Purpose of Audit

The purpose of our audit was to examine internal controls over the Village’s water operations for the period June 1, 2010, through September 25, 2012.

Background

The Village of Maybrook is located in Orange County in the Town of Montgomery and has a population of approximately 3,000. The Village is governed by a five-member elected Board of Trustees and comprises a Mayor and four Trustees. The water fund budgeted appropriations for the fiscal year ended May 31, 2012 were approximately $262,000 and were financed by user fees.

Key Findings

The Village’s internal controls over water operations need to be improved.

• The water clerk’s duties were inadequately segregated. As result of deficient internal controls, we detected errors in more than 17 percent of the water bills that we reviewed, and more than $1,100 of customer account adjustments were made without documented prior approval.
• Interfund advances were not accurately accounted for, reconciled, or repaid as required. As of May 2012, the water fund owed the general fund approximately $126,000.
• Employee benefits costs were inaccurately allocated. The water fund was over-charged approximately $74,000 for employee benefit costs.

Key Recommendations

• Segregate incompatible duties within the water operation's accounting function or implement compensating controls. Implement water billing procedures to ensure that water user charges are properly billed, collected, and recorded in a timely manner. Investigate the water billing errors and adjust customer accounts for any amounts over- or under-billed. Implement billing adjustment procedures that at a minimum require a designated official’s approval for all adjustments and that require written documentation of the reasons for such adjustments.
• Ensure that all advances between funds are repaid no later than the close of the fiscal year in which they were made and that adequate records are maintained for all such advances.
• Implement a formal cost-allocation plan that assigns employee benefit costs to the water fund ensuring that the allocations are reasonable and applied consistently.