The Board did not adopt reasonable budgets or effectively manage the District's financial condition to ensure that the general fund's unassigned fund balance was within the statutory limit. The Board adopted budgets included appropriated fund balance that was not needed as a funding source because the Board and District officials overestimated appropriations when they prepared and adopted budgets for the last three fiscal years. These budgeting practices produced operating surpluses in two of the three fiscal years year and the unassigned fund balance has exceeded legal limits all three years. As of June 30, 2015, the District's unassigned fund balance was 13.1 percent of the next year's appropriations, or $855,000 over the legal limit. The District also maintained approximately $28,600 in its tax certiorari reserve fund with no plan for its use. In addition, for three of the four District reserves, the Board has not developed a written plan that communicates to taxpayers the optimal funding levels or conditions under which the reserves will be used.

While the Board has established written regulations relating to cash receipts and non-payroll disbursements procedures, District officials and employees did not always comply with these regulations. We found that the clerk did not issue receipts for all money collected or maintain a record of all money received. In addition, there was no process in place for someone independent from the record keeping function to verify that funds were deposited into a District bank account as required by Board regulations. In addition, the Business Manager serves as the District Treasurer and has authority to sign checks, make journal entries without review, prepare monthly bank reconciliations and has full administrative rights to the District's financial system. As a result, the Business Manager has the ability to control all phases of non-payroll disbursement transactions, which could allow her to make improper transfers and payments and then conceal these activities by creating misleading entries in the accounting system. The Board and District officials have implemented compensating controls to help reduce risks such as assigning an individual independent from the Business office to review bank reconciliations prepared by the Business Manager and requiring the Superintendent to review audit trail reports generated from the financial system. However, District officials' implementation of these control procedures could be improved.

The Board and District officials should do more to ensure the accuracy of biweekly payrolls. The payroll clerks are performing incompatible duties related to payroll processing, and District officials are not sufficiently monitoring or reviewing their work. In addition, the Assistant Superintendent for Business is certifying payrolls after the payments have been disbursed, which increases the risk that the District may not detect incorrect payroll payments.

Although the Board adopted an online banking policy, District officials did not develop written procedures for online banking activities. In addition, online banking duties were not properly segregated and account accessibility was not completely controlled. Furthermore, the Treasurer and Business Office Clerk did not use proper procedures when accessing online banking sessions. Finally, the Treasurer and Business Office Clerk did not receive appropriate online banking training.

Prior to the 2015-16 fiscal year, the District had a contract with the Greenwood Lake Union Free School District (GWL) to provide secondary education to approximately 200 students at $12,240 per student, or about $2.4 million annually. The GWL contract was phased out over the two-year period of 2013-14 and 2014-15. As a result, the District's enrollment declined significantly over the past three fiscal years. Along with the decline in students, the District's revenue declined drastically. The Business Administrator did not ensure that the Board received accurate financial information. We found errors in accounting for financial transactions resulting in a misleading picture of the District's financial condition. For example, account receivables are overstated by as much as $602,000 and reported cash balances were overstated in one month by over $1.1 million. In addition, reserve fund moneys were commingled with other moneys and the District appropriated over $100,000 more than available from certain reserve funds to fund the 2015-16 budget. In addition, the Board's adopted budget for 2015-16 is structurally imbalanced. Depending on the results of operations, the District may end 2015-16 with a deficit at year end. Finally, the Board did not develop a multiyear financial plan to address the District's decline in enrollment and financial condition. As a result, the District's financial condition has been diminished.

The Board did not adopt structurally balanced budgets or properly manage fund balance. The Board consistently adopted budgets that appropriated fund balance to finance operations without a clear understanding of the amount of fund balance available to appropriate. As a result, the total fund balance in the general fund declined by over $1.5 million, or 70 percent during the past four years. As of June 30, 2015, the District's unrestricted fund balance was $143,945, or 0.6 percent of the ensuing year's appropriations.

The Board and District officials have not effectively managed the District's fund balance and reserves. The District's year-end unrestricted fund balance has exceeded the statutory limit for the past three years. As of June 30, 2015, the District's unrestricted fund balance was 9.2 percent of the next year's appropriations, or $2.6 million over the legal limit. Furthermore, the District overfunded the employee benefits accrued liability reserve by about $7.1 million and the tax certiorari reserve by about $1.5 million as of June 30, 2015. Consequently, the District has accumulated approximately $11.2 million in excess funds, representing 22 percent of the 2015-16 budget. The accumulation of these excess funds has resulted in the District's tax levy being higher than necessary to sustain District operations. Finally, District officials have not established a formal multiyear financial or capital plan to help ensure that these excess funds are properly used to benefit District residents.

We found that District employees received and used leave accruals in accordance with individual employee contracts and collective bargaining agreements. District officials implemented specific procedures to ensure employee leave accruals were earned in accordance with the employee's applicable contract. We also found District officials established effective procedures to ensure the accrual and use of leave time were recorded accurately. We commend District officials for designing and implementing adequate procedures for the accrual and use of leave time.

District officials did not maintain fund balance in accordance with statutory requirements. The District's unassigned fund balance has exceeded the statutory limit in two of the last three fiscal years. In an attempt to comply with the 4 percent limit, upon advice of their certified public accountant, District officials erroneously classified almost $1.2 million of surplus funds as other restricted funds and in a reserve for tax reduction. For the 2012-13 fiscal year, $873,000 was classified as other restricted fund balance, and for the 2013-14 fiscal year, $315,000 was classified as a reserve for tax reduction. As a result of these errors, the District's unassigned fund balance did not include funds that should have been included when calculating the statutory limit. During 2014-15, District officials reported these funds as unassigned fund balance after they realized these funds were truly unassigned. Currently, officials have no plans to expend these excess funds.

The Board developed an adequate process to ensure that claims were accurate, valid, properly supported and for legitimate District purposes. However, the claims auditor's practice is to verify the vouchers or invoices against the purchase order only. The claims auditor does not verify the vouchers or invoices against quotes, bids or contracts. Furthermore, the claims auditor does not require that these documents be attached to the claim package. As a result, the claims audit process is not as effective as it should be.

Although the Board has developed a procurement policy, the corresponding regulations do not provide guidance or requirements for seeking competition when procuring professional services or for documenting the method of selecting professional service providers. In fact, the purchasing regulations indicate that the procurement procedures for seeking competition are not required when procuring professional services. In discussion with District officials, we confirmed that their regulations were developed based on a general misconception that District officials are not required to seek competition when procuring professional services.

Based on our limited procedures, it appears that the Town has not made progress implementing corrective action. Neither of the two audit recommendations were implemented.

The City did not use a competitive process prior to entering into solar power purchase agreements or ensure the agreements were in the best interests of the City. The Board approved two power purchase agreements (power agreements) with a solar vendor without soliciting any form of competition from other solar vendors. As a result, the City may have missed an opportunity to realize greater savings, totaling between $1.25 and $7.21 million.

The City of Yonkers is authorized to issue debt totaling $45 million to liquidate the current deficits in the City School District's general fund as of June 30, 2014. Chapter 55 of the Laws of 2014 requires the City to submit its proposed budgets for the next fiscal year to the State Comptroller and the Commissioner of Education for review while the deficit obligations are outstanding. The District's budget request did not include an appropriation for textbooks. The District has three unsettled union contracts that expired in June 2014 but has not budgeted for additional expenditures it could face if these contracts are settled. The City continues to rely on fund balance for recurring expenditures. The City must seek written assurance from the State of New York Mortgage Agency that the Agency will transfer $11 million to the Municipal Bond Bank Agency for distribution to the City in accordance with the 2015 legislation for this aid. This funding source will likely not be available in future years, which results in a potential funding gap for 2017-18. Revenue estimates for sales tax may not be achievable. The budget includes raises in the metered water rates, sewer rents and real estate transfer taxes. The appropriations for tax certiorari settlements may not be adequate, the reserve for uncollected taxes may be underestimated, and the appropriation for police overtime may be underestimated.

The Town has accumulated excessive funds in the general and highway funds; fund balance has grown by 24 percent since January 1, 2012. As a result of operating surpluses, the Town has not used appropriated fund balance as an actual financing source. When unused appropriated fund balance was added back, the Town's fund balance ranged between 74 and 84 percent of the ensuing year's appropriations in fiscal years 2012 and 2013. In addition, the Board has not adopted a multiyear financial plan for the use of the Town's excess fund balance. The Supervisor has not maintained accurate and up-to-date accounting records since December 2014. Further, the Board did not perform an effective audit of claims and has not performed an annual audit of the books and records of Town officials and employees who received or disbursed money in 2014. In addition, the Board and Superintendent have not provided adequate oversight to safeguard highway department assets. There have been two known thefts of gasoline since 2012. The Board told the Superintendent to replace the locks after the second theft in December 2014, but he did not do so. Further, he did not maintain a perpetual fuel inventory to detect any fuel variances. Finally, the Superintendent was solely responsible for maintaining the highway equipment inventory and did not maintain adequate inventory records. He also sold equipment at auction with his own personal items.

As of September 2015, BOCES had six significant lease agreements with annual costs from 2014-15 totaling about $1.29 million. Prior to entering into any of the six lease agreements, BOCES officials did not ascertain whether purchasing was an option and, if so, analyze whether purchasing, rather than leasing, was the more cost-effective option. Although the Board adopted resolutions approving each of the leases, none of the resolutions provided a basis for determining that the agreements are in the districts' best financial interests. BOCES officials told us that their analysis for leasing the properties included verifying that the rent cost per square foot for each lease was at or below market asking prices. However, they did not document this analysis for five of the six leased properties.

The Board implemented adequate procedures over cash disbursements and disbursements were adequately supported, properly authorized and for valid District purposes. Because the District does not have employees, it does not process any disbursements on a payroll. As a result, the District processes all disbursements on a warrant. The Deputy compiles invoices, bills or claims against the District and verifies that they are for legitimate purposes and contain adequate documentation. The Deputy then prepares the warrant and checks for the Board to review and approve. The Board approves the warrant and checks at its monthly meeting. The approved warrant is listed in the Board's meeting minutes along with the resolution to approve the disbursements for payment. Upon approval of the warrant, the Deputy signs and the Treasurer mails the checks to the vendors. We commend District officials for designing and implementing an effective set of controls over cash disbursements.

The City of Long Beach, located in Nassau County, has been authorized to issue debt totaling $12,000,000 to liquidate the accumulated deficit in the City's general, water, sewer and risk retention funds as of June 30, 2012. Local Finance Law requires all local governments that have been authorized to issue obligations to fund operating deficits to submit their proposed budgets for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding. The proposed budget includes estimated one-time revenue of $600,000 from the sale of City property and there is currently no contract for the sale of this real property. The proposed budget includes revenue estimates of $4.9 million for beach charges, $9.3 million for refuse and garbage charges, $4.4 million for metered water sales and $5.1 million for sewer rents. These estimates include amounts that are expected to be realized from increases to the beach charges, refuse and garbage charges, metered water sales and sewer rents, which the City Council has not yet authorized. Overtime salaries are budgeted at $2.3 million, despite costs averaging over $2.9 million for the last five completed fiscal years. City officials partially implemented recommendations included in our budget review letter issued in May 2015. The City's proposed budget exceeds the allowable tax levy limit.

The Board recognizes the importance of information technology (IT) and has sought to improve the IT environment. The Board increased the IT system administrator position to full-time in May 2015; obtained a grant to cover technology items such as smartboards, a new server and laptops; and adopted policies for acceptable use, confidentiality and prohibited conduct. However, the Board has not adopted policies and procedures for breach notification, access rights, user accounts, password management, back-up procedures, protection of PPSI, wireless technology and mobile devices. In addition, each user does not have his or her own unique user account for the financial software. Instead, they share one user account with administrative rights, which allows them to add, delete, change or modify data. We also found that audit trail reports are not generated and reviewed by School officials and that the School does not have a disaster recovery plan. As a result, there is an increased risk that the School's IT data and components will be lost or misused and that the School will not be able to resume critical operations in the event of a system failure.

Internal controls over the Department's cash receipts were not appropriately designed or operating effectively. The Director was involved in all phases of the cash receipt process – collecting cash, recording cash collections and remitting them to the finance department – with no oversight. County officials did not ensure that cash collected was reconciled with collections remitted for deposit. As a result of this weak control environment, $4,811 collected by the Department could not be accounted for. In addition, funds for two cash transactions totaling $1,000 were not deposited in a timely manner. On February 23, 2016, the Director entered a guilty plea to a class “A” misdemeanor charge of Petit Larceny and agreed to terminate her employment with the County and pay restitution.