Purpose of Audit

The purpose of our audit was to review the financial condition of the sewer fund and the internal controls over financial records and reports for the period June 1, 2011, through October 31, 2012.

Background

The Village of Cuba is located in Allegany County. The Village is governed by an elected Board of Trustees consisting of a Mayor and four Trustees. For the fiscal year ending May 31, 2013, budgeted appropriations totaled $784,000 for the general fund, $205,000 for the water fund, and $282,000 for the sewer fund.

Key Findings

• The Board did not adopt budgets for the sewer fund that provided sufficient revenues to finance expenditures, because revenues were consistently overestimated. As a result, the sewer fund balance has declined dramatically from approximately $20,000 as of May 31, 2008 to a fund deficit of approximately ($54,000) as of May 31, 2012. To compensate for the lack of sufficient revenues, the sewer fund borrowed $40,000 from other funds, which has not been repaid and improperly used $30,000 from a repair reserve.
• The Clerk-Treasurer did not maintain the Village’s accounting records in a complete and accurate manner. Specifically, we found that cash, accounts receivable and accounts payable were misstated, which resulted in the operating funds’ fiscal health appearing to be more favorable.
• The Treasurer does not provide, and the Board does not request, monthly reports that would provide essential financial information.
• The Board did not ensure that the annual report was filed with our Office within 60 days of fiscal year end, as required.

Key Recommendations

• Adopt budgets with reasonable estimates for revenues, based on historical information. Periodically review and adjust sewer rates as needed to fund recurring operating expenditures. Develop a plan to address the sewer fund deficit, replenish the repair reserve and repay outstanding interfund loans.
• Ensure that the Village’s accounting records are complete and accurate and are based on adequate supporting information.
• Require the Clerk-Treasurer to provide Board member with monthly reports that provide budget-to-actual results, cash balances and cash flow projections by fund.
• Ensure the annual report is filed in a timely manner by the Clerk-Treasurer.