District officials need to improve oversight of the after- and before-school elementary child care program operations. Specifically, District officials did not institute procedures governing program operations or ensure that existing procedures were consistently followed. Officials did not ensure that the Director maintained adequate records; the functions of collecting, recording and depositing cash were adequately segregated; or that deposits were made in a timely manner. Because District officials did not provide proper oversight, there is an increased risk that errors and irregularities could occur and remain undetected and uncorrected.

The Village is experiencing financial difficulties because of systemic and historical practices of not properly monitoring and accounting for water production and then borrowing from other funds to address water revenue shortfalls. Over the past decade, these practices resulted in the Village's annual unaccounted-for water averaging more than 40 percent, totaling approximately 673 million gallons. Because other funds have been subsidizing the water fund, the Village's cash is generally depleted by April of each fiscal year. Consequently, Village officials issued revenue anticipation notes, used bond anticipation note proceeds inappropriately and delayed payments to vendors to ease the cash shortfall, which led to a downgrade of the Village's bond rating. Village officials also did not properly monitor user charges or account for water production. As a result, the Village did not bill customers accurately, resulting in a revenue loss during our audit period of $85,000. Additionally, the Clerk-Treasurer did not maintain complete or accurate accounting records and reports. Consequently, the Board was not in a position to properly monitor the Village's financial operations.

The Board did not adopt budgets based on historical or known trends. The Board overestimated expenditures by approximately 5 percent from fiscal years 2012-13 through 2014-15, which generated more than $3.5 million in operating surpluses. As a result, approximately $1.7 million of appropriated fund balance was not used. To reduce the year-end fund balance to within the statutory limit, District officials made unbudgeted transfers to the capital projects fund and to the District's reserves. These practices compromised the transparency of the District's finances and, in effect, increased the District's unrestricted fund balance to more than the statutory limit in each year. Further, two of the District's six general fund reserves, with balances totaling $4 million as of June 30, 2015, are overfunded or potentially unnecessary. Additionally, the Board did not adopt an adequate procurement policy, in compliance with New York State General Municipal Law, to require and enforce competitive procedures for procuring goods and services that fell below the competitive bidding thresholds or for professional services. We found that, of 35 purchases reviewed totaling approximately $1.4 million, the District did not properly seek competition or adequately document the reasons for selecting particular service providers for 15 purchases (43 percent) totaling more than $780,000. Therefore, the District may not be receiving services of the desired quality at the lowest possible price.

The Board and Supervisor have not effectively assessed the impact of the health center on the Town's financial condition. As a result, the health center has required over $200,000 of Town resources over the last three completed fiscal years to sustain operations. Our audit results are based on financial information obtained from source documents and the restatement of the Town's financial records because the Town's reported annual financial information was not accurate. The Supervisor is not maintaining separate accounting records for the health center's activity and some costs are not allocated to the health center accordingly. The health center's activity is recorded in the general fund using a single line item for all revenues and a single line item for all expenditures. Furthermore, while the results show deficits for the health center for the last three years, additional expenditures of $29,480 have not been correctly recorded or allocated to the health center. Adding these expenditures to the recorded results of operations in 2015 increases the total health center operating deficit to $111,559. Furthermore, the Town ended 2015 with a fund balance deficiency of almost $10,000 after having operating deficits for two of the last three years. It is imperative that Town officials continue to monitor the health center's operations using accurate financial information to minimize the impact on the Town's financial condition.

We reviewed the procurement of 100 goods and services totaling $2,456,012 and the disposal of 25 assets and found that BOCES officials purchased goods and services and disposed of assets in accordance with policies and statutory requirements. We commend BOCES officials for designing a process that enables competitive methods for the procurement of goods and services and ensures the best possible prices for assets sold as surplus.

Although District officials have maintained accurate records of employees' leave accruals, no one reviews those records to ensure all leave accrued and used has been entered into the computerized system accurately. Furthermore, District officials have not developed written procedures documenting the type of records to be maintained or guidelines for using, approving, recording and reviewing leave accruals. We reviewed leave time accruals for 25 employees and found that the District was allowing 10-month employees to accrue five days of personal leave instead of the four days allowed by their CBA. We also found that two supervisory employees were responsible for approving their own absences. This increases the risk that absences will not be recorded accurately, resulting in employees using more leave than they are entitled to.

The Board did not ensure that the Town's data was protected against loss or that personal, private and sensitive information was secured. We also found no evidence that Town officials obtained alternative quotes for purchases below competitive bidding thresholds. We tested 13 purchases totaling $12,386, which included parts for snow plow trucks, computer, equipment and tires, and found that officials did not obtain additional quotes. In addition, the Town has not obtained alternative proposals for insurance coverages for at least the past five years. The Town spent approximately $62,000 for insurance coverage in 2015. In addition, the Board did not ensure that all money disbursed was for proper Town purposes. Finally, the Board performed an annual audit of the Town Justice. However, they did not audit the financial books and records of any other officers and employees who received or disbursed money on behalf of the Town. Specifically, the Board did not audit the Town Clerk/Tax Collector's or the Supervisor's records.

The Board did not adopt realistic budgets based on historical or known trends. The Board overestimated expenditures averaging nearly 7.9 percent from fiscal years 2012-13 through 2014-15, which generated approximately $2.1 million in operating surpluses. The Board also budgeted for operating deficits during this time by appropriating fund balance each year, although these funds were not needed due to the operating surpluses generated by the unrealistic budgets. District officials reduced the year-end fund balance, to stay within the 4 percent limit established by New York State Real Property Tax Law, by making unbudgeted transfers to the District's reserves. When adding back unused appropriated fund balance, the District's recalculated unrestricted fund balance exceeded the statutory limit each year by more than 7.4 percent of the ensuing year's budget. Three of the District's five general fund reserves, which had balances totaling approximately $10.1 million as of June 30, 2015, were excessive or potentially unnecessary. Further, we found that the District incorrectly recorded money in the special aid fund that should be recorded in either the general fund or a miscellaneous special revenue fund. In addition, District officials have not developed written policies and/or procedures to formalize the separation payment process. The District does not maintain adequate supporting documentation for each separation payment. In addition, there is no review of each separation payment by any other employee or supervisor before it is paid through payroll or deposited into an employee's deferred compensation account. Furthermore, we found that the District has multiple contracts that have ambiguous terms in regards to leave accruals.

BOCES officials have not implemented appropriate access controls and did not implement procedures to delete inactive employees from the active directory and the accounting system on a timely basis. As a result of these weaknesses, BOCES' computerized data is at an increased risk of loss or misuse due to unauthorized access. In addition, BOCES officials have not implemented access controls to ensure proper segregation of duties in the computer system or limited access to users based on their job descriptions and responsibilities. Vendors doing business with BOCES must be entered into the financial software prior to creating a requisition. Access to these vendor files should be limited to an employee in the purchasing department who does not authorize purchases or approve claims for payment. However, all 83 users have access to the vendor module and can add, delete and update vendors' files, and nine of those users can finalize the changes. As a result, duplicates existed in the system because users created new vendor files when entering purchases for existing vendors.

The District finances its capital projects through borrowings, general fund budget appropriations, State aid and other sources of revenue. During the audit period, the District reported 20 open capital projects and a balance of $5.1 million in its capital fund. District officials did not properly manage and account for the District's capital projects. We reviewed four projects with authorizations totaling $144 million and expenditures of $142.6 million as of June 30, 2015. The Board did not authorize an appropriation for one project and did not effectively monitor the four projects. As a result, the District has more than $1.3 million from completed projects that has not been returned to its source and over $107,000 in expenditures that did not have an authorized budget appropriation.

The District procured goods and services in accordance with its policy and the statutory requirements. We reviewed 25 purchases totaling $109,213 that were subject to competitive quotes in accordance with the District's procurement policy. We found that 16 of these purchases were purchased using State and county contracts, which is an allowable exception to obtaining bids and quotes. Of the remaining purchases, five contained appropriate documentation indicating they were purchased from a sole source vendor and four were made after officials obtained the required number of quotes. Except for minor discrepancies that we discussed with District officials, purchases were made in accordance with the District's policy. We commend District officials for establishing and implementing an effective system to ensure goods and services were procured in accordance with their procurement policy and applicable statutes.

We found that District officials did not consistently document that they obtained materials, supplies and services at the lowest cost in the best interests of the District's residents. According to the Business Administrator, the District follows an informal price quote procedure. We tested 43 claims totaling $96,409 to determine if they contained documentation indicating that District officials sought quotes from various sources before making the purchase. Of these, 26 claims (60 percent) totaling $47,288 lacked evidence that the purchaser sought a sufficient number of price quotes from various sources. For example, claims for projection equipment and installation ($11,000), tablet computers ($9,380), District calendars ($2,476) and student agendas ($1,590) did not include the requisite number of price quotes. Furthermore, the claims auditor was unaware of the District's informal policy for securing price quotes for purchases under the competitive bidding thresholds. The lack of an adequate procurement policy could result in the District paying more than necessary for goods and services.

The Board did not audit and approve claims prior to payment or adopt a claims audit policy. The Library's senior clerk reviewed claims and prepared checks, which the Director and Treasurer reviewed, approved for payment and signed. The Board minutes did not indicate whether the Board reviewed or approved the claims. While the Director provides a financial report to the Board, which is documented in the minutes, the report does not provide sufficient detail of disbursements for the Board to adequately monitor financial activity. Internal controls are compromised when the same individuals who review and approve claims for payment also sign the checks to pay those same claims. This control weakness could be corrected if the Board audited the claims prior to payment.

We found that the Board did not formally document its approval for three administrators' salary payments totaling more than $460,000 and benefits such as health insurance, for which the District paid approximately $80,000 during our audit period. This occurred because the Board has not adopted a payroll policy and District officials have not established specific procedures to provide guidance and to ensure that employee compensation and benefit payments are accurate, properly approved and supported.

The Board and District officials did not adequately manage the District's financial condition. Officials overestimated general fund appropriations for the 2012-13 through 2014-15 fiscal years by $14.9 million (7 percent), which resulted in operating surpluses totaling $2.4 million. During this period, the District levied an additional $1.6 million in real property taxes and appropriated fund balance totaling $16 million and reserves totaling $258,440 that were not needed to finance operations as planned. This resulted in the District's unrestricted fund balance exceeding the 4 percent statutory limit ranging from 14.1 to 18.9 percent. We also project that the District will not use any of the appropriated fund balance totaling $4.5 million for 2015-16. Because District officials continued these budgeting practices when adopting the 2016-17 budget, the District will most likely experience another operating surplus. In addition, as of June 30, 2015, the District had two reserves totaling $2.6 million that were overfunded, overstated a liability totaling $638,885 and did not transfer unused flex spending moneys totaling $250,047 to the general fund, which further increases the excessive amount of unrestricted fund balance. When combining the unused appropriated fund balance for the ensuing year and reserves with the other overstatements and excesses, the District's recalculated unrestricted fund balance was between 25 and 30 percent of the ensuing year's appropriations, further exceeding the statutory limit. As of June 30, 2015, the District also had more than $3.6 million in the debt service fund available for debt payments that had not been used to finance debt payments, and it continues to accumulate money each year.

BOCES has not properly accounted for surplus funds and has not properly managed reserves in a transparent manner. From fiscal years 2012-13 through 2014-15, the Board and BOCES officials have consistently overestimated appropriations by an average of $4.4 million, or 6.6 percent, each year. As a result of these practices, BOCES has generated annual operating surpluses averaging $4.7 million and totaling approximately $14 million during this time. Although BOCES has refunded more than $10 million of its surpluses to the districts, BOCES has also used approximately $4 million (29 percent) to increase its reserves without adequate disclosure to the public and the districts. BOCES officials also overfunded three reserves and maintained a trust that was not allowable. As a result, BOCES has restricted more than $15 million in funds that should have been returned to the component and participating districts.

We found that the Board and BOCES officials did not properly manage fund balance and reserves in accordance with statute. Similar to findings in our prior audit of BOCES, we determined that BOCES officials did not properly estimate certain budget appropriations and used the resulting surpluses totaling approximately $3 million to fund unbudgeted capital projects. Furthermore, BOCES officials have improperly restricted more than $5 million of surplus funds for a purpose not statutorily allowed and had approximately $2.4 million in reserves that were not used and did not evidence plans for future use. Had certain actions not occurred, the BOCES would have had to return more than $8 million to its component districts. When the BOCES retains surplus funds the tax burden is increased for the residents of the component districts.

Although the District's budget estimates were reasonable, the Board and District officials allowed unrestricted fund balance to exceed the statutory limit for the past three fiscal years. As of June 30, 2015, unrestricted fund balance totaled $1.4 million and was 14 percent of the 2015-16 budgeted appropriations, exceeding the limit by 10 percentage points. Furthermore, the District has two reserves totaling $967,000 that may be overfunded. During the past three fiscal years, District officials have increased the tax levy by an average of $82,000, or 2 percent annually and increased the tax levy 1.5 percent for 2015-16.

Town officials did not ensure revenues were sufficient to finance current expenditure levels for the water, sewer and general funds. From fiscal years 2013 through 2015, these funds have experienced recurring operating deficits. Specifically, the water fund had an average annual operating deficit of $65,000, the sewer fund had an average deficit of $19,000, and the general fund had an average deficit of $215,670. As a result, the water and sewer funds have had to borrow $730,000 from the general part-town fund to maintain cash flow and operations. If Town officials do not take action to address the deficits, these funds may not be able to repay these loans. This will impact the general part-town fund's financial condition and result in an inequity for residents who paid for but did not benefit from these services. Further, the general fund does not have any unrestricted fund balance to fund unexpected expenses.

Generally, we found that the Board designed an adequate system of controls by establishing policies and procedures for managing, accounting and reporting the School's financial operations. However, the Board should provide clearer guidance with respect to conflicts of interest as well as better oversight of School official's compliance with designed controls. For example, we found the CEO signed checks payable to herself which were not dually signed by the Board Chairperson as required and certain checks were approved and paid without having adequate supporting documentation. Additionally, we found the Board entered into agreements with two current Trustees which appear to have conflicts of interest.