Finance Department to be privatized. Council hopes for more efficient, cheaper bookkeeping

Finance Department to be privatized
Council hopes for more efficient, cheaper bookkeeping

11/20/2005  Hoboken Reporter

For years, Hoboken's Finance Department has received substandard reviews on city audits, especially for not adequately maintaining the city's books.

In an effort maintain better municipal records and save money, the council approved a $300,000 contract with Donahue, Gironda, and Doria - a Bayonne firm that specializes in municipal accounting - to privatize the city's Finance Department. The Doria in the firm is not related to Bayonne Mayor and State Senator Joseph Doria. The $300,000 contract, according to officials, is roughly the amount of payroll for the whole department.

The basic role of the Finance Department is to record every dollar that comes into and leaves the city's coffers. According to city officials, the firm will work with the city's chief financial officer to manage the city's books. According to city financial consultant George Crimmins, the fates of the current Finance Department employees haven't been determined yet. They could be retained in their positions, absorbed by the accounting firm, moved to another city department, or laid off.

A move towards privatization

In recent years, all levels of government, seeking to reduce costs, have looked to the private sector to provide some services. The spread of the privatization movement is grounded in the belief that market competition in the private sector is more efficient.

Mayor David Roberts has voiced his support for the privatization of several areas of Hoboken municipal government. Within the last several weeks the city has privatized some of the landscaping maintenance of the city's parks and the coin collecting of the city's parking meters.

"I'm very pleased the council took the initiative to privatize the Finance Department," Roberts said Tuesday. He added that he believes the firm will bring a higher level of professionalism to the Finance Department and save the city money.

A lackluster history

The track record of the Finance Department has left much to be desired. The most recent audit, which was completed by the firm Ernst & Young, contains 29 comments about areas in need of adjustment. Several of the comments point to major problems in how the city keeps its books.

The Finance Department is continually understaffed, which has led to problems in keeping an up-to-date general ledger. This has made it difficult for the city to maintain an accurate picture of its true fiscal health and has made creating a high quality budget problematic.

In March, before the municipal election the municipal government shut down for several days over a budgetary quagmire after the mayor and a faction of the City Council were fighting.

George Crimmins, a consultant who was the city's business administrator under Mayor Anthony Russo, said the Finance Division of the city has not been functioning properly for a long time.

Councilman Michael Russo, who is a member of the council Finance Subcommittee, said that every audit over the past decade proves that the department is broken.

"In the past years, we have had the same audit comments, over and over and over again," Russo said.

What about the employees?

Crimmins said that the salaries of those employees are about $300,000, which is equal to the size of the contract with the accounting firm.

But currently the city is also paying the Finance Department employees' health and pension benefits, which according to city Business Administrator Richard England, are over $20,000 per year. If an outside company takes over the department with their own employees, there could be a significant savings in health insurance. Roberts said that it's too early to know the exact fate of the current employees in the Finance Department, but that they will be "treated fairly and honestly."

Because they are civil servants, if they are laid off, the drawn out procedure would take at least 45 days. According to the city's attorney Joseph Sherman, that is a decision that will have to be made "months down the road."

He added that Finance Department employees would have "bumping rights," which could mean they might end up in another city department.

Will it really save money?

Council President Christopher Campos said that he is "very skeptical" of privatization, and that he was not given the contract before the council meeting.

Even though the contract had the full support of the council Finance Subcommittee, Campos said he would have liked to have seen a more complete analysis of how much this is going to cost or save the city.

Likewise, Councilwoman Terry LaBruno said that she had not seen the contract, and without more information she is not fully convinced that privatization will save the city money. She gave a scenario where the city takes on this $300,000 contract, and then the city transfers the current employees to different departments, meaning the city retains their salaries.

Secondary effects

There could be a number of secondary savings. For example, there's the cost of the city's audit.

According to city officials, a city of Hoboken's size should be able to pay a firm to complete an audit for around $175,000 per year. But the books are in such bad shape that the auditor has to spend more time than usual recreating records. In past years, the city has spent over $300,000 in completing the audit.

With better bookkeeping, the cost should go down.

Audits also have been late in the past. The audit is one of the administration and City Council's best tools when writing a budget. It clearly shows where there were problems in past years, and where there might be possible efficiencies.

"This is something that we have delayed far too long," Councilman A. Nino Giacchi said. "This is a move that we have to make."


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