Purpose of Audit

The purpose of our audit was to review the financial management of the water fund and the adequacy of the Village’s controls over the billing and collection process for the period June 1, 2010, through July 31, 2012.

Background

The Village of Forestville is located in the Town of Hanover in Chautauqua County and has a population of 697 residents. The Village is governed by an elected Board of Trustees which consists of a Mayor and four Trustees. General fund and water fund appropriations for the 2012-13 fiscal year totaled $345,800 and $152,940, respectively.

Key Findings

• The Board authorized substantial improvements to the Village’s water system and obtained funding for the project from the Environmental Facilities Corporation without first identifying a plan to pay for the related debt. Although the Board raised water rates five times starting in June 2007, it did not establish a reserve to set aside any of these resources to fund project costs or the debt service payments that are expected to begin in the Village’s 2013-14 fiscal year.
• The Clerk-Treasurer’s records for the water fund were inaccurate, and misrepresented the fund’s financial condition.
• The Board did not establish policies or procedures for the billing and collection of water charges, and failed to properly segregate the duties of the Clerk-Treasurer or implement compensating controls.
• The Clerk-Treasurer did not include all unpaid water bills and fees on the tax roll for the 2011-12 fiscal year.

Key Recommendations

• Review and revise water rates to ensure they generate sufficient revenue to cover appropriations, and establish reserves to set aside an appropriate portion of revenue from rate increases to pay for future debt service costs.
• Provide complete and accurate historical data to the Board, including actual operating revenues and expenditures to date and maintain separate records for project expenditures.
• Establish policies and procedures for the billing and collection of water charges. Segregate the water billing and collection duties or implement compensating controls.
• Verify that the list of unpaid water rents is complete and accurate prior to relevy on the tax roll.