Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The District's 2016-17 tentative budget includes the appropriation of $2.36 million of fund balance to help finance 2016-17 operations. District officials project that approximately $7.06 million in fund balance may be available. The District's actions are reasonable given the constraints imposed by the tax cap. However, District officials must be aware that fund balance will eventually be depleted and a new revenue source will need to be identified to fund operating expenditures.

BOCES made 5,778 claim payments totaling $67.7 million during our audit period. We reviewed 74 of these claims totaling over $483,000 to determine if they contained sufficient documentation and were properly authorized and approved, sufficiently itemized and for valid business purposes. Most claims we reviewed were properly authorized and approved before payment, appropriately supported and for valid business purposes. However, two tuition claim reimbursements totaling $11,565 were approved and paid to an administrative employee even though tuition was not reimbursable according to the administrator's collective bargaining agreement (CBA). The claims auditor told us she was unaware that tuition reimbursements were not included in this employee's CBA. BOCES' officials explained it has been a past practice to allow tuition reimbursements for furthering education relating to employees' job duties, but agreed that if such payments are made in the future, language specific to tuition reimbursements should be included in the administrator's CBA or a policy should be established authorizing this type of reimbursement for administrative employees.

The Board needs to improve the budget process to ensure it adopts reasonable budgets and effectively manages the District's financial condition. The District reported year-end unassigned fund balance at levels that essentially complied with the 4 percent fund balance limit for fiscal years 2012-13 through 2014-15. This was accomplished, in part, by appropriating fund balance and funding reserves at year end. However, over the past three years, the Board appropriated nearly $6.4 million of fund balance, which should have resulted in planned operating deficits each year. Because District officials overestimated expenditures in the adopted budgets, the District experienced large operating surpluses in each of those years. From 2012-13 through 2014-15, total actual revenues exceeded expenditures by as much as $4.1 million and no amount of appropriated fund balance was used to finance operations. As a result, the District's tax levy may have been higher than necessary to fund District operations.

The Board and District officials have not properly managed District finances. During fiscal years 2011-12 through 2014-15, the District annually appropriated an average of $2.8 million (97 percent) more in fund balance than what was actually needed to fund operations. This practice allowed the District to circumvent the 4 percent statutory limit imposed on the level of unrestricted fund balance. During 2014-15, the District appropriated $1.8 million 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. Recalculated unrestricted fund balance ranged between 11.4 percent and 12.2 percent of the ensuing year's appropriations from fiscal years 2011-12 through 2014-15. Furthermore, the District overfunded two reserves by as much as $9.8 million (97 percent) as of June 30, 2015. This amount is 29 percent of the 2015-16 budget.

We analyzed the District's reserves for reasonableness and adherence to statutory requirements and determined that all four reserves were properly established, and three of the four reserves (tax certiorari, retirement contribution and unemployment insurance) were funded at reasonable levels. The District's employee benefit accrued liability reserve (EBALR), exceeded the amount deemed necessary to pay employees for accrued and unused sick and vacation leave time when they leave District employment by almost $178,000.

The Board minutes did not include the adoption of the two procurement policies that were in effect during our audit period or the names of the bidders and the amounts of the bids that were considered by the Board prior to awarding contracts. Although Authority officials generally followed competitive bidding requirements, they purchased a dehumidifier costing $447,000 without soliciting bids. Although the Board declared this purchase to be an emergency, the policy said that the Company would solicit at least two telephone quotes, if practical; however, the Authority received just one quote. In addition, while Authority officials met the minimum advertising requirements for a $789,948 building electrical contract for which they received only one bid, had they made more of an effort, they may have increased the number of bids received and achieved better contract terms. Further, the two procurement policies that were in effect during our audit period did not provide adequate guidance for purchases when competitive bidding was not required. For example, the policies did not clearly identify who was responsible for purchases from $2,500 up to the bidding limits, or the number and type of quotes – verbal or written – that should be obtained. In addition, Authority officials did not obtain the required price quotes for eight purchases below competitive bidding thresholds totaling $140,737 or use an RFP process as prescribed in the policies to obtain services from two professionals totaling $253,742. As a result, the Authority may have incurred higher costs than necessary or not obtained the most favorable terms for goods and services purchased.

In September 2009, the Board entered into an EPC with an 18-year contract term. The construction occurred from June 2010 to its completion in January 2014. The EPC guaranteed energy cost savings of $4.1 million over the 18-year contract term. The EPC capital project had three amendments, with a total capital project cost of approximately $3.3 million. BOCES officials used the Year 1 Measurement and Verification (M&V) Report from the energy service contractor (ESCO) to compare and verify the results of their monitoring activities to the savings reported by the ESCO. The Year 1 M&V Report showed BOCES saved a total of $181,586 and energy consumption savings of 807,875 kilowatt hours and 46,346 therms. If the BOCES continues with these savings each year, it will be on track to reach the guaranteed savings.

The District procured goods and services in accordance with its policy and the statutory requirements. We reviewed 40 purchases totaling $348,070 that were subject to competitive quotes in accordance with the District's procurement policy or were required by GML to be competitively bid. We found that two of these purchases were subject to bidding requirements. Instead of seeking competitive bids, District officials made these purchases from State contracts, which is an allowable exception to the requirement to seek competitive bids. For the remaining 38 purchases, officials were required to obtain quotes in accordance with the District's procurement policy. Except for minor discrepancies which we discussed with District officials, these 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.

The Board adopted an investment policy, last updated in February 2014, which designates the Treasurer as custodian of District funds. However, the policy does not limit depositories to banks and trusts, as authorized by GML. The policy listed a brokerage firm as a depository, with which the District opened a securities account for the deposit and investment of its two reserve funds totaling $328,063. The District's written agreement with the firm states that the firm is not a bank and that deposits are not insured by the Federal Deposit Insurance Corporation (FDIC). While the firm invested most of the District's money with various banks, the reserve accounts were not invested with a bank or trust located and authorized to do business in New York State. In addition, GML requires any amounts in excess of FDIC coverage to be secured by a pledge of eligible securities. There is no indication in the agreement between the District and the firm that the moneys are secured. Furthermore, the agreement lists the District's Board members as the signatories on the accounts, rather than the Treasurer. In addition, The Board did not exercise appropriate oversight or establish sound policies and procedures related to credit card usage and did not provide sufficient oversight of travel and meal expenditures. The District's policies for credit card use and travel expenditures were inadequate, and the Board did not establish a policy for meals and refreshments. District officials did not comply with existing policies, and the Board did not provide oversight to ensure that funds were used for legitimate District business purposes.

City officials have not effectively managed City finances by properly planning for and using general fund balance in conjunction with the development and use of a multiyear financial plan. The Council did not develop a long-term financial plan, long-term capital plan or require a cash flow analysis to monitor and assess reported revenues for reasonableness. As a result, it was unaware that the Comptroller was not submitting casino revenue claims in a timely manner. As of March 31, 2015, unrestricted fund balance totaled approximately $11 million or 11 times the City's annual real property tax levy and more than 132 percent of the 2015-16 budget. However, the Council has not adopted a formal comprehensive fund balance policy governing the accumulation and use of fund balance or created a multiyear financial plan that would substantially aid in planning City operations. Additionally, estimated revenues appear to be underestimated in the 2015-16 budget by approximately $1 million, which likely will increase fund balance during the ensuing year. Finally, the Council did not adopt policies and procedures for enforcing and collecting overdue ambulance service charges. The Comptroller wrote off more than $350,000 in uncollected charges from April 1, 2013 through May 31, 2015 without the Council's authorization.

While the school lunch fund's fund balance declined by 44 percent from 2011-12 through 2014-15, District officials have taken steps to effectively manage the cafeteria operations by attempting to decrease expenditures and increase revenues. Specifically, from 2012-13 through 2014-15, District officials, through attrition, reduced the number of full-time cafeteria employees from five staff to three staff, which reduced expenditures by 18 percent or $46,000 from 2011-12 through 2014-15. District officials implemented a recycling program and leftover cafeteria food scraps, including fruits and vegetables, are composted and used in the elementary student council's garden. Food grown in the garden is donated to the cafeteria and used in school meals. The students also sort out chip bags, juice pouches, and certain other recyclable items, which are sold to a recycling vendor. District officials were able to enhance revenues by recycling these items and from 2011-12 through 2014-15 the District was reimbursed $830 for 20,824 juice pouches and 17,999 chip bags. The District also reduced its landfill waste and the number of refuse pickups, resulting in a saving more than $10,000 in refuse costs since 2013-14. Additionally, District officials increased revenues by almost $2,000 from 2011-12 through 2014-15 through reimbursements from the recycling program.

The Board adopted budgets for fiscal years 2011-12 through 2014-15 that appropriated a total of $9.9 million in fund balance to finance District operations. However, because the District consistently overestimated appropriations by a total of $10.1 million over the four-year period, 94 percent of the appropriated fund balance was not used. These practices allowed the District to circumvent the 4 percent statutory limit on unrestricted fund balance. When adding back unused appropriated fund balance, the District's recalculated unrestricted fund balance exceeded the legal limit in each year and was as much as 9 percent of the ensuing year's appropriations. Furthermore, the District did not have proper documentation for the establishment and use of three of its four reserve funds. The District also overfunded the workers' compensation reserve fund; its $785,000 balance is more than seven times its annual expenditures of $106,000. As a result, the District appears to have levied more taxes than necessary to fund District operations.

The Board adopted budgets from 2010-11 through 2014-15 that included underestimated revenues, overestimated expenditures and appropriated fund balance that was not used to fund operations. The District had three reserves totaling approximately $3.8 million at the end of 2014-15. Although the District properly established these reserves, the Board and District officials have not established a reserve fund policy stating how much would be set aside in each reserve, how each reserve would be funded or when the reserve funds would be used. The three reserves were funded by transfers of surplus funds rather than budget appropriations that were voted on by District residents. We also found that the employee benefit accrued liability reserve and the retirement contribution reserve were not used effectively because related expenditures were funded from general fund budget appropriations. In addition, the retirement contribution reserve was funded in excess of the amount authorized by the Board. With the inclusion of unused appropriated fund balance and excessive reserves, the District's fund balance exceeds the 4 percent statutory limit.

The Supervisor's clerk did not maintain complete, accurate and timely accounting records and the Supervisor did not provide sufficient oversight of his clerk's accounting duties or appropriate training for the clerk. Consequently, the Town's accounting records contained errors in several of the Town's funds and did not agree with amounts reported to the Office of the State Comptroller on both the 2013 and 2014 Annual Update Documents (AUDs). Further, monthly bank reconciliations were not properly performed in a timely manner and were not consistently accurate. As a result, Town officials do not have assurance that all financial transactions are recorded. Further, the Board does not have complete and accurate information to monitor the Town's financial operations and assess the Town's financial condition.

The Board appropriated fund balance to finance operations each year, from 2012-13 through 2014-15. The Board's revenue and expenditure budget estimates were generally reasonable. However, the District's fund balance has exceeded the 4 percent legal limit all three fiscal years that we reviewed. During this same period the District's real property tax levy increased by approximately $91,000 or 2 percent. Rather than apply a portion of its annual surplus to reduce or stabilize the tax levy the Board chose to transfer surplus money to its reserve funds at the end of 2013-14 and 2014-15. District officials have not developed a reserve fund policy or multiyear financial and capital plans to help determine how the reserve funds fit into the District's overall financial management strategy. Finally, the District has not used the more than $115,000 in debt service fund to pay down debt.

The Board and District officials have not adequately managed the District's financial condition. The Board adopted budgets for fiscal years 2012-13 through 2014-15 that appropriated a total of $49.6 million in fund balance to finance operations. Because the District consistently overestimated expenditures by a total of $29.4 million over the three-year period, it used only $11 million (22 percent) of the appropriated fund balance. In addition, the District's fund balance policy is not in compliance with statutory requirements. As a result, the District's unrestricted fund balance has exceeded statutory limits; it ranged between 5 and 6 percent of the ensuing year's appropriations in each of the last three fiscal years. When adding back unused appropriated fund balance, the District's recalculated unrestricted funds were 12 percent of the ensuing year's appropriations. Furthermore, District officials did not have resolutions establishing eight reserve funds totaling $17.6 million and overfunded the workers' compensation and unemployment insurance reserves. As of June 30, 2015, the workers' compensation reserve fund's $2.8 million balance was sufficient to pay for associated costs for six years. The unemployment insurance reserve fund's balance of $1.3 million was sufficient to pay for associated costs for 24 years.

District officials did not adequately monitor the District's financial condition. The District reported fund balance deficits for four consecutive fiscal years, in part, due to shortfalls in budgeted tuition revenue resulting from SED's tuition rate methodology. Further, the District's student population has declined and collections of billed tuition are not timely. This has led to a decline in the District's cash position from 2011-12 through 2014-15 from $1.2 million to $531,992, a decrease of 57 percent. Over the same period, the District's current liabilities have increased from $3.2 million to $4 million, an increase of 27 percent. To alleviate the cash flow difficulties, District officials issued revenue anticipation notes (RANs) each of the past four fiscal years, including a total of $2.2 million for 2014-15. In 2014, the District only found one bidder for a $1.7 million RAN and the terms were undesirable, requiring the RAN to be payable within two months. The lack of bidders places District operations at risk.

County officials did not establish accountability over Golf Course sales. Consequently, Golf Course sales were not all recorded in the point of sale (POS) system, cash receipts were not always deposited in a timely manner and cash on hand was not properly safeguarded. Furthermore, the Director set the rates for various fees, recorded transactions in the POS system, made deposits and prepared the monthly report to the Treasurer with virtually no oversight by the Legislature or any other County official. The Treasurer used the monthly report for recording Golf Course revenues but did not verify the accuracy of the reported revenues. The Legislature did not adopt written policies governing Golf Course financial operations, develop oversight responsibilities for the Director and County officials or approve rates charged at the Golf Course. As a result, there is an increased risk that Golf Course assets, including cash, could be misused.

BOCES officials have established effective controls over cash disbursements and payroll, including segregating duties so that no individual controls all phases of a transaction, to safeguard component districts' assets. They also provide increased oversight by having independent staff review transactions for key business processes. We commend BOCES officials for establishing and implementing an effective system of internal controls over cash disbursements and payroll.

District officials provided cost effective special education services to its students and saved the District approximately $1.7 million in program and related services costs during 2014-15. Further, we estimate that the District also saved 13 other districts approximately $1.3 million during the same year as their authorized service provider. We commend District officials for providing cost effective special education services to its students and those from other districts.