District officials did not consistently enforce the purchasing policy's requirements for obtaining and documenting verbal and written quotes prior to purchasing goods whose costs exceeded policy thresholds. We reviewed 25 payments totaling $103,468 made to 25 vendors during the audit period and found that the District paid $20,262 to six vendors without obtaining the required number of verbal or written quotes. For example, District officials paid $3,557 for stage backdrops for a play, $3,217 for lumber and supplies and $2,836 for sports clothing items without obtaining any other quotes.

District officials have not effectively managed the fund balance of the general fund. As a result, the fund balance exceeded the statutory limit for the fiscal years ending June 30, 2014 and 2015. In addition, although the District has funded reserves, the Board has not established a plan that states the necessary funding levels and provides guidelines for use and replenishment of the reserve funds.

District officials have not effectively managed fund balance and have allowed unrestricted fund balance to exceed the statutory limit for the past three fiscal years by amounts ranging from 1 to 4 percentage points per year. Although District officials appropriated fund balance each year, none of it was needed because District officials also overestimated appropriations each year by an average of $3.2 million or 4 percent. When unused appropriated fund balance is added back, unrestricted fund balance exceeded the statutory limit by amounts ranging from 3 to 7 percentage points. In addition, we project that fund balance will continue to increase because the District will incur a $2 million operating surplus in 2015-16. Despite the significant amount of accumulated fund balance, District officials have increased the tax levy over the last three years by approximately $3.6 million (8 percent). Furthermore, because District officials did not properly analyze cash flow, they unnecessarily issued short-term debt each year, incurring over $309,000 in debt issuance and interest costs over the past four years.

BOCES adopted policies and procedures requiring that goods of the same kind that exceed $20,000 for purchase contracts and $35,000 for public work contracts within 12 months be subject to competitive bidding in accordance with GML. Irrespective of the type and nature of the purchase, all purchases require an approved purchase order (PO) before payment can be made. Procurements that are exempt from GML, such as professional services, are documented in the procurement guidelines. BOCES' procurement guidelines state that professional services are acquired at the discretion of the Superintendent or through separate provisions. Other than procurement for external auditor services, BOCES' policy or procurement guidelines do not require the use of competition, such as RFPs in procuring professional services.

The payroll clerk did not use a standard separation payment calculation form and District officials did not provide guidance specifying the required documentation needed to support each payment calculation and the methodology to be used. We found that the payroll clerk did not maintain calculations for three employees' separation payments totaling $21,269 (7 percent) and maintained incomplete calculations for 10 separation payments totaling $63,030 (21 percent). While the District's separation payments generally conformed to the terms of the collective bargaining agreements (CBAs) and employment policies, deviations and errors occurred because District officials did not develop procedures for processing separation. In addition, the claims auditor did not review or approve any of the separation payment calculations before payment was made. As a result, three employees were paid $4,850 more than they were entitled to. Documenting written policies and procedures that govern separation payments would help prevent any confusion or misunderstanding regarding the process and ensure that proper supporting documentation is maintained and calculations are reviewed.

The Board did not adopt a comprehensive procurement policy because it did not address the procurement of professional services. In addition, District officials did not develop or implement procedures for staff to follow when procuring professional services. Therefore, District staff did not have any guidance to determine when they should use competition, such as a request for proposal process or written or verbal quotes. Also, staff did not have any direction for maintaining required documentation during the solicitation process, including documentation requirements for decisions made. During our audit period, the District paid 39 professional services providers a total of $2.3 million. We reviewed all 33 service providers that had individually received payments totaling at or above $2,500 to determine whether the District had used competition when awarding contracts for professional services. District officials properly sought competition when procuring the services of five providers who received payments totaling $1.2 million. However, the District procured the services of three of those five providers more than seven years ago. District officials did not seek competitive proposals or quotes for the remaining 28 professional service providers who received payments totaling $1.1 million. This included services for students with payments totaling $570,339, legal services for $228,085 and consulting services for $85,930.

The Board did not adopt a policy for fuel inventory accountability and there were no written procedures to provide guidance to employees. In addition, District officials need to improve oversight of fuel reconciliations and review of fuel inventory records. Inconsistencies and variances in fuel use records ranging from 4 to 18 gallons of fuel per day occurred, but District officials did not investigate and resolve these discrepancies. District officials also did not perform any vehicle-based reviews to determine whether District vehicle use was reasonable. We identified 16 different mile per gallon (mpg) readings that did not appear reasonable when compared with the vehicle performance records. Officials also did not investigate variances identified on the fuel inventory reconciliations. Additionally, the supervisor incorrectly calculated tank fuel volume conversions. As of October 31, 2015 the volume of fuel expected to be in the tank was 102 gallons less than gallons calculated by the supervisor. The number of gallons of fuel dispensed on January 7, 2016, as displayed on the pump, was about 10 percent more than the number of gallons actually dispensed. District officials need to improve security over the fuel station.

Overall, District officials have taken actions to reduce the school lunch fund's dependence on the general fund to support operations. Specifically, District officials took steps for the District to become a Summer Food Service Program provider and increased in-house catering. As a result, we project that the school lunch fund's revenues will increase by approximately $87,000 from 2012-13 through 2015-16, and the fund will generate an operating surplus of approximately $5,000.

The Board and District officials need to improve the budgeting process to ensure that the fund balances maintained in the general and certain restricted funds are reasonable. Over the five-year period ending June 30, 2015, the District's unrestricted fund balance exceeded the statutory limit, ranging from 6.5 to 12.3 percent of the ensuing year's budgeted appropriations. From 2011-12 through 2015-16, District officials appropriated a combined total of approximately $956,000 of unrestricted fund balance as a financing source in the annual budgets. However, because the District generated operating surpluses totaling approximately $1.8 million (including a projected $242,000 operating surplus for 2015-16), none of the appropriated fund balance was actually used to finance operations. When the unused appropriated fund balance was added back, the District's recalculated unrestricted fund balance further exceeded the statutory limit, ranging from 9.4 to 14.2 percent. Furthermore, we found that restricted fund balances (i.e., the debt service fund and four general fund reserves) totaling more than $2 million were significantly more than their respective liabilities and, therefore, were overfunded. Moreover, District officials did not use any of these restricted fund balances to make payments for the associated liabilities.

District officials need to improve internal controls over cafeteria cash receipts. The Board has not adopted policies and District officials have not developed procedures governing cafeteria cash receipts or segregated the incompatible financial duties of cash handling, recordkeeping and cash reconciliations for the food service program. The food service manager did not perform an independent reconciliation of cash sales to deposits or review the work of those who performed incompatible cash receipt duties. In addition, the Treasurer performed incompatible financial duties related to collecting, recording and depositing cafeteria cash receipts and had access to the cafeteria's point-of-sale system that she did not need to fulfill her job responsibilities. As a result, the District has an increased risk that cafeteria receipts could be misappropriated and remain undetected.

During our audit period, three different individuals served as Clerk with combined cash receipts totaling $12,186. The Clerks did not always properly record, deposit, disburse and report the collection of fees in a timely and accurate manner. The Clerks did not routinely issue duplicate receipts or prepare a monthly accountability analysis. The former Clerk did not record all fees collected and deposited in her cash receipts journal. Because of this, the current Clerk's account had a cash shortage of $171 as of September 29, 2015. It is likely this amount is greater because many collections were not documented with duplicate cash receipts and certain cash receipt records were not available for review. If the Board had conducted the required annual audit of the Clerks' records, it may have been able to detect this shortage.

On a monthly basis, the Treasurer provides the Board with an abstract (i.e., list of claims) and the corresponding claims for their audit and approval. The Board Chairman and a Commissioner indicated that the Board performs a deliberate audit of each claim before the Treasurer is authorized to make a payment, which is indicated by the Commissioners' signatures on the corresponding abstract and adoption of a Board resolution. However, the Board-adopted resolutions did not include any information documenting the specific claims that were audited and approved. We reviewed 100 check disbursements and the corresponding claims totaling $424,382 to determine whether the claims paid were supported by adequate documentation, for appropriate District purposes and audited and approved prior to payment. We found that 15 claims totaling $2,523 included payments of $2,278 for purchases that were not supported by any documentation. Except for minor discrepancies that we discussed with District officials, the claims for the remaining 85 disbursements were for appropriate District purposes. We found that the Board properly audited and approved the claims for 28 disbursements totaling $87,103. However, the Board did not audit and approve the claims for six disbursements totaling $5,837. In addition, the Board could not provide us with supporting documentation to show that it audited and approved the claims for 66 additional disbursements totaling $331,442 prior to payment. Seven of these claims totaling $317,741 were for monthly payments for ambulance services. These deficiencies occurred because the Commissioners did not record the date of their approval on the corresponding abstract for these claims and the Board minutes did not include resolutions specifying the claims that were audited and approved.

The Board did not adopt policies for password management, protection of personal, private and sensitive information (PPSI), wireless technology, remote access, mobile devices, sanitation and disposal of electronic media, user accounts, access rights, data backups and breach notification. In addition, the Business Manager had administrative rights to the financial software, which provided her with the ability to add or update user access rights and add, delete, change or modify data. The Business Manager was unaware that she had administrative rights and, upon learning this, her administrative rights were removed. The Board also did not adopt a disaster recovery plan. As a result, 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.

The Board and District officials did not effectively manage the District's financial condition by ensuring budget estimates were reasonable and based on historical costs and trends, and that fund balance was maintained at the statutory limit. In 2013-14 and 2014-15 the District adopted budgets that projected planned operating deficits (appropriated fund balance) of $103,272 and $218,440, respectively. However, the District instead experienced operating surpluses of $173,105 in 2013-14 and $37,382 in 2014-15 and did not need to use the appropriated fund balance. Furthermore, the District has accumulated unrestricted fund balance that exceeds the statutory limit for the ensuing year's budgeted appropriations. As of June 30, 2015, the District's reported unrestricted fund balance was 19 percent of the 2015-16 budgeted appropriations.

The Board did not adopt budgets based on historical or known trends. The Board consistently overestimated expenditures between 4 and 11 percent from fiscal years 2012-13 through 2014-15, which generated $4.2 million in operating surpluses. The Board also budgeted for operating deficits during this time by appropriating $400,000 in fund balance each year, but did not need to use these funds due to the operating surpluses. To stay within the 4 percent statutory limit, District officials made unbudgeted transfers to the capital projects fund and to the District's reserves. When adding back unused appropriated fund balance, the District's recalculated unrestricted fund balance was more than 5.5 percent of the ensuing year's budget in each year. Further, as of June 30 2015, the District overstated encumbrances by at least $198,771, which understated the amount of available unrestricted fund balance. As a result, unrestricted fund balance was actually 6.3 percent of the 2015-16 budget. We also found that four of the District's 10 general fund reserves, which had balances totaling $6.3 million as of June 30, 2015, were overfunded or potentially unnecessary. Finally, District officials did not have written policies and/or procedures governing separation payments and did not maintain adequate supporting documentation for each separation payment. The District's three collective bargaining agreements and three of its individual employment contracts did not clearly indicate at what point in the school year leave is granted, or whether the available leave for the current year should be pro-rated if an employee leaves before the end of the school year. We reviewed separation payments totaling $188,276 made to 17 employees. District officials made payments totaling $12,058 to four employees that they could not verify were correct due to ambiguous contract terms.

The District established authorizing provisions in the Board-adopted collective bargaining agreements, contracts, memorandums of agreement and management confidential benefit resolutions that defined how to calculate the various components of the separation payments. However, no policies or procedures have been adopted or put in place to provide guidance to employees and District officials when processing, reviewing or approving these payments to ensure that the calculations were accurate and sufficiently supported. As a result, District officials made eight questionable separation payments and incorrectly calculated five separation payments totaling $73,568.

District officials need to improve the budget process to ensure budget estimates and reserve balances are reasonable and fund balance is maintained in accordance with statutory requirements. The District appropriated approximately $500,000 of fund balance annually from 2010-11 through 2014-15 as a financing source in the annual budget, but more than 90 percent of this amount was not needed due to operating surpluses. In addition, District officials transferred money to the District's reserves at the end of each year, which resulted in four reserves being overfunded by approximately $1.8 million (96 percent of total reserves) as of June 30, 2015. Further, these reserves (debt service, retirement contribution, unemployment insurance and tax certiorari) had balances that were excessive or unnecessary because expenditures for reserve related costs were included in the annual budgets and not paid from these funds. These practices allowed the District's unrestricted fund balance to appear that it was within the 4 percent statutory limit. However, when unused appropriated fund balance and excess reserves were added back, the District's recalculated unrestricted fund balance each year was approximately 30 percent of the ensuing year's appropriations. During 2014-15, District officials appropriated $585,000 for the 2015-16 budget. However, we project that it will not be needed. As such, we expect the District's unrestricted fund balance will continue to exceed the statutory limit, which contributed to real property taxes being higher than necessary to fund District's operations.

The Board has not properly managed financial reserves or sufficiently followed the District's reserve policy and regulations. District officials were unable to provide us with evidence that they have documented the financial need or purpose to be served for each reserve, the conditions under which reserves will be used or replenished and the rationale used to determine the appropriate funding level for each reserve. As of June 30, 2015, the District had seven reserves totaling approximately $11 million. We found that four reserves, with balances totaling $7.3 million, appear to be overfunded. In addition, the District has not properly used the debt reserve, which had a balance of $2.9 million, to pay related debt. In addition, District officials did not provide appropriate oversight over fuel that was delivered to the transportation contractor's tanks. As a result, the District cannot be certain that all of the fuel purchased by the District was used for District purposes. It appears that the District may have purchased approximately 3,800 more gallons of fuel, valued at approximately $7,300, than it should have.

The Board and District officials did not adequately manage the District's financial condition to ensure that fund balance was within the statutory limit. From fiscal years 2012-13 through 2014-15, the District's unrestricted fund balance exceeded the 4 percent statutory limit. For example, the District had unrestricted fund balance in the general fund totaling over $1.7 million, or 17.6 percent of the following year's appropriations, as of June 30, 2015. The Board adopted budgets for the three-year period that appropriated a total of $810,000 in fund balance to finance District operations. However, due to operating surpluses in the same years, none of the appropriated fund balance was used. The District experienced operating surpluses because budgeted revenues were underestimated and appropriations overestimated by almost $2.7 million for the three-year period. For the same period, the unrestricted fund balance averaged about $1.4 million. As a result, the District's year-end unrestricted fund balance as a percentage of next year's budgetary appropriations averaged about 14.1 percent over the last three years, which is almost three and a half times the statutory limit. When the unused appropriated fund balance is added back to the unrestricted fund balance, the District's recalculated unrestricted fund balance ranged from almost 11 percent to 21 percent of the ensuing year's appropriations. Finally, the Board has not adopted a multiyear financial plan to allow it to facilitate the development of future finances. Such a plan would help the Board and District officials monitor and plan for the use of fund balance.

District officials have generally taken appropriate action to manage the District's financial condition and are planning to increase future fund balance. From fiscal years 2012-13 through 2014-15, District officials typically prepared accurate budgets that generated minimal operating surpluses or planned operating deficits. To maintain programs and manageable tax increases, while dealing with the loss of $3.49 million in State aid, District officials used fund balance and interfund transfers to finance general fund operations. Because of this practice, the District's 2014-15 unrestricted fund balance decreased to 1.2 percent of 2015-16 budgeted appropriations. District officials acknowledged the decline in unrestricted fund balance and developed a plan to increase it to between 3 and 4 percent of the ensuing year's budget. District officials started to implement this plan by addressing the District's reliance on non-recurring revenues as a financing source. Therefore, District officials reduced interfund transfers in the annual budgets by approximately $445,000 during the audit period and implemented certain cost savings measures. As a result of their efforts, we project that the District will end 2015-16 with a modest operating surplus that will increase unrestricted fund balance. In addition, the District has developed multiyear financial and capital plans. However, including more details in these plans, such as funding sources, would benefit the District as it faces current and future economic and environmental challenges.