The Board could improve its oversight of the Company's fiscal activities and the safeguarding of its resources. The bylaws do not adequately segregate the Secretary/Treasurer's duties. The Secretary/Treasurer receives all Company moneys, pays all bills, verbally reports the Company's financial status at regular Company meetings and keeps a record of the Company's monthly meeting minutes. Although the Secretary/Treasurer read the paid bills to the membership each month for approval, no review of the vouchers, invoices or bank statements was made by members of the finance committee prior to payment. Also, the adopted policies for credit cards, procurement and bill paying were inadequate. Finally, the finance committee did not complete an annual audit of the Secretary/Treasurer's books and records in January 2015 or 2016.

Although the Board has adopted a credit card policy, it did not establish written policies and procedures for gasoline credit card use and monitoring. The credit card policy does not identify the number of cards to be issued or the individuals authorized to use the cards. District officials did not always assign gasoline credit cards to a particular vehicle and, when they did, the assigned card was not required to be used only for a particular vehicle. Also, one PIN was issued to a group of employees rather than to individuals, and one PIN was issued for the District's boat. As a result, accountability over gasoline purchases is diminished and there is limited assurance that the $19,225 in gasoline purchases made by District employees and officials were for proper District purposes.

While the procedures in place for the collection and disbursement of occupancy taxes paid to the County were sufficient, the Treasurer could improve oversight by implementing procedures to ensure that establishments are paying the correct amounts. Procedures should include an analysis to compare the total taxable sales for lodging accommodations as reported by the Tax Department to what was reported to the County. We found variances that indicate the County possibly could have collected an additional $1.9 million in occupancy tax revenue. In addition, procedures should also include steps to identify lodging facilities that are not registered with the County. We identified 16 lodging facilities not registered with the County that should have been remitting occupancy tax. For 12 of these businesses, we estimated the County could have collected approximately $101,000 for the period of June through August 2015. The Director did not conduct inspections of certain weighing and measuring devices, perform packaged commodity inspections and verify pricing and scanning accuracy in all potentially eligible businesses in the County. The Director can enhance consumer protection by maintaining up-to-date inventories of retail businesses for both inspection and price testing purposes, and by documenting inspection and test results. Also, the Department did not maintain records of the complaints it received or the actions it took to address them.

We found that the Treasurer maintained appropriate financial records and disbursements were generally for reasonable Department expenditures. However, oversight of the Department's financial activities could be improved. The Department has a constitution and bylaws, but they do not define the financial oversight responsibilities and do not provide specific guidelines on how the membership should exercise its decision-making power. As a result, the Treasurer makes deposits, disburses cash and performs all recordkeeping functions without an adequate independent review. Additionally, a code of ethics has not been adopted. The Treasurer did not provide a written monthly report to the Department officials that detailed the receipts and disbursements each month and the officials and membership have not required the Treasurer to submit an annual report for their review. Furthermore, the Treasurer has not filed the annual foreign fire insurance report for 2015, as required by GML. These weaknesses in oversight create a risk that Department resources may not be used for appropriate purposes or that related decisions may not be in the general membership's best interest.

We found that the Board generally provides adequate oversight of District financial activities to ensure that financial activity is properly recorded and reported and that District money is safeguarded. We commend District officials for designing and implementing an effective set of controls over cash receipts and disbursements.

The Board adopted a resolution authorizing the Treasurer to pay “customary and normal utilities bills” prior to audit. The Treasurer manually prepares disbursement vouchers for each vendor invoice received and provides them to the Board for its review and approval at each monthly Board meeting. The Treasurer does not provide the Board with a warrant, abstract or a list of checks. Three Board members review and approve each claim voucher at the meeting, which is evidenced by their signature on the voucher. The Board does not adopt a resolution approving the claims, and there is no record in the meeting minutes which, if any, claims the members reviewed and signed. The Treasurer then prepares the vendor checks on pre-printed check stock that is electronically affixed with his signature. The Treasurer gives the printed checks and the claim vouchers to a Board member, usually the Chair, for a second manual signature. The Chair compares the prepared checks with the vouchers to ensure the payments are for valid District purposes before signing the checks. He does not compare them to a list of approved claims, confirm the sequence integrity of the check numbers or perform any other control procedure. The Treasurer provides the Board with a list of the mailed disbursement checks at the following Board meeting. The Board then adopts a resolution approving the total dollar amount of the disbursements, after the checks have been endorsed and mailed to vendors. However, the resolution does not include information indicating the number of checks or check number sequence. Because the endorsed checks are mailed prior to the resolution, the Treasurer is paying them in advance of Board approval. In addition, Board members are not provided with a warrant, abstract or a list of checks to compare to the vouchers they are reviewing. Further, no record is maintained of the claims reviewed and approved to compare to the list the Board receives at the subsequent Board meeting. Without a list of claims, the Board cannot be assured that it is reviewing and approving all District claims prior to payment.

The Board needs to improve its oversight of the Authority's operations. During our audit period, the Authority maintained five operating accounts (one for each of its three housing developments, one for the property in development, and a general operating account) and issued 1,536 non-payroll checks totaling $6,324,737. However, the Board and Authority officials have not adopted policies and procedures to ensure that cash receipt, cash disbursement and bank reconciliation duties are segregated. As a result, the Administrative Assistant records and deposits cash receipts, disburses moneys and reconciles bank accounts. In addition, the Board has not established compensating controls, such as reviewing monthly reports (comparing budgeted to actual expenditures, bank reconciliations or cash flow projections) or reviewing the Administrative Assistant's work.

While the Board has not adopted written policies and District officials have not developed written procedures over the payroll function, we found no significant exceptions with the accuracy of the payment of salaries, wages or separation payments. The District Clerk routinely records the Board's approval of individual contracts, collective bargaining agreements, employee hirings, salaries, wage rates, resignations and retirements, along with the effective dates of the activity, in the minutes of the Board's meetings. The payroll clerk then enters the Board-approved information into the human resources management system which is used to make the respective salary, wage or separation payments. Additionally, the Superintendent reviews and certifies the regular payrolls. Although the payroll system is operating effectively and our testing did not identify exceptions, the Board and District officials should document the system in writing and adopt a payroll policy to ensure the system stays in operation, as staff members or duties change over time.

We determined that certain sources of revenue and expenditure categories in the preliminary budget are not reasonable and, at current rates, could potentially contribute to a depletion of the general fund balance within three to five years. Further, the City has not completely implemented recommendations contained in our prior budget review letters issued between March 2009 and March 2016. The City's preliminary budget complies with the property tax levy limit set by statute.

On a monthly basis, the Treasurer provides the Board members with the claims for its audit and approval. The Board performs a deliberate audit of each claim before the Treasurer is authorized to make payment, which is indicated by the Commissioners' initials on each individual claim and adoption of a Board resolution. However, the Board could improve the audit process to ensure all claims are audited before payment, when required. The Board approved the Treasurer's use of a debit card to purchase office supplies and postage. The use of a debit card is not permitted by law and severely weakens controls over District officials' ability to monitor and secure District cash.

The Board needs to improve its management of the District's financial condition. The Board did not adopt a policy to address the level of unrestricted fund balance to be maintained or a multi-year financial plan. In addition, the Board adopted budgets that appropriated $1.6 million of unrestricted fund balance between 2013 and 2015. However, the appropriated fund balance was not used because the Board also overestimated budgeted expenditures resulting in a total of $1.65 million of operating surpluses due in large part to expenditures for salaries and health insurance. Consequently, the District had unrestricted fund balances that ranged from 78 to 85 percent of the ensuing year's budgets over the past three years. As a result, the District's tax levies were higher than necessary. The Board also needs to improve the District's procurement procedures. District officials made 38 purchases totaling $395,731 without the use of requisitions or purchase orders and two payments totaling $117,421 to vendors that were not selected through a competitive bidding process. In addition, District officials made 12 payments totaling $18,856 to vendors without obtaining quotes and procured services from five professionals totaling $181,121 without using competition. As a result, there is an increased risk that budget appropriations could be overspent and that the goods and services procured will not be appropriate, necessary and acquired at the best cost.

We found the District did not award the Length of Service Awards Program (LOSAP) points in accordance with District policy. As a result, in 2015 three firefighters received one year of service credit and a defined contribution of $700 each to which they were not entitled. We also identified discrepancies in the points awarded to all 30 firefighters we reviewed. However, these inaccuracies did not affect the service credit awarded to the remaining 27 participants. This occurred because the District did not award points for participation in miscellaneous activities in accordance with General Municipal Law and because the District did not perform an adequate review of points awarded. We also found mathematical errors in the points awarded and reported to the LOSAP Administrator. Finally, as of July 31, 2016 the District officials had not prepared a summary of LOSAP points earned to date for the 2016 year.

The District's unrestricted fund balance, for the 2013-14, 2014-15 and 2015-16 fiscal years, exceeded the statutory maximum of 4 percent of the ensuing year's appropriations. However, from 2013-14 through 2015-16, the unrestricted fund balance declined from $4,079,523 (13.0 percent of the ensuing year's appropriations) to $3,777,439 (11.3 percent of the ensuing year's appropriations). Additionally, District officials appropriated an average of $1.3 million in fund balance as a financing source in each of the annual budgets for 2014-15 through 2016-17, but the unrestricted fund balance still exceeded the 4 percent statutory limit. However, the District used fund balance totaling between $512,702 and a projected $210,000 in 2016-17 to finance operations. When unused appropriated fund balance for the ensuing year was added back, the District's recalculated unrestricted fund balance as a percent of ensuing year's appropriations exceeded the 4 percent statutory limit each year by more than 10 percentage points. We found that revenue estimates were reasonable while appropriations have been overestimated by $4.6 million in total, or an average of 4.4 percent per year, from 2013-14 through 2015-16. We projected the results of operations for fiscal year ending June 30, 2017 and anticipate the District to have a small operating deficit. This will result in the use of fund balance, but not the $1.3 million planned.

We found that the Board needs to improve its oversight of District operations. Specifically, the Board has not established adequate written policies and procedures governing cash receipts and disbursements, nor has it adequately segregated the Secretary-Treasurer's duties. Furthermore, the Board has been giving the District's four employees a Christmas bonus in addition to their fixed salary. These bonuses, which constitute an unauthorized gift of public moneys, totaled $800 for 2015. In addition, District officials did not maintain complete and accurate fuel inventory records or adequately monitor gasoline credit card purchases. The District maintains one 500-gallon above-ground diesel storage tank at District headquarters, where 13 individuals have keys to the fuel pump. From January 2015 through July 2016, the District purchased 7,513 gallons of diesel fuel at a total cost of $18,249. District officials did not maintain complete and accurate fuel inventory records to safeguard and account for fuel. As a result, District officials could not account for more than 2,000 gallons of diesel (28 percent of the diesel purchased), valued at approximately $5,000. In addition, the District's five gasoline credit cards were used to make 393 gasoline purchases totaling $14,221 during the same period. Our review of 82 charges made with two of these cards, totaling $4,016, found that 45 of these purchases (55 percent) totaling $2,150 were lacking either odometer readings or receipts.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. District officials have reviewed their tax levy limit calculation to ensure that the District's proposed tax levy increases the 2017-18 tax levy within the limits established by property tax cap law.

We reviewed the Treasurer's records and reports and verified that all cash receipts and disbursements were properly recorded and reported. Cash receipts consisted of only the real property tax levy, which was properly recorded and deposited. The 148 cash disbursements totaling $41,777 during the audit period were properly recorded and reported.

The District currently holds individual whole life insurance policies with face values totaling $280,000 for seven employees, officers and former officers who were provided these benefits by Board resolution (three managerial employees, three current Board members and one former Board member). As of December 31, 2015, these policies had a combined cash surrender value of $119,871. Because General Municipal Law only authorizes group life insurance for officers and employees of a water district, the District is not authorized to offer individual life insurance policies for its managerial employees and Board members by Board resolution. Also, to the extent these policies have a cash surrender feature with the cash value payable to the District as owner, this may constitute an unauthorized investment of District funds. The District paid over $16,600 in premiums during our audit period for individual whole life insurance coverage for the seven individuals, even though there was statutory authority only to provide group life insurance.

The Board and District officials need to improve the budget process to ensure reserves and fund balance are maintained at reasonable levels. From fiscal years 2011-12 through 2015-16, the Board adopted budgets that resulted in operating surpluses each year ranging from $216,000 to $2.6 million. The Board used surplus funds to increase reserves and accumulate fund balance up to the 4 percent statutory limit. Restricted funds grew from $285,000 as of June 30, 2012 to $4.5 million by June 30, 2016. The appropriation of fund balance and transfers of surplus funds to increase reserves at year-end resulted in the District's reported unrestricted fund balance remaining within the 4 percent statutory limit. By not establishing adequate reserve policies and not funding reserves through budget appropriations, the Board may have missed the opportunity to use fund balance as a financing source, fund one-time expenditures or reduce the tax levy. We also found that the Board did not ensure that employees received only the reimbursements they were entitled to. The District reimbursed three employees $15,000 for use of personal vehicles to commute from home to work which was not provided in a written agreement. The District also reimbursed an ineligible employee for $4,726 in daycare expenses.

The Board did not implement adequate claims processing procedures to ensure claims were adequately supported, properly authorized and for valid District purposes. The Treasurer compiles bills and invoices and provides a listing of bills to be paid (abstract) to the Board to authorize the payment of claims. The Board Chairman and Treasurer indicated that the Board does not perform a deliberate audit of each claim by comparing the claim as listed on the abstract against available supporting documentation. Instead, the Board reviews the abstract and documents its approval of claims by signing the abstract and passing a resolution to approve claims for payment. However, the resolutions do not include information necessary to determine the number and dollar amount of the claims authorized for payment. Furthermore, without a thorough and deliberate examination of the individual claims and supporting documentation, the Board does not have enough information to determine whether the claims it approves are appropriate and legitimate, and there is an increased risk that improper claims could be paid.

The Board and District officials did not prepare accurate budgets for the 2012-13 through 2015-16 fiscal years as appropriations were overestimated by an average of $5.5 million per year, or 15.8 percent. Furthermore, appropriated fund balance was never used as budgeted because the District's budgeting practices produced operating surpluses in all four fiscal years reviewed. When unneeded appropriated fund balance is added back to unrestricted fund balance, unrestricted fund balance exceeds the statutory limit by 9 percentage points. Finally, the employee benefit accrued liability reserve, the unemployment insurance reserve and the insurance reserve are overfunded.