An audit by the Office of the State Comptroller turned up a number of flaws, ranging from potential conflicts of interest to a lack of data security, in the way the Town of Hurley does business.

But town officials have largely shrugged off the critique, calling the issues raised minor and common in small communities where common-sense solutions often trump strict adherence to process.

“A little bit nitpicky,” was how town Councilwoman Janet Briggs characterized the findings in the routine audit by state Comptroller Thomas DiNapoli’s office, which covered the period between January 2010 and August 2011.

The audit released earlier this month focused on the town’s adherence to policies regarding purchasing, hiring outside contractors, information security and compliance with worker’s compensation and disability laws. The probe found a number of problems, but did not allege outright corruption or call for further investigation by law enforcement.

The audit turned up two potential conflicts of interest including a lease agreement between the town and Councilman John Gill and a lack of required documentation of Councilwoman Barbara Zell’s husband’s partial ownership of an engineering firm hired by the town.

The audit found that Gill, a farmer who has served on the board since 2003, was paid $12,500 for a five-year seasonal lease agreement with the town. The lease agreement allowed the town to use a fertilizer shed on Gill’s property to store salt during the winter months. In an official response to the audit, Town Supervisor Gary Bellows wrote the shed was leased as a part of a shared-services agreement with the Town of Marbletown and the Ulster County Highway Department, which also store salt at the facility. Bellows and other town officials also defended the agreement — the original deal to store salt predated Gill’s tenure on the board — as a sensible, money-saving step allowed highway crews to salt roads in Old Hurley without having to return to the department’s storage facility on Dug Hill Road in West Hurley.

“It saves a massive amount of time,” said Gill. “And when you’re dealing with snow plowing it’s all overtime, time turns into money.”

But the audit found that the lease agreement ran afoul of both state municipal law and the town’s own ethics code, adopted in 2007. Gill said he voluntarily terminated the lease agreement back in February when the auditor advised him it represented a conflict of interest.

The audit found another violation of the ethics code when investigators were unable to locate a required disclosure form showing Zell’s husband’s ownership stake in engineering firm Brinnier and Larios which provides services to the town. Zell, who the audit noted has abstained on votes related to Brinnier and Larios contracts, said that she has disclosed the relationship annually and has a copy of the form for 2011.

Briggs said both the salt shed deal and Zell’s connection had been cleared by the town’s own ethics board. According to Zell, the auditors critique came as a surprise.

“I really don’t think we made any mistakes in that regard,” said Briggs. “There have never been any complaints that I know of.”

The audit also questioned the town’s policy regarding hiring outside contractors for engineering, legal, accounting and other professional services. According to the audit, a random sample of 10 outside professionals engaged by the town showed that none had been selected through a competitive bidding process. The audit reported that the town policy does not require bidding for professional service contracts, but added “without seeking appropriate competition prior to selecting professional service providers, town officials may not have obtained services at the best prices.”

In Bellows’ response, he claimed that the town had sought bids on professional services in the past but said they had not been filed with payment vouchers due to “sloppy filing.” Bellows added the town board believed that there was no need to carry out a competitive bidding process for professional service providers appointed during the town’s annual reorganization meeting. Gill, meanwhile, said sticking with contractors like Brinnier and Larios, who have provided engineering expertise to the town for at least 50 years, allowed for continuity.

“Our engineering firm has been with us since before I was born,” said Gill, 57. “You need someone with experience with what’s been going on with the town over all of these years.”

The audit also found minor errors with the town’s adherence to purchasing policy, noting that on six occasions during the audit period, items were purchased without the required price quotes. The report noted more significant problems with the town’s information technology plans. According to the report, too many people had access to sensitive information. The audit further noted that the town had weak security on its online banking services and had failed to develop a plan to retrieve information in the event of a disaster or to notify people in case of security breach. Finally, the report noted instances where the town had not kept proof of workers’ compensation and disability coverage for contractors doing business with the town.

In his written response, Bellows, who did not return calls seeking comment, noted some administrative changes to ensure that paperwork for purchases, proof of insurance and other documents were properly filed. As for the salt shed, the audit report noted that the town can maintain the lease, but only after seeking approval in state supreme court. The board is expected to decide whether to pursue the waiver at a meeting later this month.

“It’s just a money-saving small town solution,” said Briggs of the salt shed deal. “I think small towns should have the option and the opportunity to do things that make sense for the taxpayers.”