The Board has not effectively managed the Library's financial condition to adequately safeguard the Library's resources. The Library experienced increasing operating deficits over the last three completed fiscal years of $41,611 in 2012-13, $87,767 in 2013-14 and $174,485 in 2014-15, which was $87,000 more than Library officials planned. This occurred because Library officials spent more than budgeted, primarily for building maintenance, health insurance and personal service costs. In addition, the Board was not monitoring the Library's financial position and did not address these rising costs. As a result, unappropriated fund balance declined from over $224,000 to approximately $42,000, or by about 81 percent, during this period. The Board was unaware of the Library's true financial condition. Prior to March 2015, the Board relied on the Village to handle its fiscal oversight responsibilities. Although the Board received monthly financial reports from the Village Treasurer that included budget-to-actual comparisons of revenues and expenditures, the reports did not include accurate cash or fund balances. As a result, the Board thought the Library had approximately $500,000 available to fund operations. However, at the beginning of January 2015, the Library had approximately $61,000 available and spent almost $67,000 during the course of that month. Because the next significant anticipated revenue was not due until late February, the Village Treasurer recognized the cash shortage to cover operations and made an interfund advance of $100,000 from a capital projects fund to the library fund.

The District's unrestricted fund balance exceeded the statutory maximum from July 1, 2012 through June 30, 2015. In addition, the Board adopted budgets that overestimated expenditures by a total of $9.3 million and underestimated revenues by a total of $2.8 million. Operating surpluses during this period totaled $3.6 million and, therefore, fund balance appropriated by the Board was not used. When considering the unused appropriated fund balance, the District's unrestricted fund balance as of June 30, 2015 was 23 percent of the ensuing year's budget rather than 19 percent that District officials reported. The District also maintained three reserve funds with balances totaling $1.9 million, as of June 30, 2015, and two of them were overfunded. District officials did not use these reserve funds during the audit period but instead used operating funds to pay for related costs. Further, over the same three-year period, the District's tax levy increased from $36 million to $37.7 million (5 percent). Given the excess fund balance and idle reserve funds, the tax levy may have been unnecessarily high.

The Board and District officials have not adopted realistic budgets or effectively managed fund balance and have allowed unrestricted fund balance to exceed the statutory limit of 4 percent for the past three fiscal years by amounts ranging from $350,000 to $940,000 or 3.9 to 10.7 percentage points. Although District officials appropriated an average of $430,000 of fund balance each year to help finance the subsequent year's budget, the amount appropriated was not used because the Board and District officials overestimated appropriations by an average of $870,000 or 10 percent each year. When unused appropriated fund balance is added back, unrestricted fund balance exceeded the statutory limit by amounts ranging from $1.4 million to $1.9 million or 12.8 to 17.5 percentage points. Based on the 2015-16 and 2016-17 adopted budgets, these budgeting practices have continued. District officials also misclassified a portion of fund balance as non-spendable, thereby improperly reducing unrestricted fund balance. Despite the significant amount of accumulated fund balance, the Board and District officials continued to raise the tax levy by an average of 2 percent each year or a total of $350,000 over the last three years.

We selected a sample of 33 vendors who were paid approximately $4.1 million during our audit period and found that District officials generally complied with General Municipal Law bidding requirements for purchases totaling more than $3.3 million from 12 vendors but did not use other competitive methods to procure goods and services from seven vendors who were paid $420,749. These procurements were for professional services and items that were under the bidding thresholds. Our prior audit, which was released in August 2009, recommended that the District amend the procurement policy to include requirements for awarding professional services after soliciting competition, but the District chose not to do so.

The Board established an effective claims auditing process to ensure that claims were properly audited before payment and supported by adequate documentation, that the goods and services were received and that the claims were for proper Town purposes. We commend Town officials for establishing and implementing appropriate procedures for auditing claims.

The Library System's purchasing policy needs to be improved because it does not address what internal procedures to use for purchases that do not require competitive bidding. As a result, Library System personnel do not have adequate guidance when making purchases on behalf of the member public libraries. We examined all purchases, totaling $372,348, made by the Library System on behalf of its member public libraries during our audit period. Most purchases were made in accordance with General Municipal Law. However, the Library System does not verify that vendor quotes are in agreement with the State contract prior to ordering. Consequently, minor errors in pricing occurred. The Library System made 33 purchases totaling $56,146 for computers and computer related equipment. Except for the minor discrepancies, which we discussed with Library System officials, all the computer and computer related equipment purchases were made using State contract pricing. Because the Library System does not verify State contract pricing, there is a risk that it may not get the best possible price when making purchases for member libraries.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. We also found that District officials generally implemented the recommendations in our prior budget review letter issued in April 2015.

BOCES officials need to improve controls to adequately secure and protect IT systems. Four employees had unauthorized personal Internet usage, which included accessing websites for shopping, personal email, social networking, travel and entertainment. Also, nine employees had more access rights than necessary for their job duties. Furthermore, the rooms housing the servers and IT infrastructure did not have safeguards to track access and protect IT assets, and BOCES officials have not developed a disaster recovery plan to guide action in the event of a disaster. Additionally, the Board appointed a claims auditor but needs to improve its oversight of the claims auditing function. There was no evidence that 33 claims totaling $100,873 were checked to ensure they did not exceed their related purchase orders or that 13 claims totaling $42,526 agreed with approval contracts or agreements. In addition, two claims totaling $26,675 were not mathematically accurate, three claims totaling $14,250 were not itemized and five claims totaling $12,672 were paid without proper approval. Additionally, the claims auditor did not submit adequate claims audit reports to the Board each month that included discovered conditions.

Company officials need to improve controls to ensure that financial activity is properly recorded and reported and that Company money is safeguarded. Company officials did not establish adequate controls or provide sufficient oversight of the Company's financial activities. Consequently, the Company's accounting records were not properly maintained, bank reconciliations were not prepared and crucial financial reports were inaccurate or not prepared and submitted to Company officials or to the Office of the State Comptroller. In addition, duplicate press-numbered receipts were not issued to provide supporting documentation for the funds collected during our audit period and checks received totaling $21,181 were not deposited in a timely manner. The Company required that all checks be signed by two Company officers. However, the Treasurer was able to bypass this control and disburse checks at any time because the President and Chief periodically both signed a series of blank checks for the Treasurer to use for Company disbursements. Of the 122 check disbursements totaling $68,487 that were disbursed during our audit period, Company officials did not approve 114 disbursements (93 percent) totaling $64,830 before the payments were disbursed as required by the constitution. In addition, 65 disbursements (53 percent) totaling $24,256 were not supported by adequate documentation and 31 disbursements (25 percent) totaling $10,568 were gifts to individuals or donations made on the Company's behalf. However, because the constitution did not specify the types of expenses authorized to be paid with Company funds, the Company did not have sufficient guidance for disbursements that were made for non-fire protection purposes.

The City incurred operating deficits in fiscal years 2012 through 2015 totaling $2.8 million. As a result, general fund balance decreased by approximately 58 percent, from $4.8 million to $2 million. The City's financial condition has deteriorated over the past four years because City officials have adopted budgets that were not structurally balanced. In addition, the Mayor, Council and Director did not properly budget for, and the Mayor did not ensure that the Comptroller properly accounted for, health care expenditures. The City's financial condition will continue to decline during 2016 because the adopted budget is again not structurally balanced. We estimate that the City will likely incur an operating deficit of at least $400,000 unless significant and immediate spending changes are implemented. As a result, the City will have less than $800,000 in spendable fund balance remaining as of December 31, 2016. We also estimate that the City will have minimal cash at the end of 2016 and will likely be experiencing cash flow problems as a result. We also reviewed the 2017 preliminary budget estimates and determined that the City is likely to have a budget gap of more than $2 million. City officials will have to take meaningful steps to reduce expenditures or obtain additional revenues. Despite the City's deteriorating financial condition, City officials have not developed a multiyear financial plan that would aid in planning and managing the City's finances and operations, nor have officials developed a multiyear capital plan.

The Board did not always enforce its policies and procedures. Although the Board is required to approve all budget transfers above $25,000, the Chief Financial Officer approves these transfers. We reviewed 30 budget transfers totaling $9.2 million and found that 24 totaling $7.8 million were not presented to the Board for approval. The Board approved the remaining six budget transfers totaling $1.4 million between 18 and 70 days after the transfer was processed. The Board's ability to monitor the budget and ensure that account codes are not overspent is compromised when it does not approve budget transfers. Additionally, BOCES officials are making excessive use of miscellaneous budget codes for expenditures. Expenditures totaling $2.3 million were coded to miscellaneous budget codes during the 2014-15 fiscal year. This reduces the transparency of BOCES operations. BOCES officials are also not ensuring that all employees are adhering to the established purchasing policy and procedures. Employees purchased goods and services totaling $13,700 from six vendors before preparing purchase orders to be approved by the purchasing department. The purchasing department is not adequately tracking the occurrence of confirming purchase orders by notifying employees of their lack of adherence to the established policy.

The Board did not ensure that adequate accounting records and reports were maintained and did not effectively monitor the District's financial operations. The Clerk did not maintain accurate and complete accounting records and the Treasurer did not provide the Board with adequate periodic reports. Furthermore, we recalculated the District's assets, liabilities and fund balance and found unrestricted fund balance deficits for the 2013-14 and 2014-15 fiscal years and budgetary deficits for the 2013-14, 2014-15 and 2015-16 fiscal years. Additionally, the District incurred a cash flow shortage that precluded employees from cashing their paychecks from July 2013 to September 2013. In 2014, the District liquidated two certificates of deposit containing reserve funds and transferred those moneys to the general fund checking account. If the District had not made these transfers, the District would have also experienced cash flow shortages in 2014 and 2015.

The Board needs to improve its internal controls over water rents to ensure that they are accurately billed and collected and ad valorem assessments are properly levied. We found that internal controls over water rents and assessments were inadequate and oversight is lacking. Because Town officials were uncertain of District boundaries, ad valorem assessments were not levied on all properties in the District. As a result, assessments charged to District property owners were higher than necessary. We also identified 79 properties in the District that were paying ad valorem assessments but were not billed water rents. As a result, the Town may have lost as much as $31,850 in revenue during our audit period. In addition, 41 customers who were charged the minimum quarterly water rent may actually be using more water than the amount billed for minimum use. We also found that some meters were broken and had not been operating or repaired since March 2011. As a result, the Town may be losing revenue by not knowing the actual amount of water used by customers with broken meters. Finally, the Board did not establish procedures to provide guidance to the clerk, or adequately segregate the clerk's duties. As a result, customers were billed incorrectly or not billed at all.

The Board implemented adequate procedures over cash receipts and disbursements. Cash receipts were all deposited in District accounts, and disbursements were adequately supported and for valid District purposes. Except for minor discrepancies that we discussed with District officials, all checks were adequately supported, properly authorized and for valid District purposes. We commend District officials for designing and implementing an effective set of controls over cash receipts and disbursements.

District officials should improve their billing process for nonresident students by determining actual attendance dates. We reviewed 10 tuition invoices for seven nonresident students placed at the District totaling $219,941 from the 2012-13 through 2014-15 years. While District officials effectively identified nonresident students who were placed at the District, we found that the Treasurer used incorrect attendance dates when calculating bills for three students. As a result, two home districts were underbilled by $5,078 and one home district was overbilled by $638.

The Board and District officials did not effectively manage the District's financial condition. District officials did not adopt budgets based on historical or known trends but instead overestimated expenditures by almost $2.7 million over the last four fiscal years (2011-12 through 2014-15). The District appropriated $2.4 million in fund balance as a financing source in the annual budgets for 2012-13 through 2015-16. However, the District's budgeting practices resulted in operating surpluses in three of these years and we project the District will also likely end 2015-16 with an operating surplus. As a result, none of the appropriated fund balance will be needed to finance operations. The District also retained an average of approximately $342,000 of unrestricted funds in the debt service fund, $1.1 million in the agency fund's group health insurance account and $429,000 in excessive reserves over these years. When adding back unused appropriated fund balance, excess money retained in the debt service, agency funds and reserves, the District's recalculated unrestricted fund balance exceeded the statutory limit, averaging more than 18 percent of the ensuing year's appropriations, or more than four times the statutory limit. From 2011-12 through 2015-16, District officials increased the tax levy by approximately 7 percent. As a result of these practices, District officials levied real property taxes that were higher than necessary to fund District operations. Additionally, the Board did not adopt a written reserve fund policy or develop a multiyear financial plan.

City officials have not established sufficient procedures for pursuing the collection of unpaid parking violations or set a benchmark for collection rates. The City collected $110,000 in revenues for 4,367 violations from January 2011 through April 2016, which represents 61 percent of total parking violations. We determined the City could have collected an additional 1,757 parking violations totaling approximately $44,000 if it collected fines for 85 percent of the parking violation tickets issued. If the City collects the additional 24 percent of parking violations that are still outstanding, dating back to January 2011, the City could receive approximately $83,000 in additional revenue. We also found that the Finance Department staff deposited the receipts for fines collected intact and in a timely manner.

The Board needs to improve controls over the Company's financial activities. The Board has not established policies and procedures for cash receipts, cash disbursements, fundraising or the audit of claims. Bingo operations did not follow applicable regulations. Fundraising reports were not always complete and did not contain sufficient information to verify proceeds. We found that $14,787 (54 percent) of bingo deposits were not made timely and 37 canceled checks totaling $9,016 (23 percent) did not contain the required two signatures. The Company paid hall rental expenses of $24,900 to itself, which it then deposited into the Company's checking account and paid the Treasurer six checks totaling $1,090 as reimbursements for supplies which is not permitted by bingo regulations. We also found disbursements made without supporting documentation to identify the purpose for the payments.

The general fund has been subsidizing the Dover Ridge sewer and water districts (Districts). As a result, the sewer and water funds owe the general fund $100,020 and $13,745, respectively. Accounting records for the Districts are not accurate. All amounts billed could not be traced to deposits, all expenditures could not be explained and bank reconciliations were not performed in a timely manner. Furthermore, we found inadequate segregation of duties in the Districts' financial activities with no compensating controls in place. Finally, the Board-approved procurement policy did not include the method of selecting the Districts' professional services provider. As a result, there is no assurance that professional services for which the Districts paid a total of $187,209 in the last three years were acquired in the most prudent and economical manner.

In recent years, the Board has balanced its adopted budgets with appropriations of fund balance and reserves, which has led to planned operating deficits from 2012-13 through 2014-15 and a $2.2 million decline in the general fund balance. While the District maintained over $5.7 million in its reserve funds through 2014-15, it did not use the reserve funds as appropriated in the budgets. Officials primarily relied on unrestricted funds to finance the operating deficits which caused the unrestricted fund balance in the general fund, as reported by the District, to decline to about $139,000 at the end of 2014-15. However, due to an overstatement of recorded liabilities, the actual unrestricted fund balance was approximately $527,000 at the close of 2014-15, representing a 63 percent decline from 2012-13. The Board has subsequently continued to appropriate fund balance and reserve funds totaling at least $1.45 million each year in the 2015-16 and 2016-17 adopted budgets. As a result, the District's general fund balance will likely continue to decline. In addition, the school lunch fund was not self-sufficient and required advances and subsidies from the general fund to finance its operations. During 2013-14, the District improperly charged the school lunch fund's health insurance costs, totaling over $129,600, to the general fund to avoid a further deterioration of the lunch fund's financial condition. At the end of 2014-15, the lunch fund owed the general fund $47,000 and in 2015-16 borrowed an additional $20,000 to help with cash flow. Lastly, the Board has not developed a multiyear financial plan to address the declining fund balance and to guide the use of the reserve funds.