Purpose of Audit

The purpose of our audit was to evaluate the Clerk’s financial management practices from January 1, 2009, to May 25, 2012.

Background

The Town of Otto is a rural community located in Cattaraugus County, with a population of 800 residents. The Town Board consists of an elected Supervisor and four elected Council members and is the legislative body responsible for overall Town operations. The Town’s general fund appropriations for 2012 fiscal total $1.1 million. The Clerk reported cash receipts totaling $20,789 for 2011 and $4,600 from January to May 2012.

Key Findings

Internal controls over the Clerk were not appropriately designed or operating effectively, which allowed a shortage of $4,134 to occur and not be detected.

• The Clerk had no record of payment or enforcement of unpaid sewer bills totaling approximately $8,500 including her own, which totaled $950 and is included in the $4,134. Furthermore, the Clerk discarded tax stubs which prevented us from verifying if she paid $970 of her own taxes, and the Clerk backdated tax collections to avoid imposing late penalties totaling $569, including her own which totaled $102.
• The Clerk received apparent duplicate payments for tax bills resulting in overpayments totaling approximately $2,600 that have not been refunded to the appropriate taxpayers or banks.
• The Board failed to provide oversight including performing an adequate audit of the Clerk’s records and documenting the records reviewed and the results of the audit in the minutes. The Board members and the Clerk failed to address similar findings in our 1999 and 2001 audit reports. Had they done so, the shortage may have been prevented.

Key Recommendations

• Provide documentation to law enforcement officials concerning the misappropriation of Town moneys. Take immediate steps to protect Town moneys to prevent additional shortages.
• Retain all evidence of receipt, including DEC transaction reports, tax stubs and escrow lists. Impose penalties on taxpayers making payment after the penalty free period.
• Ensure all duplicate payments are refunded to the individual taxpayers or banks to which they are owed.
• Perform an adequate annual audit of the Clerk’s records.