ITHACA, N.Y. — Ithaca city officials had for years failed to maintain accurate financial records, perform independent audits, provide regular reports and apprise the Common Council with timely and accurate financial information, a recent audit from state comptroller’s office found.
The New York State Comptroller office published a 22-page report on March 27 that reviews the city’s financial reporting going back six years to 2020. The report sheds new light on the issues underpinning the city’s financial practices.
Auditors from the state comptroller’s office found a cascading and overlapping set of problems with the way the city’s controller, manager, chamberlain and finance department managed public funds. Those issues led auditors to believe that city officials have not had a clear sense of the city’s financial standing since December 2022.
Public concern began to swirl around Ithaca’s financial management systems after the city lost its credit rating in March 2024 and has continued to struggle to catch up on a backlog of independent audits — the most recent of which was only completed for fiscal year 2021.
The state comptroller’s audit is a separate review from the years of independent audits the city is working through. The latter are an annual reporting requirement that requires the city to contract an outside firm to review its financial records, while the comptroller’s office provides independent oversight of state and local finances, regularly auditing local governments but not necessarily on a routine cycle.
One of the biggest issues state auditors identified in the city was incomplete accounting records. Records for 2023 and 2024 were still open and multiple transactions for those years had not been recorded. Then there was the issue of delays. For example, in 2024 there was a delay of at least 30 days in recording over 4,000 transactions worth a total of $10 million, with the longest delay being over 280 days.
Based on the city’s fund balance at the end of 2024, auditors concluded that the city would not be considered fiscally stressed, meaning it can generate enough revenue to cover its expenses and manage short-term financial problems. However, auditors warned that “the total number of delayed transactions may continue to rise as the City finalizes its accounting records,” meaning the city’s risk of inaccurate financial reports could grow as records are corrected
Some parts of the accounting records were simply missing altogether. State auditors found that for 2023 and 2024 there were over $1 million worth of budget adjustments that had not been recorded by the controller’s office staff. These adjustments had been approved by the, but because they had not been recorded, created a risk that the city could spend more money than it actually had available.
Another problem area state auditors identified was the city chamberlain reconciling the city’s 22 bank accounts. Reconciliation is the process by which the city compares its own financial records with those from the bank, ensuring that they match. Auditors found that the four most challenging bank accounts to reconcile, with a combined balance of over $50 million, had not been reconciled for periods ranging from five months to four years as of February 2025.
In addition to the backlog, state auditors noted there was no process in place to make sure that someone independent of the chamberlain’s office ensured bank reconciliations were being done, a task that they suggested should fall to the city manager. When asked about this, state auditors wrote that City Chamberlain Jessica Wright told them “she had not fully considered the control benefits of independent reviews.”
City officials weren’t just flying blind due to inaccurate financial records. State auditors found that from 2020 through 2024 former mayors and managers had not provided the Common Council with “key financial reports” every month.
The city controller’s office did provide the council with some verbal and written updates, mostly focused on revenue sources and trends. But those updates varied in content, were not consistently provided and did not include state-recommended information such as cash balances and financial performance measures.
Former City Manager Deborah Mohlenhoff told the auditors that the city’s accounting system was to blame, saying it could not create a financial report in a format presentable to the council. State auditors found that was not the case, saying in the report that “the Deputy Controller provided us with a budget-to-actual comparison report from the City’s accounting system, which would be a useful report for the Council.”
The Common Council — which requested that Mohlenhoff resign late last year — had long-standing complaints about a lack of timely financial reports until the body adopted a new policy in December requiring the city administration to provide more detailed and regular updates.
It wasn’t just the council that didn’t receive regular updates. New York State law requires the city to send an annual report of its finances to the state comptroller’s office within 120 days of the end of the year. The Ithaca Voice has previously reported that the city has habitually filed these reports late. Auditors noted that not only were the reports for 2020 and 2021 filed late, and reports from 2022 through 2024 have yet to be filed.
The city’s chronic late filing means that since 2017 it hasn’t received a “fiscal stress” score from the state comptroller, an early warning system to indicate if there are potential financial issues.
City officials told state auditors that they were usually late to file their annual reports because they were waiting for annual audits to be completed to ensure the annual reports were accurate.
But what happens when those independent audits are running years behind?
The audit for 2020 was completed in early 2023, and the audit for 2021 was completed halfway through 2025, the report noted. And the remaining audits have yet to be completed.
In March 2024 the rating firm Moody’s withdrew the city’s credit rating due to the city’s backlog of audits, which has led to the city likely receiving higher interest rates when it issues bonds.
City officials offered state auditors several explanations for the series of financial problems identified in the report. Acting Controller Wendy Cole blamed the delays of independent audits on a backlog of work in the finance department, which stemmed from furloughs connected to the COVID-19 pandemic. That backlog includes the incomplete accounting records from 2023 and 2024 noted in the report, which the acting controller also connected to staffing shortages.
One such shortage is for the position of a permanent city controller, which has been vacant since 2023 as city officials have conducted multiple failed searches.
The report included 11 recommendations for how to address the city’s financial management issues, along with a seven-page letter from Ithaca Mayor Robert Cantelmo in which he agreed with the audit’s findings and laid out how the city would follow through on its recommendations.
One action that the city has already taken, according to Cantelmo, was to hire two staff accountants for the controller’s office in February of this year. The city is also hiring for two additional unspecified roles in the same office, and has an “anticipated start date” of mid-2026 for a new controller.
Another action taken by the city was to reinstate monthly financial reports, and connect them to performance goals for Acting City Manager Dominick Recckio. The first such report was delivered on March 4 and is available on the city website.
In addition to the monthly financial reports, Recckio is expected to deliver an annual financial report to the council in April or May of this year. Starting in May, the controller’s office will post approved budget adjustments immediately after council meetings.
Other actions, including filing annual financial reports to the state comptroller’s office, were listed by the mayor as either in progress, or waiting on independent audits to be completed.
The city also contracted the accounting firm Bonadio Group to consult on how to bring its “severely outdated” accounting systems up to date.