Purpose of Audit

The purpose of our audit was to assess the internal controls over the District’s financial operations for the period January 1, 2009, through December 31, 2012.

Background

The Locust Valley Water District is located in the Town of Oyster Bay, in Nassau County. The District is governed by an elected three-member Board of Commissioners consisting of a Chairman, a Secretary, and a Treasurer. The District supplies drinking water to 7,500 customers in the Hamlet of Locust Valley, the Village of Lattingtown, and sections of the Villages of Mill Neck and Matinecock. The District’s total revenue for 2012 fiscal year was approximately $2.2 million. The District’s 2012 expenditures totaled more than $2.4 million.

Key Findings

• The Board frequently over-estimated budgeted expenditures for the 2009 through 2012 fiscal years, and also appropriated $1 million in fund balance each year which was not fully needed to finance District operations. As a result, only a fraction of the appropriated fund balance was used to fund operations in three of the four years reviewed. None of the appropriated fund balance was used in the other year.
• The Board also appropriated more fund balance than was available to balance three of the four ensuing years’ budgets. Had the Board had a fund balance policy in place budget estimates could have been more realistic, budgets would have been structurally balanced and the District’s financial condition would have been more transparent to residents.

Key Recommendations

• Adopt budgets that realistically reflect the District’s operating needs. Appropriate only available fund balance to finance operations in succeeding years’ budgets.
• Adopt a fund balance retention policy identifying the portion of fund balance to be retained for contingencies and to provide cash flow throughout the fiscal year.