been made." Id. at 32. In November 2011, the Comptroller put the defendant on notice that transfers between funds with different tax bases could only be made on a temporary basis, with payment of interest. Government Exhibit 604, which is attached hereto as Ex. 2, is a draft of a Comptroller's report that eventually was published as Office of the New York State Comptroller, Town of Ramapo: Internal Controls Over Selected Financial Activities, which is attached hereto as Ex. 3. In November 2011, the defendant received a draft of this report, which stated in both its draft and final versions that: General Municipal Law (GML) allows municipalities to temporarily advance monies from one fund to another (with certain restrictions). Towns generally are not authorized to make budgetary transfers between funds that have different tax bases. When Town officials advance monies between funds that have different tax bases, they must repay the advance, with a comparable 5 Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 6 of 8 amount of interest, by the end of the fiscal year in which the advance was made. Exs. 2 and 3 at 19. The defendant responded to this allegation by addressing only a temporary transfer from the Police Fund to the General Fund. Ex. 2 at 43. The Comptroller in rebuttal -which was sent to the defendant in November 2011 -- again stated that: When Town officials advance monies between funds that have different tax bases, they must repay the advance, with a comparable amount of interest, by the end of the fiscal year in which the advance was made. Ex. 2 at 56. Further, the Comptroller has issued public opinions dating back as early as 1977 clearly stating that transfers cannot be made between funds with different tax bases except as provided for in Section 9-a. 1982 Opinions of the State Comptroller No. 82-249, 1982 WL 20348 (proposed transfer "not permissible" because "[i]t would be a transfer of funds from one tax base to another tax base")(attached as Ex. 4); 1977 Opinions of the State Comptroller No. 77-128, 1977 WL 4376 ("[i]nasmuch as an appropriation for a partcounty health district is raised from a different tax base than the appropriation for county general fund purposes, it would be inappropriate to transfer surplus funds of such district to the county general fund")(attached as Ex. 5). The defendant's improper transfers therefore, violated Section 9-a because they were not repaid within a year. They also violated Section 9-a because no interest was paid despite the fact that the two funds have different tax bases. They should not have happened at all. They were nothing more than a theft from those taxpayers who pay into the Ambulance Fund but who are exempt from payment into the General Fund. Contrary to the defendant's argument, the evidence will show that the transferred funds did not consist of fees. As a result, General Municipal Law Section 122-b is inapplicable. Further, while fees may be Town money -- just as all the money in the Ambulance Fund is Town money -- they are fees raised using Ambulance Fund assets and serve as recoupment of Ambulance Fund expenses. The fees, therefore, belong in the Ambulance Fund. In addition, the source of the transferred funds is irrelevant here. Section 9-a applies to money "held in any 6 Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 7 of 8 fund." It does not consider how money got into a fund, whether from taxation or from fees. The operative fact is that the money that was transferred from the Ambulance Fund to the General Fund was first held in the Ambulance Fund. Finally, the defendant has offered no persuasive authority for his argument that the transfers were appropriate because the two funds covered the same geographic area; in fact, the law, as described above and as supported by common sense, is otherwise. II. The Medium As the Court has already said, the defense is free to cross the witness on her statements to the medium. The defendant, therefore, is free to seek what he claims he wants on cross examination: whether she has an interest in the defendant's conviction; whether she has a bias against the Town; whether she has a bias against the defendant; whether those interests or biases arose because of what others told her or advised her; and whether she is lying based on what others told her or advised her. Defendant's April 5, 2017 Letter Brief at 2-3. As the Court has also said, the defense can do all that without getting into the fact that the defendant visited a medium. For the reasons set forth in the Government's earlier brief and argument, cross examining the witness specifically about the medium would be improper. Federal Rule of Evidence 610 applies regardless of whether the witness believes in the medium. Any questioning about the potential existence of that belief would be improper, as it would seek evidence that would be inadmissible under Rule 610. Further, if the defendant does not believe in the medium, the fact she visited a medium is still irrelevant. Moreover, even if such evidence were relevant, its probative value would be substantially outweighed by a danger of unfair prejudice, confusing the issues, misleading the jury and wasting time. Fed.R.Evid. 403. The defendant's letter brief contains a bit of hyperbole. Nothing in either medium tape supports the defendant's argument that any medium convinced, or even encouraged, the witness to sue the Town. Even those portions of the tapes described by the defense show that the medium only made predictions about the success of such a lawsuit, which, apparently, is part of what mediums do. The witness' statement that a lawsuit would "probably" be filed shows that the witness was likely to file 7 Case 7:16-cr-00259-CS Document 108 Filed 04/07/17 Page 8 of 8 suit. It was hardly unusual for the witness to be undecided about bringing a lawsuit two months before the suit was actually brought and the defendant's attempt to connect the visit to the medium with the initiation of the lawsuit is a giant leap in logic. Further, two visits to a medium within any time span is hardly "frequent" by any means. For the reasons set forth above, in the Government's earlier briefs and in oral argument, the Government respectfully requests that the defendant's in limine motion regarding the Ambulance Fund transfers be denied, that the Court give the jury the Government's proposed instruction on this issue and the the Court grant the Government's in limine motion regarding the medium visits. Respectfully submitted, JOON H. KIM Acting United States Attorney By: cc: /s _________________________________ James McMahon Stephen J. Ritchin Daniel Loss Assistant United States Attorneys (914) 993-1936 Defense Counsel (by ECF) 8 Case 7:16-cr-00259-CS Document 108-1 Filed 04/07/17 Page 1 of 3 Information for Town Officials GOVERNMENT EXHIBIT Division of Local Government and School Accountability "immr - ?Ir- Case Document 108-1 Filed 04/07/17 Page 2 of 3 Sample Bank Reconciliation Book Balances: General Fund $3,694.33 Water District 927.78 Sewer District 763.84 Book Balances $5,385.95 Less: Bank charges not entered on . books (such as returned check) (3865) Adjusted Book Balance 35,347.30 Bank Balances 1/31/30: $5,535.80 Plus: Deposits not credited by bank (entered by bank 2 1/ XX) - 78.58 $55,614.38 . Less: Outstanding Checks #463 8 51.34 #489 68.19 #501 147.55 (267.08) a Net Bank Balance $5,347.30 Interfund Advances Towns are authoriZed to make temporary cash advances of moneys from one fund to another (General Municipal Law, Section The law provides that a cash advance under this section should be authoriZed in the same manner as a budgetary transfer between appropriations (by the town board) and that suitable records of each advance must be kept. Any cash advance must be repaid as soon as moneys are available, but not later than the close of the ?scal year in which the advance is made. When a transfer is made between funds supported by different tax or assessment bases, the repayment of the advance must include an ar'nount reasonably estimated to be the additional amount that would have been earned on the investment of the moneys in the fund making the advance had the advance not been made. Finally, because certain speci?c revenues are earmarked to be used only for particular purposes, Section 9?a prohibits advances of the proceeds of obligations or other moneys which are otherwise required by law to be used only for stated purposes. Service Charge For Dishonored Checks The town board, by resolution, may impose a service charge to be added to any account owed to the town after a check or other written order tendered as payment has been dishonored (General Municipal Law, Section 85). Whenever the account is for a tax, special ad valorem levy or special assessment, the service charge must be included on whatever list of delinquent accounts is prepared for the enforcement of the lien. The service charge must be collected in the same manner prescribed by law for the collection of the account for which the check was tendered, and the municipal corp oration may require future payments to be tendered in cash or by certi?ed or cas bier?s check. The board, by resolution, may determine the amount of the service charge; however, the maximum amount of the charge may not exceed the maXiinum charge for dishonored checks provided for in General Obligations Law, Section 5?328 (currently 32 Information for Town Of?cials . i Case Document 108-1 Filed 04/07/17 Page 3 of 3 13. 14. 15. 16. What are the local law procedures to increase the salary of elected town board members, elected town clerks and elected highway superintendents over the advertised amount in the notice of hearing on the preliminary budget? A local law increasing the salary of elected. town of?cers is subject to the following: It must be passed by an af?rmative vote of a majority of the total voting strength of the town board (three af?rmative votes of a ?ve?member board). The style of the local law shall be: ?Be it enacted by the town board of the Town of . The local law may include only one subject, which must be set forth biiefiyin the title of the local law ?increase salaries of certain elective town officers?). The local law must be introduced by a member of the town board and may not be passed until it is in its ?nal form. It must have been on the desks or tables of members of the board at least seven days prior to its ?nal passage, exclusive of Sundays, or have been mailed to each town board member at least 10 days prior to its ?nal passage, exclusive of Sundays. However, if the supervisor has certi?ed that immediate passage is required, the local law must be passed by an af?rmative vote of at least two?thirds (four votes of a ?ve?member board). The town board must?hold a hearing on the local law, generally on ?ve days prior public notice. The local law must be subjected to permissive referendum procedures; thus, it cannot become effective until 45 days after its adoption if no petition for referendum is ?led or, if a petition is ?led, only after it is passed at: referendum (Town Law, Section 27; Municipal Home Rule Law, Sections 20 and 24). In a town without a village, may the town board transfer from the appropriation for contingent purposes to the highway fund? Yes, but not directly. The town board must ?rst modify the general fund budget to indicate that a portion of the contingent account balance is being transferred to appropriation account A9901.9 (Transfers to Other Funds). The amount transferred to the highway fund will be recorded as a revenue in account D5031 (lnter?ind Transfers). If a water district covers the entire town outside any village(s), may moneys be transferred to it from the town outside village general fund? No. There is no provision in New York State law that permits a transfer between such a special district fund and an operating fund. Assume a substantial amount of unrestricted fund balance and unanticipated revenue collections in the general fund, town outside Village; assume also that appropriation balances in other operating funds are insuf?cient. May cash be transferred to these other funds, and, if so, are there any restrictions? Transfers of available unrestricted fund balance and unanticipated revenue collections may be made to funds having the same tax base, such as the general fund outside village to the highway outside village fund. Chapter 3 Budgets and Finances 47 ?hr? - 'r Case Document 108-2 Filed 04/07/17 Page 1 of 6 To: Michael Klein[KleinM@ramapo? nu nnu?l From: Melissa Reimer Sent: Wed 2/1/2012 12:45:14 PM Importance: High Ramapo Melissa B. Reimer, CPA ?SupetvisorofFiscai Services Town of Rarnapo ?23lRoute 5?3 Suffern, NY 10901 Dirpr?t 845?018?2095 Main - (845) 357?5100 I Fax - (845) 357-7209 Email From: Sent: Wednesdav. Februarv 01. 2012 10:48 AM To: Melissa Reimer Subject: Town of Ramapo Internal Controls Over Selected Finanmal by the Of?ce of the Qtafe Comptroller. A copy of the report has also been mailed to the person responsible for ?ling such report and making it available for public inspection. Constitution, and the authority granted to the 8 ate Comptroller by Article 3 of the General Municipal Law lf?n ?l A written corrective action plan (CAP) that in this report should be prepared and filed within 90 days, pursuant to Section 35 of the General Municipal Law. For more Information on preparing and ?ling your CAP, please refer to our brochure, Respor?ing to an 080 this report and have indicated that it is also intended to serve as your CAP, you do not need to submit another CAP. ?Ft?fthrus at this report w?illbeh?emfu?o you. iffou require ave any ques ions, ease fee! GOVERNMENT GOVERNMENT EXHIBIT EXHIBIT 2 604 15 Cr. 259 03 USAO-225635 ?41? my: 1 ?T*m 4w Case 7:16-cr-00259-CS Document 108-2 Filed 04/07/17 Page 2 of 6 these over-expenditures occurred for several reasons. first, the ?nance software used by the Town has settings that. would prohibit the creation of requisitions if funds are unavailable; however, these settings are currently disabled, which allows users to create requisitions against funds that are not available. In addition. during the purchasing process, when requisitions become formal purchase orders, there is no control in place to identify requisitions that do not have suf?cient funds available. Further, Town of?cials do not provide- the Board with regular budget reports for monitoring purposes. 11' 11 1 1 . tilt? apptove cl LU ?anufn .- LL. m1n-A?11v-z Ln n: $1-1n 1 LL?Llly Luut U1 Lab UM UL l,le issue. Without. proper controls, there is a risk that the Town?s a'ready declining ?nancial position may worsen. Inter?Fund Advances General Municipal Law (GML) allows municipalities to temporarily advance monies from one fund to another (with certain restrictions). Towns generally are not authorized to make budgetary transfers between funds that have different tax bases. When Town of?cials mn uuvuLluu JLLU 1 must repay he advance, with mu: 1.. . ads that have different tax bases, they a {6331: met] to T?nmn?e denliiwino fir . on M, is ?com? ?mama.? L. 1' depended on inter-?tnd advances from the. other Town operating funds to help finance operations. At ?scal years ended December 31, 2009 and December 31, 2010, the Town advanced approximately $3.3 million and $3.9 million, respectively, between funds dittermg tax bases. Town ottleials did not pay back these funds to the end of the ?scal year. Town of?cials were not aware that the advanced funds were required to he paid back by the end of the ?scal year ?crals did not remv these advances with a Lat/?J comparable amount ofinterest For examnle in "10003 the nolice ?md loaned $3.3 illion to the general fund. These funds were originally inveSted in Cus earning 1.45 percent, if these funds had remained L1 LL 111 1 1' 01A MIC they WULUU. [ldVC Chi. tULttuug $17,3?l3. lUWll of?cials only paid the police fund $2,730 1n1nterest. Therefore, the police fund lost Epl7,24j in interest because it was not paid back with a comparable tale of inteiest. The Board is responsible for approving all inter-fund advances. and must ensure that all temporary inter-fund advances are repaid by ?scal year end with interest at a comparable rate to what the fund would have earned if the monies had not been advanced. If repayment does not occur at a comparable interest rate, taxpaver inequities will UUCUL 036_02281 24 USAO-225656 l" Case 7:16-cr-00259-CS Document 108-2 Filed 04/07/17 Page 3 of 6 fT?r? 1" r- l}llILL?. LUWH aupe: Fin t- We? 5a. i own (it Kamapo 1 2J7 Route 5.9 l? Snffern \?en York Christopher P. St. Lawrence Supervisor Councilman Daniel Friedman Councilwoman Frances M. Homer L'ounetlman Yitzeholt Ullman 1 0 :3 . I 3? 1X: 91. Patrice a. hue. 5 November 4, Bill i State of New York State Office of the State Comptroller Newburgli Regional Of?ce 33 Airport Center Drive Suite 103 New Win door, New York 12553 ATTENTION: Chriswplier J. Eilis, ChiefExammer r. C) i Internal Controls Over Selected Financial Activities of the Town of Ramapo Dear Mr. Ellis: By letter dated September 7, 2011, the Supervisor and the Town Board of the Town of Raniapo wer? findings related to the Intemal Controls Over Selected Financial Aotiyities of the Town of 1 Rainapo audit.? The letter invited ?an appropriate of?cial of the Town of Ramapo? to respond by 16116? to the preliminary draft ?ndings; and to Hilrlrem flange whinh are a- J.?le u: UUMLIIL incomplete. The date to provide a letter response is November 4. 201 Thiq letter Pnnetimteg the Town of Ramapo?s response submitted by Ramapo Town Supervisor Christopher P. St. 211,131-9an a. waxyv: should be revised or eliminated. 11. Although the transmittal letter accompanying the preliminary draft ?ndings notes that the QPP due ment is ?to be kept con?dential" until the release. oi a ?nal report, and that the N361 ?preliminar? draft: findings- "nay be immaculate of incomplete", the draft ?ndings have page 50 USAO-225664 7 r- mm?W'Wm?rn'1l?r?mn nun-ur? - Case 7:16-cr-00259-CS Document 108-2 Filed 04/07/17 Page 4 of 6 a. I --5C. declining ?nancial pcsition may - iiWithout proper controls, there is a risk that the Town?s alread worsen.? Response: The ?so?:ware used by the Town does have a setting which prevent requisitions from being processed where line item balances are insuf?cient While the Town can activate this setting: we have not done so and suggest that this not be done now in lith of the effective review process already in place. Periodically throughout the year, each Department Head is provided with its department budget and the year to date line item. SEC expenditures. All requisitions are reviewed by the Purchasing Department and the Finance Noisy Department and become purchase orders if funds are available to pay them. Where there are Page 56 purchase orders are identi?ed with appropriately available funds The. allegatinn that there i: a . a. to pay them. Inter ?Fumf Transfers 14. Statement in Draft Reportadvances from the other Town operating funds to help w? December 31, 2009 and December 31, 2010. the Town advanced approximately $3.3 million and $3.9 million, respectively, between funds with differing tax bases. Town of?cials did not pay back these funds prior to the end of the fiscal year, I own ottic1als were not aware that the advanced funds Wen; required it) be? paid de-lf. by the end ofthe??scal yCdi. finance operations. A: lePQl yearn: pride Further, Tewn officials did not repay these advances with a comparable amount of funds were originally invested in CBS earning 1.4-3 percent; it these tunds had remained in back wi a comparable rate of inter est.? Response: The statements that the Town did not repay inter??uid trnanerq timeiy 1101? did fawn nf?cjalc te be made are incorrect. Repayments ind . - . . . . . . . . ee- made Further the rennrt it; ?11; NoteZS T1 . Cf rage no paid. The borrowed ?uids were taken on September 9. 2.009 from a money market account with in which the funds were about to be moved to a checking account at Provident Bank earning The 1.4 interest reference in the report is apparently erroneously taken, from a CD which had matured on Augusr 20, which was not. renewed. Jhe inter~tund transrer USAO-225680 ?irm'rwe-wvwn-Case 7:16-cr-00259-CS Document 108-2 Filed 04/07/17 Page 5 of 6 5 1'3 11?? r. ,1 See am: bankmg [Izimaricmmsi 3:10:10 W1 all Omar bank iransa??npzm an? 3nd reconcileu Note gs regum?} and Hague-rig: kiwi" 96330113: miner things. i-naking the ?rm-line fmnsaciions {51EEC-011C 13 1011 0 {3 OHS 121C 111}; 056 CITES OB- H13. . 5L. CONCLIESE In Eight 0fthe detailed regponge herein submiItei it is. respectfully requested that the. "pre unmary lugs re are 1'0 Tamra-ls ?61? Selected Finanm Activifies of additional is needed to assist in the preara?ion Gf? ?nal please send such acmrdin 'vhs". Opher P. t. Lawrenca USAO-225686 ?VVWr?n?lr wwm?? 1mm n1? Case 7:16-cr-00259-CS Document 108-2 Filed 04/07/17 Page 6 of 6 Note au?ln. ?1.1 explanations. Note 25 The numbers in the report were not changed, as this number was not supported by the audited ?nancial statements. in addition, the $97,074 in revenue that was not realized is listed in the Towns ?nancial 22.2. 535v.11 g. tvtuuacy. The signi?cance of the budget lines being over budget is that the law does not permit the Town to overdraw an appropriation or use a fund or appropriation to pay a claim chargeable to another fund or appropriation. Town of?cials must obtain Board approval before exceeding any appropriationthe Town over-expended $6.2 million in 0?79"} individual accounts in the Town's five major ?mds demonstrates a lack of controls over the Town?s ?nances. Note 28 When Town of?cials advance monies between ?mds that have different tax bases, they must repay the ?scal year the advances were made. With I11. 9 -: .. 1. I made Repayments of advances were made in Fehmary nfthe year, which is not within the interest the were taken from the rate ofintercst ofthc Fl], Note 29 Town ot?eials did not comply With the law and pay back the funds prlor to the end of the ?scal year with a comparable amount of interest. Note 30 Town of?cials have not developed and documented a formal disaster recovery plan pertaian to information technology. The plan mentioned in the Town?s response does not address information technology. USAO-225693 ?4 mm? "warm?n