Audit Objective
Did Schenectady County (County) officials develop and manage a comprehensive investment program?
Audit Period
January 1, 2023 – October 31, 2024
Understanding the Program
A comprehensive investment program should serve four basic objectives – legality, safety, liquidity and yield. A comprehensive investment program is used to establish basic procedures, assure that investment assets are adequately safeguarded, establish and maintain internal controls and proper accounting records to provide accurate reporting and evaluation of investment results. During our audit period, the County maintained an average available for investment balance of $134.9 million among three bank accounts earning from no interest to 2.8 percent interest.
Audit Summary
While the County’s investments were generally legal, safe and liquid, County officials did not develop and manage a comprehensive investment program. Officials also did not monitor investments, formally solicit interest rate quotes or consider other legally permissible investment options. In addition, County officials did not create a comprehensive investment program with written procedures for the investment of County funds and did not prepare monthly cash flow forecasts or otherwise monitor investments to estimate funds available for investment.
The County maintained most of its available-for-investment funds (monthly average of $112 million) in a money market account at a banking institution. The account had an interest rate of 0.4 percent which was seven times lower than the interest rate (monthly average 2.8 percent) of another money market account the County had at a different financial institution. Furthermore, other investment options providing significantly higher interest rates were available to County officials.
Had officials managed a comprehensive investment program, solicited interest rate quotes and deposited funds into a bank account or an investment option already used by the County, officials may have realized additional earnings ranging from $5.1 to $10.6 million. Because County officials did not develop and manage a comprehensive investment program or written procedures to provide specific actions to take – including how much of the available funds to invest – officials missed an opportunity for the County to realize additional revenues, which would benefit County operations and potentially reduce the financial burden for County taxpayers.
After we started the audit, the County Legislature (Legislature) adopted an investment policy, which delegated the responsibility for the administration of the investment program to the Commissioner of Finance. The policy required the Commissioner of Finance to establish written procedures for the operation of the investment program. However, as of October 31, 2024, the Commissioner of Finance had not established any written procedures, such as preparing monthly cash flow forecasts to estimate funds available for investment.
The report includes six recommendations that, if implemented, will improve the County’s investment practices. County officials generally agreed with our recommendations, and their response is included in Appendix B.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and New York State Office of the State Comptroller’s (OSC) authority as set forth in Article 3 of the New York State General Municipal Law (GML). Our methodology and standards are included in Appendix C.
The Legislature has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to Section 35 of GML. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Legislature to make the CAP available for public review in the County Clerk’s office.