Purpose of Audit

The purpose of our audit was to evaluate the Town’s financial condition and budgeting practices for the period January 1, 2010 through August 31, 2013.

Background

The Town of Reading is located in Schuyler County and is governed by a five-member Town Board consisting of the Town Supervisor and four Board members. The 2013 Town appropriations were approximately $1.1 million.

Key Findings

• We found that the Board has not adopted a policy and Town officials have not developed procedures to govern the level of unexpended surplus funds to be maintained. Additionally, the Board has no policy for developing accurate budget estimates. Because the Board did not adopt accurate and realistic budgets and monitor them against actual results of operations the Town has accumulated excessive fund balances in the town outside-village funds, 115 percent in the general fund and 93 percent in the highway fund for the ensuing year’s appropriations.
• The Town comingled cash for various funds but did not account for cash separately by fund until the year-end financial reports were prepared. Therefore, at the end of 2011 the Board decided to transfer an additional $55,000 from the highway town-wide fund to the capital project fund and the Board appropriated $30,000 of non-existent highway town-wide fund balance in its 2013 budget to help pay for expenditures As a result, as of December 31, 2012, the highway town-wide fund had a total deficit fund balance of $36,491.
• There were no policies or procedures for the establishment, use and record keeping requirements for reserve funds and the Town could not provide any documentation to indicate that any of the reserves were properly established pursuant to General Municipal Law.

Key Recommendations

• Establish a policy and develop procedures to ensure that unassigned fund balance is maintained at an appropriate level and only assign fund balance for the ensuing year that is available.
• Account for cash balances by fund continually. If needed, separate bank accounts for each fund could be established.
• Reestablish reserves and develop policies and procedures that specific the purpose, amount and duration of reserves needed for long-term planning.