The District's policies and procedures for timekeeping and leave accruals are not adequate to ensure time and leave records are accurate. The District paid an employee $50,477 more than he was entitled to for unused leave accruals at the time of his retirement. Time and attendance records are not submitted by all employees. In addition, leave accrual records for five employees included numerous errors. Additionally, for two of four biweekly payrolls, payroll hours worked and salaries paid were inaccurate resulting in an underpayment to three employees totaling $1,226 and minor overpayments to two employees totaling $55. The Board did not establish and adopt policies and procedures over cash receipts to ensure all cash receipts were properly collected, recorded and deposited. The Fishers Island freight agent's duties related to cash receipts are not adequately segregated, collections received are not reconciled to collections recorded and duplicate pre-numbered receipts are not issued for cash collected. Records indicate that $1,636 in fees were not invoiced or collected, $300 of cash receipts were collected but never recorded in the accounting software and another $300 was collected and never deposited in the bank account. In addition, because the Assistant Manager of Business Operations does not maintain a perpetual inventory of ferry ticket books, at least seven ticket books worth $1,575 are unaccounted for. Because the Assistant Manager of Business Operations does not impose late fees for property that the District rents, the District has not collected more than $20,000 it is entitled to based on lease agreement provisions. Finally, District officials did not ensure that goods and services were procured in compliance with statutory bidding requirements and the District's procurement policy. We identified $617,037 in purchases that were not properly bid as required by law and approximately $38,600 in purchases that were made without obtaining quotes as required by District policy.

District officials have established adequate procedures to ensure the accuracy of salaries and wages paid to employees. The Board approves all salaries and pay rates in the various contracts for the instructional, non-instructional and administrative employees at the District. At the beginning of each school year, the senior account clerk updates each individual employees' salary, pay rate and leave accruals, as stated in their respective contracts, in the District's financial system. We commend District officials for designing and implementing a good system of controls to help ensure the accuracy of compensation paid to employees.

District officials need to improve their security policies and procedures. Our review of 80 District-owned MCDs disclosed PPSI on 16 (20 percent) of these devices. We also found that District officials have not developed a classification scheme or performed an adequate inventory of the PPSI stored on District MCDs. Unless the District officials identify all the PPSI maintained, it could be difficult to promptly notify the affected students and their families and other parties if a data security breach should occur. In addition, District officials need to improve their oversight of cash collections for extra-classroom activity funds and athletic events. Officials did not implement policies and procedures over athletic event admissions and adopt procedures to ensure adequate reconciliations of extracurricular cash collection activities were prepared. District officials did not ensure that sufficient documentation was maintained for cash collections and pre-numbered cash receipts were issued for all money collected. We identified 29 cash receipts totaling $17,577 that were not deposited within the three-day period allowed by District policy. In addition, the athletic director did not monitor or periodically reconcile the athletic event ticket inventory to account for the number of tickets sold. As a result of these discrepancies, District officials were unable to determine if all ticket money collected was deposited.

To determine if the District's controls over its cash receipts were designed and working effectively, we examined cash receipts totaling approximately $151,000. While we found the District adequately segregated the cash receipt duties, certain controls could be strengthened to ensure that cash collected by the District is protected from misappropriation, loss or theft and is deposited timely. The District did not establish formal, written cash receipt policies and procedures. We found that cash receipts are kept in an unlocked and unattended cabinet. The cabinet used to store the District's cash receipts is not locked during business hours. Because the cabinet is located in a corridor outside the Treasurer's and clerks' offices, neither party has a direct line of sight to the cabinet and, therefore, cannot monitor the cabinet. In addition, the clerks do not always log cash receipts into the cash receipts log when it is received. Twelve cash receipts totaling $7,975 were deposited before a clerk recorded receiving the cash in the District's cash receipts log.

The Board and District officials did not adopt reasonable budgets or ensure that fund balance and reserves were managed in accordance with statutes. From fiscal years 2012-13 through 2014-15, the District overestimated appropriations in the adopted budget by approximately 12 percent each year. The District has also appropriated approximately $1.5 million of fund balance and reserves annually as a financing source in the annual budget, which was not fully used. This practice allowed the District to circumvent the 4 percent statutory limit imposed on the level of unrestricted fund balance. However, when adding back the unused appropriated fund balance, recalculated unrestricted fund balance for each year ranged from $1.4 million (9 percent of the ensuing year's appropriations) to $1.6 million (10 percent of the ensuing year's appropriations), exceeding the allowable limit. Although recalculated fund balance levels consistently exceeded the limit through June 30, 2015 and are projected to continue to do so through June 30, 2016, District officials continued to raise the tax levy every year totaling more than $360,000, or 8 percent, over the last four years.

District officials did not ensure that time, attendance and leave accrual records were accurate, complete and properly approved. The Board did not establish policies and formal written procedures over payroll timekeeping to ensure that employees' leave and work time was accurately accounted for. As a result, time sheets were incomplete and employees were credited with incorrect leave accruals. In addition, District officials did not segregate duties in the time and attendance software, and there were no compensating controls in place. Because of the lack of segregation of duties or compensating controls, there is an increased risk that unauthorized changes to the time and attendance records, software security settings and user authorization privileges could occur and go undetected.

The Board needs to improve its procedures for the special programs to ensure that all cash collected for the playground and driver's education programs is properly collected, accurately recorded and deposited in a timely manner. The Board did not adopt a cash receipts policy and District officials did not adequately segregate the Director's duties or implement compensating controls such as providing supervisory reviews of the Director's activities. In addition, the Director did not maintain logs of all cash received or issue triplicate pre-numbered receipts for playground cash received. Furthermore, District officials did not ensure that pre-numbered receipts were issued for funds received for the driver's education program or that the funds were collected by District officials or employees and deposited in a timely manner. As a result, there is an increased risk that money collected for special programs may be lost or misused.

We found that Library officials controlled expenditures. They developed budgets in four-year increments and then determined real property tax levies based on these budgets. Library officials also reviewed budget-to-actual reports monthly to ensure that expenditures were within budgeted amounts. They have also implemented cost-saving measures, such as obtaining grants and reducing health insurance costs. As a result, the Library's total operating expenditures decreased by approximately $60,000 from 2011-12 to 2014-15. We commend the Director and Library officials for effectively managing Library expenditures.

Authority officials have developed procedures to ensure all cash collections for parking are accounted for and deposited intact and in a timely manner. The Authority uses four methods to collect parking payments from customers; single-space meters, multi-space meters, pay-on-foot machines (park then pay prior to exiting the garage) and monthly parking permits. The Authority bills businesses that pay by check for the permits and automatically charges individuals' credit or debit cards on a monthly basis. The Authority contracts with an armored car company to count and deposit money from the single- and multi-space parking meters at least once per month. On a daily basis, the managers remove the money from the pay-on-foot machines, count it, prepare a deposit slip and deposit the money into the Authority's bank account. The Authority also charges prepaid parking rates for parking in the garages when there are special events such as concerts. The Authority contracts with a third-party employment agency for temporary staff who, along with Authority employees, staff the garages for these special events. We commend Authority officials for establishing a control environment that adequately safeguards cash collections.

The Board developed an adequate process to ensure that special education claims were accurate, valid, properly supported and for legitimate District purposes. However, District officials have not formally documented their procedures in writing, which can lead to a lack of guidance and inconsistencies in how the procedures are carried out. During our audit period, the District processed 107 special education claims from eight vendors, totaling $570,289. We examined 12 special education claims containing 115 invoices and totaling $198,788 to determine whether rates charged and services rendered agreed with applicable contracts, invoices were adequately itemized and properly supported showing the level of service provided for each date, and claims contained the claims auditor's and other approvals required by the District's procedures. We found only minor discrepancies, which we discussed with District officials. However, the lack of written procedures increases the chance that claims will not be processed properly or that procedures will not be properly communicated when there are staffing changes.

Based on our limited procedures, it appears that the Town has made limited progress implementing corrective action. Of the 21 audit recommendations, eight recommendations were implemented, eight recommendations were partially implemented and five recommendations were not implemented.

District officials did not always obtain competitive quotes and adhere to bidding requirements when procuring goods and services. We selected a sample of 30 vendors who were paid approximately $2.2 million between July 1, 2014 and December 31, 2015. District officials did not have bid documentation to support payments totaling $757,700 made to two vendors for transportation, and they did not have documentation to support sole source payments totaling $53,000 to two vendors for textbooks. While the Board adopted policies and procedures that provided guidance for purchases that do not require competitive bidding, District officials did not follow the policy and use competitive quotes to procure goods and services from 14 vendors paid a total of $116,626.

The Board and District officials could improve their management of the school lunch fund's financial condition. Over the last three fiscal years, fund balance decreased over $61,000 as a result of operational deficits averaging approximately $20,000 per year. At the end of 2014-15, the school lunch fund owed the general fund $131,000 and the District has reported negative total fund balance since 2012-13.

District officials need to improve the procedures established to govern the issuance and use of District credit cards. During our audit period, the District had two credit card accounts and 29 credit cards. One account was for general purpose purchases with two credit cards and the other account was for fuel purchases with 27 fuel credit cards. While the credit card policy is extensive, it did not require employees to acknowledge receiving the policy or address cash advances available with the general purpose cards. We reviewed 15 credit card payments totaling $32,906 for purchases made using these credit cards to determine whether the purchases were for a legitimate District purpose and complied with the District's policy and procedures and whether the cards were adequately safeguarded and used only by authorized personnel. The purchases we reviewed were generally for legitimate District purposes. However, District officials did not always follow the District's credit card policy and procedures. The Superintendent did not identify the job titles of all employees that had custody of District issued credit cards, Business office personnel did not submit a list of authorized card users to the Board annually and the Board did not approve a list of employees who used fuel cards.

The Justices properly collected, recorded and reported Court money in a timely manner, the records were current and accurate, and reports to the Justice Court Fund were timely and complete. However, the Justices did not ensure that Court money was always deposited in a timely manner. We reviewed eight months of financial activity during our audit period and found that the Justices and the clerk accurately accounted for money collected. However, our review of 147 cash receipts totaling $24,135 collected during these months disclosed that 24 receipts totaling $3,258 were not deposited in a timely manner. We also reviewed the Justices' bank reconciliations and accountabilities and found that accountabilities were not always prepared, which increases the risk that money may not be properly accounted for and differences between the liabilities and cash on hand may not be identified.

Although the Board adopted an administrative regulation outlining the requirements for obtaining requests for proposals (RFPs) for professional services, the regulation did not provide sufficient detailed requirements or guidance for seeking competition when procuring professional services. We reviewed the District's process for procuring services. Seven professional service providers were paid a total of $239,689 during our audit period. District officials properly sought competition using RFPs for contracts of three service providers (architect, attorney and external auditor) totaling $120,493. However, the District did not properly seek competition for contracts with the other four professional service providers totaling $119,196.

The District procured goods and services in accordance with its policy and the statutory requirements. Specifically, the District made 174 purchases totaling approximately $1 million that were subject to bidding requirements. We determined that all of these purchases were either competitively bid or allowable exemptions from bidding. One hundred forty-eight purchases totaling approximately $229,000 required quotes or RFPs. With minor exceptions, District staff obtained the necessary quotes or RFPs for these purchases. District employees were aware of and adhered to the District's purchasing policy requirements. We commend District officials for designing a purchasing process that enables competitive methods for the procurement of goods and services.

District officials developed multiyear financial plans that include revenue and expenditure projections as well as the anticipated use of reserve funds to aid in future budget preparations. The District has also developed a separate reserve plan which includes details regarding the anticipated use of reserve funds for a five-year period. However, this plan does not include information related to funding and maintaining the individual reserve funds. District officials also have not prepared a formal analysis of reserve funds based on the District's projected needs, as required by the reserve policy. As of June 30, 2015, the District's reserve funds totaled $6 million, or approximately 17 percent of the total budgeted appropriations for the 2015-16 fiscal year. Two of the reserves – unemployment insurance and liability – have balances that are excessive or unnecessary based on the District's needs. In addition, District officials have not developed a formal, documented multiyear capital plan. District officials informed us that they plan to develop a formal, multiyear capital plan once the building condition survey is received, which is expected by the end of the 2015-16 fiscal year.

Although the Board has developed a purchasing policy and BOCES officials have developed corresponding regulations, they do not require competition when procuring professional services. Therefore, the policy and regulations do not indicate when or at what monetary threshold it is appropriate to use written requests for proposals or written or verbal quotes. Instead, the regulations state that these are not required, but may be used at the business office's discretion. Additionally, although the policy and regulations require adequate documentation be maintained, they do not outline the specific documentation requirements to be used during the solicitation process, including documentation for the decisions made. BOCES officials also told us that they do not have informal guidelines to ensure competition is sought for professional services.

Although the District complied with competitive bidding requirements and adopted a purchasing policy, the policy did not include guidance for procuring professional services. As a result, District officials did not use competitive methods when procuring services from five professionals costing $363,815. In addition, although the policy did require District officials to obtain written quotes for purchases under the competitive bidding thresholds, they did not obtain the required quotes for 11 purchases costing $49,250. District officials also did not enter into a written agreement with an attorney for services costing $44,586. As a result, there was no assurance that certain goods and services were procured in the most economical way and in the best interests of residents, or that there was agreement as to the attorney's services and compensation.