Company controls were not adequate to ensure that financial activity was properly recorded and reported and that Company moneys were safeguarded. As a result, it appears the Treasurer was able to misappropriate approximately $8,500 from January 1, 2014 through May 31, 2015. In addition, there was a shortage of $490 in bell jar proceeds that were controlled by the President without detection by Company officials.

We found that Town officials have allocated sufficient resources to properly maintain the Town's roads. However, they have not allocated sufficient resources for future highway equipment needs. Without sufficiently addressing the Town's long-term capital needs, Town officials may be spending more than necessary on equipment repairs. The capital plan should incorporate the Board's decisions about when equipment should be replaced and whether to accumulate funds for replacement in reserves or take advantage of current low interest rates to finance acquisitions. Further, in the event of a catastrophic failure of equipment, the Town may not be able to provide necessary services to Town residents or will face a large uncertain and unfunded future expenditure.

The Board and District officials need to improve the budget process to help ensure fund balance is maintained in accordance with statutory requirements and reserves balances are reasonable. From 2010-11 through 2014-15, the Board appropriated an average of almost $2.2 million as a financing source in the District's annual budgets. However, because the District incurred operating surpluses in four years of these years, the District used only about 2 percent of the appropriated fund balance. The Board has also overfunded reserves by $4.7 million (88 percent of total reserves) as of June 30, 2015. When the unused appropriated fund balance and excess reserves were added back, the District's recalculated fund balance exceeded the statutory limit ranging from 19 to 21 percent for the five-year period.

The Board and District officials retained excessive levels of fund balance above the statutory limit. From 2012-13 through 2014-15, unrestricted fund balance at fiscal year-end exceeded the statutory limit by 12 to 13 percentage points. The District's external auditors recommended each year that the District reduce the fund balance levels to comply with the statutory limit, yet the District did not take corrective action. From 2013-14 through 2015-16, the District appropriated $1.4 million in fund balance as a financing source in the annual budgets. This appropriation of fund balance reduced the level of reported unrestricted fund balance at the end of each fiscal year. However, the District only spent approximately $309,000 of the appropriated fund balance to finance operations during 2013-14 and 2014-15. We estimate that the District will realize an operating surplus of approximately $337,000 for 2015-16 and will not use any of the $188,750 of fund balance it appropriated for the 2015-16 budget. Therefore, the District will only use approximately 21 percent of the total appropriated fund balance during these years. When the unused appropriated fund balance is added back to unrestricted fund balance in the year in which it was appropriated, the recalculated unrestricted fund balance exceeded the statutory limit by 15 to 17 percentage points.

The Board, as a whole, did not audit any claims during the audit period. Instead, each quarter, it designated a single trustee to audit all claims, after which the Board, as a whole, reviewed and approved the abstracts by resolution. Any Board member other than the trustee designated as claims auditor could request to review individual claims if there were questions about an unfamiliar vendors or unusual claim amounts on the abstracts; however, this did not often occur. Our review of 30 claims totaling $147,624 disclosed that the designated trustee did not perform a thorough audit of claims. As a result, eight claims totaling $1,791 did not contain sufficient supporting documentation. Although all eight claims were for Library programs, none of them had any support to show that the programs actually took place. While our review did not disclose any inappropriate purchases, when the Board, as a whole, does not audit and approve all claims, there is an increased risk that the Library could pay for goods and services that are unauthorized, excessive or unnecessary.

The Board should improve its oversight of the Department's fiscal activities and the safeguarding of its resources. The bylaws do not adequately segregate the Treasurer's duties. They require the Treasurer to receive all Department moneys, pay all bills and report the Department's financial status at regular Department meetings; however, they do not provide for mitigating controls such as someone other than the Treasurer reviewing and reconciling the bank accounts. The bylaws also require the President to call for an annual audit of the Department's books and financial records by the Village Clerk/Treasurer or authorized alternate. The annual audit was ineffective since it consisted of a comparison of the bank statement balance to the check register and did not include other items such as disbursements or canceled checks. In addition, the Board has not adopted any written policies or procedures addressing cash receipts and disbursements, procurement or claims processing. As a result, the Treasurer did not issue duplicate receipts for donations; made all deposits and disbursed cash without the Board's prior approval; and performed all recordkeeping functions. Although the Treasurer provided a monthly report that listed paid disbursements and deposits for the Board's review, the report did not include a reconciled bank statement for the Board's review and verification.

Although the claims auditing policy contains provisions related to the appointment and duties of the claims auditor, the Board did not ensure that the appointed claims auditor reported to the Board on a monthly basis. Instead, the claims auditor reported to the Business Manager, who is also the Board-appointed purchasing agent. District officials were aware that the claims auditor should be reporting to the Board and told us they were developing a report to provide to the Board. A previous audit report issued by the Office of the State Comptroller in 2007 included a recommendation that the claims auditor should report directly to the Board with respect to the results of claims audits. We reviewed a sample of 50 claims totaling approximately $2.3 million out of 1,394 claims totaling approximately $26.3 million. All payments tested were accurate, supporting invoices matched amounts charged, purchase orders for goods received were signed by the receiver, and there was evidence of the claims audit prior to payments being remitted to the vendor.

Although the District's Human Resources office generally notified the information technology (IT) office of new hires and employees who separated from District service, there was no written policy for notifying the IT office of new hires, keeping track of equipment assigned to employees and collecting equipment when an employee leaves District employment. The District's inventory of portable electronic devices lacked key information, such as date inventoried and purchased, and did not show all devices assigned to employees. Our review of equipment assigned to 38 former employees found three tablets unaccounted for, two of which were later recovered after our inquiry. In addition, one Board member had a prohibited interest in District contracts because he owned a business from which the District purchased awards for student athletes, which cost a total of $14,723 during the Board member's terms between July 2009 and July 2015.

The Board did not properly manage the Town's financial condition. It improperly allocated approximately $181,500 of sales tax distributions and $150,400 of Consolidated Local Street and Highway Improvement Program revenue across differing and incorrect tax bases, resulting in taxpayer inequity. Furthermore, Town officials maintained inaccurate accounting records resulting in misstatements in several funds. We provided training to the Supervisor and Board in 2015 on proper sales tax allocation and other budgeting practices. The Supervisor and Board were receptive to the training and correctly allocated sales tax in the 2016 budget. We commend local officials for taking corrective action for 2016 and encourage them to correct for the misallocations of prior years.

We examined 20 claims totaling $269,495 to determine if District officials obtained competitive quotes in compliance with the District's purchasing policy. Although the Board generally ensured that District officials complied with the District's procurement policy for purchases requiring quotes, officials could improve their purchasing process by attaching sufficient supporting documentation to claims when purchases are made from a government contract.

The Board adopted effective policies and procedures for the Authority's cash receipt processes and Authority officials adequately segregated the duties of collecting, recording and depositing cash. The cash receipt process is centralized and all collections are done at the Authority's main office. The majority of payments received are made by check or automatically through the customers' bank accounts and a small amount of cash is received at the Authority office. We commend the Board and Authority officials for designing and implementing effective controls over cash receipts.

We found that District officials did not always account for employees' leave accruals in accordance with applicable agreements. As a result, the District made separation overpayments of $14,971 during our audit period.

Although the District's policy indicates that it has a written online banking agreement with its bank, District officials were not aware of any agreements regarding online banking. The Board adopted an online banking policy, but District officials did not develop written procedures for online banking activities. District officials also did not adequately segregate online banking duties and did not dedicate a separate computer for online transactions to limit access to online bank accounts. Furthermore, both the Treasurer and Business Administrator have the ability to perform online banking transactions, but neither has received Internet security awareness training. As a result, there is an increased risk that inappropriate transactions or misappropriations could occur.

District officials appropriately developed a detailed, quantitative five-year strategic plan. Although District officials did not meet each specific goal of their five-year strategic plan, this occurred because they had to reprioritize their work to plan for a new program. As a result, the District was awarded grants totaling over $2 million to assist farmers with environmental conservation projects. District officials have worked to meet the goals outlined in their mission statement and should routinely review and update their five-year strategic plan to address new priorities as they arise.

The Board and District officials have not effectively managed the District's fund balance. The Board adopted budgets for fiscal years 2012-13 through 2014-15 that appropriated a total of $60.8 million in fund balance to finance operations. Because the District's budget consistently overestimated expenditures over that three-year period, the District used only $5.6 million (9.2 percent) of the appropriated fund balance. As a result, the District's unrestricted fund balance has exceeded statutory limits. When unused appropriated fund balance was added back, the District's recalculated unrestricted fund balance was between 8.2 and 9.2 percent of the ensuing year's budget, more than twice the legal limit. Furthermore, District officials could not provide Board resolutions establishing five reserve funds totaling $36 million. Additionally, District officials could not provide a clear purpose or intent regarding the future purpose of $4.2 million restricted in the insurance reserve and the Board overfunded the retirement contribution reserve by $4.3 million. In addition, the Board and District officials did not comply with District policy when hiring the new Superintendent and all administrators. The Board did not hire the most qualified available candidate for the Superintendent position as required by its own policy. The Board paid Eastern Suffolk Board of Cooperative Educational Services (BOCES) approximately $7,000 to conduct a thorough search for a qualified Superintendent. Instead of hiring one of the candidates BOCES recommended as having the best qualifications, the Board hired a candidate that BOCES recommended be excluded. Furthermore, the adopted Board policy requires the Superintendent to recommend two candidates for each administrative position. The Board did not comply with the policy when appointing the Assistant Superintendent for Secondary Education or advertising for the position of Director of Policy and Programs. Also, District officials did not post 17 of 27 administrative positions filled during the audit period, many of which were temporary.

The Board needs to improve internal controls to effectively protect the District's computer system and data. The Board has developed an acceptable use policy and an email policy. However, the acceptable use policy does not address computer users who do not use the District's computers for instructional purposes or the inappropriate use of IT equipment. In addition, the email policy allows for the use of personal email through external mail servers. Further, District staff are able to access websites such as online shopping, social networking sites, travel and automobile sites that are unrelated to their District duties and violate the acceptable use policy because the District's web filtering software is not configured to block access. We also found that one District computer had no virus protection software installed. As a result, users could expose the District to malicious attacks that could compromise systems and data. Further, time spent by employees using District resources for personal reasons represents lost District resources.

The Board has not formally adopted a multiyear capital plan. However, they have informally planned for and addressed some of the Village's critical infrastructure needs and updated or improved other Village structures. From 2012-13 through 2016-17, Village officials completed three projects to improve the Village's critical infrastructure and other assets. These projects, totaling approximately $4.7 million, included significant upgrades and improvements to the municipal water system ($4.23 million), rehabilitation of the municipal building ($390,000) and equipment additions to a local park ($39,850). The financing sources for these projects included grants, debt and the planned use of fund balance including established reserves. While Village officials made a conscientious effort to fund the costs associated with these capital improvements through the use of fund balance and other funding resources, the Board increased the 2016-17 real property tax levy by 9 percent, or about $20,000, to reduce its continued reliance on fund balance. Through a formally documented multiyear plan, Village officials may have been able to mitigate the need for a significant one-time increase to the tax levy.

District officials used competitive methods when procuring goods and services, in accordance with the District's purchasing policy and applicable laws. We reviewed a sample of 20 purchases totaling $149,853 that were subject to the District's procurement policy. We found that except for one minor issue, which we discussed with District officials, these purchases were obtained using competitive methods. We commend District officials for complying with the statutory requirements and designing a purchasing process that enables competitive methods for procurement of goods and services.

Over the five-year period 2011-12 through 2015-16, the District's reported unrestricted fund balance ranged from 12 to 17 percent of the ensuing year's budget. Although the Board appropriated fund balance annually to fund operations, it was not used because annual budgets resulted in operating surpluses. In addition, the District's tax certiorari reserve was overfunded by $793,000 and the workers' compensation reserve was not used to fund expenditures totaling approximately $1.5 million. When overfunded reserve amounts were added back into unrestricted fund balance, the recalculated unrestricted fund balance exceeded the statutory limit by 13.9 to 24.6 percentage points over the five-year period.

The Board and District officials did not adequately manage the District's financial condition. We found that the Board and District officials regularly prepared and adopted unrealistic budgets. The last four fiscal years' budgets were comprised of overestimated appropriations and underestimated revenues, resulting in aggregate operating surpluses totaling $719,000. Therefore, $2.06 million in appropriated fund balance was not used to financial operations. In addition, the District ended 2015-16 with another operating surplus totaling $268,000 further adding to their total fund balance. Overall, District officials improved their budgeting practices with the adoption of the 2016-17 budget, by budgeting based on historical trends. District officials also established reserve funds to prepare for future contingencies. However, they did not always include the funding of reserves in the budgets voted on by taxpayers. Instead, the Board allocated amounts to reserves at the end of each fiscal year to reduce unrestricted fund balance to the statutory limit. Four of the District's seven general fund reserves, which have balances totaling $8 million as of June 30, 2016, are overfunded and potentially unnecessary. When adding back the unused appropriated fund balance and overfunded reserves, the District's recalculated unrestricted fund balance ranged from 21 to 24 percent of the ensuing year's appropriations. As a result, the District's tax levy was higher than necessary to fund District operations. Finally, District officials have not implemented adequate internal controls over the claims and accounts payable processes, as incompatible duties are not adequately segregated and mitigating controls have not been implemented.