Purpose of Audit

The purpose of our audit was to assess the Town’s budgeting practices for the period January 1, 2012, to May 20, 2013.

Background

The Town of Laurens is located in Otsego County and serves approximately 2,400 residents. The elected Town Board is the legislative body responsible for managing Town operations, including maintaining sound financial condition. The Town’s general and highway fund budgeted appropriations for the 2013 fiscal year totaled approximately $275,000 for the general fund and $998,000 for the highway fund.

Key Findings

• The Board did not prepare reasonable budget estimates. The Board received an extra $1.7 million in unbudgeted revenues from 2008 to 2012. Of this amount, $1.3 million is related to flood revenues. The Board budgeted $6.2 million in expenditures over the same time period and actually spent $6.8 million, resulting in excess spending of $630,000. The Supervisor does not segregate flood-related expenditures in the accounting records, so it could not be determined how much of this difference was attributable to the flood. As a result, the combined unassigned fund balance for all funds had risen to more than $577,000 by the end of 2012, which was 45 percent of the ensuing year’s budget.
• Because flood-related expenditures are not segregated in the accounting records or the adopted budgets, there is not a base-line level for routine expenditures, which makes it difficult to adopt proper budgets in the subsequent year.

Key Recommendations

• Develop budgets that reflect known expenditure needs and current revenues to finance those needs. Establish procedures to govern budgeting practices that include determining a reasonable level of unexpended surplus funds to be maintained.
• Account for flood related revenues and expenditures separately from normal operating revenues and expenditures in order to facilitate the accuracy in budgeting for normal operations, and to better quantify the effects of flooding.