Purpose of Audit

The purpose of our audit was to review the Town’s financial management and internal controls over purchasing for the period January 1, 2011 through March 29, 2013.

Background

The Town of of Henrietta is located in Monroe County. The Town is governed by an elected Town Board which is composed of four Council members and a Town Supervisor. Budgeted appropriations totaled approximately $17 million for 2012.

Key Findings

• The Board and Town officials have not developed long-term financial plans, policies, or procedures to govern budgeting practices and the level of unexpended surplus funds to maintain. The Board has adopted budgets that were not based on sound and realistic estimates of revenues and expenditures, and the Town has accumulated a significant amount of unexpended surplus funds in the general and drainage district funds.
• The Board did not provide sufficient oversight over financial operations, or establish and monitor policies and procedures to help ensure that the Supervisor properly accounted for all financial activity and adequately segregated financial duties.
• The Town did not develop adequate policies and procedures over the use of credit cards.
• The Town also did not monitor compliance with its code of ethics policy and entered into contracts that resulted in a Board member having a prohibited interest.
• The Town did not implement policies or procedures to help properly classify individuals as independent contractors or employees, and made payments totaling $175,000 to four individuals as independent contractors, who likely should have been treated and compensated as employees.

Key Recommendations

• Adopt policies and establish procedures to govern budgeting practices that include determining a reasonable level of unexpended surplus funds to be maintained.
• Review the Town’s bank accounts and close those that are unnecessary. Segregate the duties of the payroll clerk and ensure that a payroll certification is completed.
• Establish adequate internal controls over credit card use.
• Review and update the Town’s code of ethics and cease doing business with the Board member’s business.
• Carefully review, with consultation from the Town’s counsel as appropriate, the status of individuals currently considered to be independent contractors to determine if they should properly be designated as employees.