Purpose of Audit

The purpose of our audit was to review the City’s financial condition, the recording of financial activity, and the information technology environment for the period January 1, 2009, to January 9, 2013.

Background

The City of Niagara Falls is located in Niagara County and encompasses approximately 17 square miles. The City Council, consisting of five elected members, has legislative responsibility for the City’s operations. The City’s adopted general fund budget for 2012 was approximately $86.3 million, and for 2013 was $81.4 million.

Key Findings

• The City has had a pattern of structural budget deficits, meaning recurring revenues were not sufficient to fund recurring expenditures. During our audit period (2009 through 2013 budgets) the general fund’s budget gap averaged $12.4 million. City officials balanced the budgets using fund balance and an estimate for casino revenue that averaged $5.3 million annually. One cause of this structural deficit was that although casino moneys have not been received since 2008, the City continued to budget for these revenues.
• Although City management has implemented IT policies and procedures, including a computer use policy, they have not implemented adequate controls and restrictions over user access to the financial system. Further, City management has not developed adequate procedures for data backup and storage, or a comprehensive disaster recovery plan.

Key Recommendations

• Develop structurally sound and realistic budgets.
• Establish policies and procedures for access controls to restrict financial software permissions to only those functions that are necessary for employees’ job duties. Establish policies and procedures for data backup and storage, and comprehensive guidelines for disaster recovery.