Purpose of Audit

The purpose of our audit was to evaluate the District’s financial condition and controls over procurement for the period January 1, 2015 through June 30, 2016.

Background

The Town of Hempstead Sanitary District No. 2 is located in the Town of Hempstead in Nassau County. The District, which provides refuse collection and recycling pickup services to more than 55,000 households and commercial businesses, is governed by an elected five-member Board of Commissioners. Budgeted appropriations for 2016 totaled approximately $12 million.

Key Findings

• The Board did not adopt a policy to address the level of unrestricted fund balance to be maintained or a multiyear financial plan.
• The Board adopted budgets that appropriated $1.6 million of unrestricted fund balance between 2013 and 2015, none of which was used.
• The District's unrestricted fund balances ranged from 78 to 85 percent of the ensuing year's budgets over the past three years, and as a result, the District's tax levies were higher than necessary.
• District officials made 38 purchases totaling $395,731 without the use of requisitions or purchase orders and made payments to vendors that were selected without using competition.

Key Recommendations

• Adopt a policy to address the level of unrestricted fund balance to be maintained and develop a multiyear financial plan.
• Adopt budgets that do not appropriate fund balance that is not needed.
• Use surplus fund balance as a financing source for funding one-time expenditures, funding needed reserves or reducing District property taxes.
• Develop procedures that require the use of requisitions and purchase orders prior to ordering goods and services, procure items above the bidding thresholds through a competitive bidding process and obtain written and verbal quotes for procurements between $1,000 and the bidding thresholds.