Village officials have established effective procedures that ensure claims are adequately documented and properly supported, for legitimate Village purposes and approved prior to payment. The Clerk-Treasurer receives vendor invoices from a department head or by mail and prepares the claim packets. The Clerk-Treasurer consecutively numbers all claim packets and lists them on an abstract. Pre-paid claims are included on the abstract. The Clerk-Treasurer submits the claim packets to the Board for review at the regularly scheduled Board meetings. Each Board member reviews each individual claim packet and Board resolutions approving payment of claims are then passed and documented in the meeting minutes. We commend Village officials for designing and implementing this system of controls over the approval of claims.

The Board and District officials have not developed adequate written policies and procedures governing the claims processing function. In addition, the Board did not develop a comprehensive job description that outlines the claims auditor's expectations and requirements. The claims auditor compares invoices against only the purchase orders, which does not always provide adequate documentation about the vendors' prices. The claims auditor does not compare invoices against quotes, bids or government contracts, and there is no policy that requires that these documents be attached to the claims. We found no indication that the claims auditor documented any exceptions or concerns she may have found.

The Board did not audit and approve claims prior to payment. The Library's bylaws do not address the requirement for an audit of claims, and the Board did not adopt a written claims audit policy. The Director reviews and approves invoices and provides them to the Library's senior clerk, who then prepares checks. Checks require two signatures prior to payment – the Director and the Board President. However, the Board President pre-signs blank checks and does not review the claims for which checks are written. In addition, the Board minutes did not indicate that the Board conducted an audit of claims. Internal controls are compromised when the same individual who reviews and approves claims for payment also signs the checks to pay those claims and when checks are pre-signed. We reviewed 171 claims totaling $59,967 to determine whether they were itemized, contained adequate supporting documentation and were proper Library expenditures. Other than a few minor exceptions that we discussed with Library officials, claims were generally properly itemized, had adequate supporting documentation and appeared to be for proper Library expenditures.

Although the Board has adopted a procurement policy that requires competition for purchases not subject to bidding requirements, the policy does not clearly establish procedures for procuring professional services. Also, the purchasing agent and claims auditor did not always ensure that purchases were made in compliance with the policy or require District officials to properly document compliance when they sought competition. We selected 20 vendors who were paid approximately $589,000 and found District officials could not demonstrate that they sought competition when procuring professional services from five vendors who were paid approximately $164,000 or obtain quotes for purchases from one vendor totaling $3,000

The Justices properly collected, recorded and reported Court money in a timely manner. Court records were current and accurate and reports to the Justice Court Fund were timely and complete. The Justices also ensured that Court money was deposited in a timely manner. We reviewed the Justices' bank reconciliations and accountabilities and found that accountabilities were accurately prepared and the money collected by the Court were properly accounted for. We commend Court officials and employees for establishing and implementing adequate procedures to ensure Court money is properly collected, recorded, deposited and reported in a timely manner.

Although reconciliations were performed, the bank statements and reconciliations were not provided to the Commissioners to enable a proper review of financial transactions. The former Joint Youth Director collected money from participants and used those funds to pay for activities in cash rather than turn them over to the Treasurer. Additionally, the collections that were remitted to the Treasurer for deposit were not adequately supported with duplicate receipts or other documentation. However, the Treasurer did ensure that all collections received were safeguarded by securing them in a locked safe until deposit.

The District has not established written policies or procedures for the cash receipts process at the District's Business Office or for the Food Service Department, which collects cash at the school cafeterias. We found that the key duties of cash handling, recordkeeping and reconciliation are concentrated with one position. In addition, there was no process in place for someone independent from the recordkeeping function to verify that funds were deposited into a District bank account. Generally, we found that cash receipts were accurately recorded and deposited timely and intact. District officials have implemented compensating controls to help reduce risks, such as oversight of the cash receipts process, review of prepared bank deposits and bank reconciliations by the Treasurer. However, District officials' implementation of these control procedures could be improved by assigning tasks to an individual independent from the Business Office to perform the review and requiring review of the audit trail reports generated from the financial system.

District officials properly performed criminal history background checks, which helped ensure the safety of their students. The Board adopted a policy entitled Fingerprinting and Criminal History Record, which states that the District “shall not employ or utilize a prospective school employee unless that person has been granted a clearance for employment by the New York State Education Department (SED) or an emergency conditional appointment has been made in a manner consistent with this policy and applicable regulations of the Commissioner.” We commend District officials for properly obtaining fingerprint-supported criminal history background checks of prospective employees and requesting the clearance for prospective employees already fingerprinted from SED.

The Department did not maintain an adequate recordkeeping system for the LOSAP attendance records and has not established procedures to ensure the information is organized and accurately recorded. Several types of attendance forms are used to track participation in LOSAP activities, including incident reports, call logs and activity sign-in sheets. We compared LOSAP attendance records with the participant activity reports for 22 volunteers. We found that volunteers' points were inaccurately recorded. Twelve volunteers were awarded 129 fewer points than they were entitled to and 10 volunteers were awarded a total of 87 more points than they were entitled to.

The Board did not adopt realistic budgets or ensure that reserves were reasonably funded. District officials consistently overestimated expenditures during the last five fiscal years (2010-11 through 2014-15). These budgeting practices generated more than $3.5 million in operating surpluses. The District also appropriated an average of approximately $995,000 in fund balance annually, which was not needed to fund operations due to the operating surpluses. This practice allowed the District to appear that it was within the 4 percent statutory limit imposed on the level of unrestricted fund balance. However, when adding back unused appropriated fund balance, the District's recalculated, unrestricted fund balance ranged between 6 and 9 percent of the ensuing year's appropriations, exceeding the limit for all five years. In addition, from 2010-11 to 2015-16, District officials increased the tax levy by 12 percent. District officials also used approximately $8.4 of fund balance to fund six reserves that, as of June 30, 2015, totaled approximately $8.3 million. The retirement contribution reserve is overfunded, and the employee benefit accrued liability reserve is fully funded but not used. As a result of these practices, the District's tax levy may have been higher than necessary.

The Board did not implement sufficient controls to safeguard Department money. Although the Treasurer maintained financial records, she did not keep adequate documentation to support all financial activity or prepare monthly bank reconciliations. Furthermore, the Treasurer performed all aspects of the cash receipt process with no oversight and did not maintain supporting documentation for cash receipts collected from fundraising activities. Because Department officials did not adhere to the bylaws and provided insufficient oversight of the Treasurer’s financial duties, officials cannot be sure that all money collected was deposited or that Department funds were appropriately spent.

The Board and District officials did not effectively manage the District's financial condition by ensuring budget estimates were reasonable and adopting realistic budgets based on historical costs and trends. Because the District overestimated expenditures by a total of $36.5 million (8 percent) from July 1, 2012 through June 30, 2015, an average of more than $12.1 million per fiscal year, the appropriated fund balance (an average of about $8.7 million each year) was not used. Additionally, the District reported year-end unrestricted fund balance at levels that did not comply with the 4 percent statutory limit for the past three fiscal years. When adding back unused appropriated fund balance, the District's recalculated unrestricted funds were about 11 percent of the appropriations in the 2015-16 budget. The District also maintained five reserve funds with balances totaling $35.6 million as of June 30, 2015, four of which were overfunded. District officials appropriated reserves totaling $10.3 million to fund budgeted expenditures without disclosing to residents which reserves would be used and how much was appropriated from each reserve. Furthermore, the District did not have Board resolutions establishing two of the five reserve funds.

District officials need to improve their monitoring of custodial employee overtime to ensure that the District is incurring only necessary overtime costs. The District does not have a comprehensive payroll policy or written overtime procedures. The Assistant Superintendent for Business told us that overtime is preapproved either verbally or by email. During our audit period, the District paid $166,271 for overtime. Of this amount, $152,140 (92 percent) was paid to custodial unit employees. We examined records relating to 346 overtime hours ($14,871) worked by the 10 custodial unit employees that worked 100 overtime hours or more in the fiscal year ending June 30, 2016. We found no documentation that 314.5 overtime hours, totaling $13,321 had been preapproved by a supervisor. For example, one cleaner worked 44 overtime hours and received overtime payments totaling $1,535 for 13 days of summer cleaning at the middle school without documented supervisory preapproval. Had overtime preapproval been required and documented, District officials may have been able to rearrange work shifts to incorporate summer cleaning into employees' regular workdays.

BOCES officials did not adequately use multiyear planning, which includes ensuring that reserves are appropriately established, maintained and supported. They did not develop formal, written multiyear financial plans, including a reserve plan that indicates their intentions for funding, using and accumulating reserve funds. BOCES officials also did not prepare a formal analysis of certain reserve funds to ensure amounts were appropriate for BOCES' needs or include reserve funding in the annual budgets. We also found that BOCES can manage its software more effectively and efficiently. The Board's acceptable use policies were inadequate because they do not include enforcement practices and specific penalties for noncompliance. The IT staff did not maintain a comprehensive inventory list of all software that BOCES currently owned and for which it purchased licenses. In addition, BOCES officials and IT staff did not regularly monitor or review computers to ensure that all software installed was appropriate and legally obtained. As a result, we found that eight of 86 computers had improper software applications that included noneducational gaming software, a coupon application and an Internet browser rewards bar. We also found that BOCES did not have sufficient documentation to provide evidence that it purchased licenses for six of 177 software programs that required licensing.

Although the treasurer properly accounted for receipts and disbursements for most of the clubs we reviewed, we found one club, the Middle School Student Association, with significant deficiencies. For example, no evidence was found that proceeds from at least five events were deposited. We estimate the proceeds should have been approximately $7,600, based on typical revenue collected at these events. For these same events, faculty advisors paid at least $3,300 to various event vendors without going through the proper disbursements process and approximately $4,300 remains unaccounted for. This occurred because the Board did not establish adequate policies and procedures to ensure receipts from all events are deposited, and the treasurer did not ensure the faculty advisors followed the established, informal procedures.

The Board and District officials did not always effectively manage the District's financial condition by ensuring budget estimates were reasonable and adopting realistic budgets based on historical costs and trends. As a result, the District overestimated expenditures by a total of $12 million (4 percent) from July 1, 2012 through June 30, 2016. Additionally, to stay within the year-end statutory limit for unrestricted fund balance, District officials appropriated a total of $9.4 million of fund balance. However, this appropriated fund balance was not needed to finance operations because the District had a total of $2.9 million in operating surpluses in three of the four fiscal years. When adding back unused appropriated fund balance, the District's recalculated unrestricted fund balance exceeded the statutory limit.

The Board should improve its oversight of financial activities. Although the Board has adopted a code of ethics and purchasing and investment policies as required by statute, they do not have any policies or procedures for credit card usage. Additionally, prior to the current Chairman’s election, they did not have policies or procedures for hall rental receipts. Furthermore, the Treasurer is responsible for performing virtually all of the District’s financial duties. While Board members did review some monthly reconciliations, they did not have adequate records to perform a comprehensive review.

Although the significant revenue and expenditure projections in the preliminary budget are reasonable, we identified several concerns with the preliminary budget that City officials should address. First, the proposed tax levy of $5,674,602 is projected to exhaust approximately 88.5 percent of the City's constitutional tax limit. Also, the budget provides for a limited contingency equal to only 0.21 percent of general fund appropriations, and does not provide for a tax overlay. In addition, the general fund budget relies on a significant amount of interfund revenues from both the water and sewer funds. With limited ability to levy additional property taxes, and the need to increase contingency amounts and provide for a tax overlay in the budget, City officials may need to reduce expenditures or find additional recurring revenues to ensure that the City has available funding for unexpected events and that the necessary amount of property taxes will be collected in the coming year.

We identified a cash shortage of $1,401 in the Clerk's office. Had the Board conducted the required annual audit of the Clerk's records, it may have been able to detect this shortage. Our audit determined that certain Clerk fees were not recorded in the Clerk's cash receipts journal. We identified numerous transcripts and licenses that were issued and not recorded in the cash receipts journal nor included on the Clerk's monthly report. The Clerk did not issue press-numbered duplicate receipts for all cash collected, accurately record all transactions or deposit cash receipts intact.

The District should manage its software more effectively and efficiently. The Board's acceptable-use policies are inadequate because they do not detail practices for enforcement, such as monitoring computer use and reviewing installed software, or include specific penalties for noncompliance. IT staff does not maintain a comprehensive inventory of all software that the District owns and for which it purchased licenses. In addition, District officials and IT staff do not regularly monitor or review District computers to ensure that all software installed by the user is up-to-date, appropriate and legally obtained and that virus protection and patches are installed and up-to-date. As a result, 21 of the 40 computers in our test sample had improper software applications that included software for a personal cell phone, Internet television services, a coupon application and an Internet parental monitoring application. In addition, we found five instances of malware, and significant personal use by 16 users. The installation of non-business, non-educational or unlicensed software may be exposing District computers and networks to unnecessary risks, such as copyright infringement, hacking or other malicious events. Because the Director did not develop a disaster recovery plan, as required by Board policy, there is an increased risk that the District's IT data and components will be lost or misused and that the District will not be able to resume critical operations in the event of a system failure or ransomware attack.