The Board did not develop reasonable budgets. Over the last three fiscal years, the District spent almost $4.7 million (11 percent) less than budgeted. Because District budgets overestimated expenditures, the District did not need to make transfers to the general fund from the debt service fund as budgeted from 2012-13 through 2014-15. District officials were also unable to demonstrate why $1.8 million in fund balance (as of June 30, 2015) should be restricted in the debt service fund. By removing these excess funds from the general fund, the District in effect circumvented the statutory limit on unrestricted fund balance and reported reasonable levels. If these excess funds were added back to the general fund, the recalculated unrestricted fund balance would be 15.5 percent of the next year's appropriation, or almost four times the legal limit.

District officials provided special education services to its students in a cost-effective manner and saved the District a total of approximately $339,000 in program and related services costs during the 2013-14 and 2014-15 fiscal years. In addition, the District provided services to students in a neighboring district and received $60,000 in tuition revenue during this same time period. We commend District officials for providing cost-effective special education services to students.

The District's unrestricted fund balance as of June 30, 2015 was approximately $2.8 million, exceeding statutory limits by 5.9 percentage points. The Board has not developed a reserve policy to guide District officials on the funding and use of reserve funds. Although reserves have been properly established, the reserves have been funded by operating surplus rather than budgeted appropriations. It also appears that the tax certiorari reserve is overfunded by approximately $489,000.

District officials have not properly managed fund balance. As a result, unrestricted fund balance has consistently exceeded statutory limits. As of June 30, 2015, unrestricted fund balance was more than 10 percent of the ensuing year's budget, or approximately $3 million over the legal limit, and is projected to remain at nearly the same level at the end of 2015-16. Although District officials annually appropriated a portion of fund balance towards the subsequent year's budget, the full amount appropriated was not needed because the District's budgeting practices generally resulted in operating surpluses. When unneeded appropriated fund balance is included in unrestricted fund balance, the District actually exceeded the limit in all three years. Recalculated fund balance ranged from $8.6 million (16 percent) to $9.1 million (19 percent). The general trend to complete the year with an operating surplus is projected to continue in 2015-16. Although fund balance levels consistently exceeded statutory limits, District officials continued to raise the property tax levy every year with increases totaling more than $684,000 or 6 percent over the last four years. Had District officials levied the same taxes in 2014-15 as in 2012-13, District residents could have experienced a cumulative savings of over $1.5 million. Furthermore, although District officials maintained a debt reserve totaling $2.5 million, they did not properly use these funds to retire debt. Instead, the District routinely levied taxes for these expenditures. As a result, District officials may have missed opportunities to reduce the property tax levy.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget for the general, electric and parking funds are reasonable. The water and sewer funds' tentative budgets are not balanced and include a deficit of approximately $236,000 and $206,000, respectively. Village officials plan to raise water and sewer rates. The Village has adopted a local law to override the tax levy limit.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable, except for the following matters. Although District officials increased real property taxes within the amount allowed by law, District officials could have used amounts from their excessive reserves and/or appropriated additional fund balance to finance operations. Therefore, District officials are imposing a higher real property tax levy on District residents than is necessary to provide educational services. Furthermore, because District officials presented the tentative budget to OSC for review prior to the adoption of the State budget, District officials should make appropriate changes to their State aid estimates based on the information that has since been provided.

The Chenango Valley Central School District, located in Broome County, issued debt totaling $3.5 million to liquidate the accumulated deficit in the District's general fund and food service fund as of June 30, 2008. Local Finance Law requires all local governments that have been authorized to issue obligations to fund operating deficits to submit their proposed budget for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding. Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District's proposed budget complies with the property tax levy limit.

BOCES officials established effective procedures that ensured purchases complied with GML and the BOCES' purchasing policy. We commend BOCES officials for complying with GML and their purchasing policy when making purchases that required competitive bidding and purchases not subject to competitive bidding that required written or verbal quotes.

Although the District has written procedures regarding the tuition reimbursements process, they were inadequate. Specifically, the Superintendent approves the courses that an employee has applied for and the Administrative Assistant tracks employees and the courses that have been approved for reimbursement. Once the employee completes the course and is eligible for tuition reimbursement, the Administrative Assistant submits a requisition form to the accounts payable clerk for payment. However, there is an inadequate segregation of duties because no other employee makes a final review of the tuition reimbursement before payment is made to the employee. Additionally, the District's written employment separation process procedures do not contain steps to verify that employees have fulfilled any post-reimbursement employment obligations. As a result, District officials made two payments totaling $4,932 that we confirmed to be overpayments because the employees failed to meet the credit hour or grade level requirements necessary for reimbursement.

Except for some minor discrepancies, which we discussed with District officials during our fieldwork, salaries and wages paid to employees matched Board-approved contracts and collective bargaining agreement stipulations. We commend the District for effectively designing and implementing policies and procedures that ensure the accuracy of salaries and wages paid provided to District employees.

The Board did not adopt realistic budgets based on historical or known trends. It consistently overestimated operating expenditures by 6 to 7 percent from fiscal years 2012-13 through 2014-15, which generated $6.3 million in operating surpluses. The Board also budgeted for operating deficits during this time by appropriating fund balance averaging $4.1 million each year, although these funds were never used due to the surpluses generated by the unrealistic budgets. To reduce the year-end fund balance to stay within the 4 percent limit established by New York State Real Property Tax Law, District officials also 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 has ranged from 6 to 7.5 percent of the ensuing year's budget, exceeding the statutory limit in each year.

We found that the Board did not provide proper oversight to ensure appropriate corrective action was implemented to address significant issues identified by auditors. As a result, the Town's financial records remain inaccurate, incomplete and unreliable, and the Board is not in a position to properly monitor the Town's financial condition. Furthermore, significant interfund advances remain unpaid, which could negatively impact the town-wide general fund's financial condition. The Board hired an accounting firm to assist the Board in preparing a written response to our 2012 audit and develop a corrective action plan (CAP), but the Board did not ensure that the CAP was implemented. The Board also did not respond to material weaknesses and significant deficiencies identified by the Town's external auditor for the past three fiscal years. The Town has spent more than $281,000 for various accounting and audit services, but many significant audit findings and accounting deficiencies remain unaddressed. The Board's failure to implement audit recommendations in a timely manner has resulted in the continuation of extremely poor accounting recordkeeping and a lack of reports. This fosters an environment where the Board cannot effectively assess or monitor the Town's financial condition. We found that the Board did not provide proper oversight to ensure appropriate corrective action was implemented to address significant issues identified by auditors. As a result, the Town's financial records remain inaccurate, incomplete and unreliable, and the Board is not in a position to properly monitor the Town's financial condition. Furthermore, significant interfund advances remain unpaid, which could negatively impact the town-wide general fund's financial condition. The Board hired an accounting firm to assist the Board in preparing a written response to our 2012 audit and develop a corrective action plan (CAP), but the Board did not ensure that the CAP was implemented. The Board also did not respond to material weaknesses and significant deficiencies identified by the Town's external auditor for the past three fiscal years. The Town has spent more than $281,000 for various accounting and audit services, but many significant audit findings and accounting deficiencies remain unaddressed. The Board’s failure to implement audit recommendations in a timely manner has resulted in the continuation of extremely poor accounting recordkeeping and a lack of reports. This fosters an environment where the Board cannot effectively assess or monitor the Town’s financial condition.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. However, based on the 2016-17 proposed budget, the Village will have exhausted 94.4 percent of its taxing authority. The Village's ability to rely on real property taxes as an increased revenue source in the future is limited. In addition, the Village's proposed budget for the 2016-17 fiscal year includes $500,000 from the tax stabilization reserve that will be use to lessen the real property tax levy. Because the Board has not yet adopted a resolution to use the reserve, it must do so before it adopts the proposed budget. The Village's proposed budget complies with the property tax levy limit.

District officials achieved health insurance cost savings by changing health insurance carriers and offering employees a buyout incentive. During the scope period, the health insurance and buyout incentive cost savings totaled $826,000. We commend District officials for implementing these cost savings measures.

The BOCES procured goods and services in accordance with its policy and statutory requirements. The Board adopted a purchasing policy in 2006, and updated it in 2011, that identifies procedures for using competitive bidding when required and obtaining quotes when competitive bidding is not required. The Board appointed a purchasing agent who is responsible for ensuring that BOCES purchases comply with the policy and procedures. We commend BOCES officials for establishing and implementing effective purchasing procedures.

We found that Officials obtained food pricing for participating school districts at the lowest reasonable cost available. Officials also attempted to acquire milk and bread at the lowest reasonable cost, but faced a lack of bidders to provide milk or bread to all school districts participating in the cooperative bid. Officials have also taken steps to ensure that the bid process is not influenced by favoritism, extravagance, fraud or corruption.

The Board has not governed and operated the Library in accordance with its charter, bylaws and the City code. The Board is unfamiliar with the Library's charter and bylaws and the City code pertaining to the Library. As a result, the Board and Director have not assumed all duties required by the Library's governing documents, leaving City officials with primary control over the Library's operations and finances. In addition, because the Treasurer does not submit complete and adequate monthly financial reports to the Board, it does not have a complete understanding of the Library's financial position and cannot effectively monitor the budget and actual results of operations. Furthermore, the Board has not undertaken its obligations related to determining the Library's budget. For example, the Library did not receive $107,539 in funding from the City during 2012 and 2013 in accordance with the Library's budgets, as adopted by the Common Council, which could have been used for Library activities. Also, the Board does not audit and approve claims prior to them being processed for payment by the City.

BOCES officials established adequate payroll processing procedures to ensure employees were accurately paid their approved salaries and wages. Establishing and adhering to a good system for processing and verifying payroll payments ensures the employees will be accurately paid the salaries and wages to which they are entitled. We commend BOCES officials for designing an effective system that ensures the accuracy of compensation paid to employees.

The Board did not establish an adequate claims auditing process. The Board adopted a claims auditing policy which contains provisions related to the appointment and duties of the claims auditor if the Board chooses to have a claims auditor assume its responsibility for auditing claims. However, the Board did not appoint a claims auditor, nor did the Board perform the claims auditing function. Instead, the Board reviewed and approved warrants, which is not an acceptable substitute for the requirement to audit each claim. Further, while the Board's approval of the warrant was generally performed prior to the disbursement of funds to pay the claims, in some instances, checks were prepared and distributed prior to the Board's approval of the warrant. As part of the District's claims process, the account clerk received deliveries and reviewed invoices and the business manager prepared warrants and signed checks. While this process does provide for the review of claim documentation, by law, neither of these positions are eligible to perform the duties of a claims auditor.

District officials have effectively managed the District's financial condition. District officials are using sound practices when planning, monitoring and controlling budgets, and they have developed and monitored long-term capital and financial plans. We encourage District officials to continue to update and monitor these plans and take appropriate actions when necessary, as their current long-term financial plan projects a deficit unrestricted fund balance of $935,226 by 2018-19.