Audit Faults Financial Practices at LTV

A comprehensive financial audit of LTV, the nonprofit organization that provides public access cable TV in East Hampton and is funded largely by the town, found no misappropriation of funds but pinpointed 19 financial practices that fell short.

The town funnels the lion’s share of the franchise fee it receives from Cablevision to LTV — at present some $677,000 annually. In light of the audit’s results, officials have called for LTV to prepare a corrective action plan addressing every one of the auditors’ findings and for the submission of periodic written progress reports.

Auditors from the accounting firm Nawrocki Smith discussed the audit, which covered 2010 through 2014, at a town board meeting on Tuesday. The administration of LTV underwent wholesale turnover after the audit period, with Jim Shelly now the board chairman and Morgan Vaughan executive director. They attended the meeting on Tuesday, along with a number of current board members.

Among the areas where the auditors said improvements were needed were recordkeeping regarding payroll and employees, the handling of cash receipts and bank statements, the use of credit cards, and adherence to a policy requiring approval from the LTV board for purchases of over $5,000, and from the town board for purchases over $10,000.

The audit was set in motion after Robert Strada, the former LTV board chairman, raised the question of possible misuse of funds by its former director, Seth Redlus, who had resigned after a clash with Mr. Strada and his wife, Michelle Murphy Strada, who was also on the LTV board. Town officials commissioned the full review of the books last summer. The approximate $40,000 tab for the audit will be deducted from the money the town gives LTV.

Mr. Strada questioned continuing payments to Mr. Redlus for technical consulting services even after he had relocated. But others defended the arrangement, saying Mr. Redlus’s expertise was needed during a transition period. A rift among board members followed, which resulted in the ouster of Mr. Strada and his wife as well as several of their allies. Mr. Strada then asked the county district attorney for an investigation. The auditors said this week that they had met in December with the D.A. to discuss the audit, but did not address  any possible investigation.

 Citing “the seriousness of the findings and recommendations that were made,” Town Supervisor Larry Cantwell said after Tuesday’s presentation that improvements were needed “to insure that the contribution that’s being made by the town is accounted for.”

Mr. Shelly called the recommendations the auditors made “invaluable.” Thirteen of the suggestions have been implemented and six are in progress, Mr. Shelly said.

“This audit, painful as it was, has provided us with a roadmap to the future. We realized that some of our management practices were inadequate for the organization we have become,” he said.

 “The importance to the town is that we’re funding your organization to a large extent,” Mr. Cantwell told the LTV representatives. “The truth is there has been a serious lack of internal controls at LTV, and the oversight has been woefully inadequate on the part of the board.”

“I think what we’ve realized is, because of the amount of funding we receive from the town and the village, we’re treated differently from other not-for-profits you do business with,” Mr. Shelly said. “The board of LTV now realizes that we have to perform to a much higher standard.”

Following the auditors’ report, Ms. Vaughan, who was appointed LTV’s interim executive director last spring after Mr. Redlus departed and stepped into the position permanently in August, addressed each of the auditors’ recommendations, assuring the board that the problems had been addressed.

But the supervisor called her assurances insufficient. “As we go through these things, I don’t want you to assume that your response is an acceptable response,” he said. Ms. Vaughan expressed frustration with the criticism. “We’re producing a vast amount of things,” she said of the work being done by LTV. “This is not money that is being squandered.”

Besides providing opportunities for the public to produce their own cable shows on channel 20, LTV tapes and airs meetings of governmental bodies on channel 22, which also airs school and educational programs.

“That’s not the point here today,” Mr. Cantwell told Ms. Vaughan. “This is not about the quality of the services that you are providing. This is about the quality of the accounting of the funds that you are receiving and spending.” An earlier audit of LTV, conducted by the town budget office in 2012, had identified similar shortcomings.