While District officials kept taxpayers informed about the level of fund balance through public meetings, budget newsletters and internet video recordings, they did not properly manage fund balance or ensure budget estimates and all reserve fund balances were reasonable. Total fund balance has increased by more than $1 million from 2012-13 through 2014-15 and unassigned fund balance was over 7 percent of the ensuing year's budget as of June 30, 2015, exceeding the statutory limit of 4 percent. Over the past three years, District officials used approximately $1 million of the annual operating surpluses to fund five reserves that, as of June 30, 2015, totaled approximately $3 million. While most reserve fund balances were reasonable, one was overfunded. As a result of these practices, District officials may have levied real property taxes that were higher than necessary to fund District operations.

Village officials have no oversight or monitoring procedures in place to ensure that deposits are made within 10 days, as required by Village Law. The Treasurer deposited Village receipts as infrequently as one to two times per month. In addition, neither the Treasurer nor the police clerk issued duplicate receipts for payments received in the mail or by check. While the Treasurer maintains a cash receipts log that notes the date, payee, amount and form of payment, this log is not periodically reviewed and is not a sufficient alternative to issuing press-numbered receipts for all transactions. Because Village personnel do not deposit receipts in a timely manner or record the collection of all receipts in a press-numbered duplicate receipt book that is routinely reviewed by an individual outside of the collection process, the Village has an increased risk that cash receipts could be lost, stolen or misappropriated without detection.

The Board did not adopt adequate policies for tenant rent collections to ensure payments were safeguarded. Incompatible financial duties within the Authority's office were not adequately segregated and the controls designed to mitigate the associated risks were insufficient. However, we found that three clerks' duties could be modified to help segregate the processing of rent collections. We randomly selected the month of November 2014 within our audit period and reviewed 105 tenant rental payments and related fees during that month totaling $30,734. Except for minor discrepancies which we discussed with Authority officials, we found that all tenant rental payments were properly recorded in the accounting system and deposited intact and in a timely manner. The Board also did not establish policies or procedures to guide staff when processing claims against the Authority. As a result, claims were not audited prior to payment. We reviewed 50 claims totaling $189,005 to determine whether they had proper supporting documentation and were appropriate Authority expenditures. Although we found that the claims reviewed were proper Authority expenditures, we identified minor deficiencies which we discussed with Authority officials.

District officials have established effective procedures to ensure claims are adequately documented and supported, for legitimate District purposes and approved prior to payment, in accordance with District policy and Education Law. The Board adopted a claims policy which requires the claims auditor to determine that each claim against the District is for a valid District purpose, and that the obligation was incurred by an authorized District official, the items for which payment is claimed were in fact received or services were rendered, and the obligation does not exceed the available appropriation. The policy also requires the claims auditor to verify that the claim is mathematically correct, does not include previously paid charges, and is in agreement with the purchase order or contract upon which it is based. We commend District officials for establishing effective procedures for processing claims against the District.

In many regards, the Board has taken a passive role and yielded much of its rightful decision-making duties and authority to the College President. The President and other College officials have been allowed to act independently of the Board and have made significant decisions out of the view of the public and students. The Board did not authorize salaries and benefits for senior executives. The President assumed responsibility for establishing salaries and authorizing benefits for senior executives and was allowed to do so without adequate Board oversight. College officials did not submit required written justifications to the Board for approval prior to creating 10 senior executive positions with annual salaries totaling $756,000. Moreover, the College made questionable compensation payments to two executives totaling $77,000. Also, leave records were not accurate or updated in a timely manner. As a result, two executives received overpayments totaling $5,285. In addition, although the Board adopted a procurement policy that required competition for purchases not subject to bidding requirements, College officials did not follow it. The College paid 11 professionals a total of $440,000 for services without using requests for proposals as required by the College's procurement policy. The College also paid one professional $514,000 for services without verifying that State contract pricing was obtained. Further, the College did not enter into written contracts with eight professionals for services totaling $342,000 and paid two professionals a total of $72,400 based on claims that lacked dates and/or descriptions of the services provided. Finally, the Board has not provided adequate oversight over the College's contracts with affiliated entities to ensure services were rendered as contracted and the consideration provided by the College was appropriate. The College, the Auxiliary Services Corporation of Erie Community College (ASC) and the Erie Community College Foundation are separate and distinct entities governed by their own Boards. However, certain College officials − including the President and the Chief Administrative and Fiscal Officer − hold key positions at the Foundation and the ASC, respectively. The close relationship between the three entities and these overlapping roles have often compromised the transparency of the College's actions and operations.

The Board did not properly oversee the District's $17 million capital project. While the completed project costs were below the amounts budgeted, the Board did not ensure goods and services were procured in compliance with the General Municipal Law or the District's procurement policy. In addition, the Board did not periodically obtain and review budget-to-actual financial reports or review and approve change orders. Without proper monitoring, the project could have experienced large cost overruns or work could have been performed that was outside the voter-approved project scope; Furthermore, the Board has little assurance that project goods and services were acquired in the most prudent and economical manner and without favoritism.

Since fiscal year 2012, the Board has taken steps to reduce the Town's town-outside-village excessive fund balance. However, the Board did not develop a written multiyear financial and capital plan that detailed how to accomplish its goal of reducing fund balance and lowering the overall budget and tax levy in a five-year period. The Board also did not have policies or procedures governing budgeting practices or the level of fund balance to maintain. In addition, due to accounting errors and lack of monitoring, sales tax revenues were inappropriately disseminated and cash flow problems and tax payer inequities occurred. Specifically, at the end of 2014, the town-wide general fund had a total fund balance deficit of $38,956 and the traffic district fund had a fund balance deficit of $44,073. As of the end of 2014, the town-wide general, capital projects, fire protection, traffic district and park funds all used a total of $1.3 million in cash from other funds to pay their financial obligations. However, four of the five funds ended the year with insufficient cash assets to pay back the liabilities as required.

The Board did not establish adequate internal controls over the cash disbursements process. As a result, 12 checks totaling $241,893 were written to the Chair's wife, of which $239,622 was inappropriate. The Chair represented $228,871 of this amount as reimbursement for payments to the District's contracted architect, which neither the Chair nor his wife had made. To obtain reimbursement, the Chair submitted falsified invoices and supporting documentation for nonexistent architectural services, business trip expenses, and permits that were never purchased. In addition, the District's credit card was used to make $14,910 in questionable purchases, including gas, cigarettes, groceries and other personal items. We also found that the Board did not perform a proper audit of claims prior to payment or ensure that adequate supporting documentation was attached. The District made 63 payments totaling $451,844 that had no support and another 64 payments totaling $196,863 that had purchase orders, but no other supporting documentation such as an itemized receipt or invoice. Had the Board performed a thorough audit of all disbursements and questioned the unsupported claims, it likely would have discovered these inappropriate payments and been able to take corrective action.

The District contracted with the Consultant to oversee and coordinate transportation services for $32,600 annually. However, we found that, as reported in our prior audit, the companies of the Consultant and the Vendor appear to be related or affiliated to each other. Despite the concerns raised in our prior audit and a report by an independent transportation advisor (Advisor) hired by the Board, the District entered into a new contract with the same Consultant when the contract expired in 2009. We found that the Board has not provided sufficient oversight of the Consultant and the Vendor. District officials have not periodically solicited bids or requests for proposals for primary transportation services. Instead, they have subsequently extended the contracts annually as they expired. In addition, we found that the Consultant did not provide all of the services which, based on the contract with the District, appeared to be the Consultant's responsibility. The Consultant reviewed the Vendor's monthly billings. We reviewed 22 disbursements totaling over $1.2 million and found minor deficiencies. However, we found that the mileage information submitted by the Vendor for fuel reimbursements was not supported by appropriate documentation and the District was overbilled for over 5,200 gallons of fuel with a value of approximately $16,300 for 2013-14.

We reviewed the Village's cell tower revenues and cash disbursements to professional service providers and found that, generally, controls over tower revenues and disbursements were adequate. However, the Village did not receive any revenues for one of the co-locators during the 2014 calendar year. Village officials told us they did not have any new amendments for the delinquent cell carrier and were unable to determine the exact dollar amount owed to the Village. We estimated the amount the Village did not receive to be between $13,900 and $14,900. After we completed our fieldwork, the Village settled with the co-locator and received $13,250.

District officials generally ensured claims were properly audited prior to payment. However, the BOCES claims auditor approved all District payments including the payments made to the Otsego Northern Catskills BOCES. When a BOCES directly provides claims auditing services to a district using a BOCES employee, while providing goods and other services to the same district, the arrangement puts the individual serving as claims auditor in the position of approving significant claims submitted by the BOCES, the individual's employer. Therefore, the claims auditor's objectivity and independence is compromised. In addition, checks are printed with the Treasurer's electronic signature affixed prior to the claims audit, and the Treasurer does not directly supervise the application of her signature. The District's independent auditors identified a control weakness in the District's claims audit process in the 2013-14 fiscal year. For example, they found several months in which claims were paid prior to certification from the claims auditor. Finally, The Board and District officials generally ensured the unrestricted fund balance was within the 4 percent statutory limit. However, certain reserves had significant balances when compared to their respective liabilities. District officials have a five-year plan to reduce these reserves to reasonable levels.

The Board does not appropriately evaluate projects and award financial benefits because it has not established adequate project evaluation criteria. Although the Board has established a Uniform Tax Exemption Policy (UTEP), the policy does not include general criteria applicable to all projects or guidelines for projects seeking tax exemptions. In addition, the cost-benefit analyses used to evaluate projects do not compare the community costs against expected community benefits. Moreover, the Board does not properly monitor the performance of businesses because it does not compare employment and capital investment goals against actual project results. Lastly, although the UTEP contains a recapture provision, this provision is vague and does not include specific events that could trigger recapture and plans for implementation or potential penalties. While we acknowledge that specificity in the recapture clause is not required, it is good business practice to include some type of criteria to facilitate accountability. Finally, SIDA officials did not effectively administer the City's Development Fund money. SIDA's audited financial statements show that over $2 million is due to the City from the Fund. SIDA officials should coordinate with City officials to determine the extent to which the $2 million liability should be repaid to the City.

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. For the 2013-14 and 2014-15 fiscal years the District overestimated expenditures by a total of $682,398. This overestimation averages 15 percent of total appropriations for the two years. As a result, the District has accumulated an amount of unrestricted fund balance that exceeds the statutory limit of 4 percent of the ensuing year's budgeted appropriations. As of June 30, 2015, the District's unrestricted fund balance was 59 percent of the 2015-16 budgeted appropriations.

Village officials did not provide adequate oversight of the cash receipts process. There were no procedures for the reconciliation and reporting of cash receipts from trash bag sales to residents used to pay for their refuse pickup service or for Program fees. In addition, there were no procedures for the periodic inventory of the trash bags that were purchased and stored but not yet sold to residents. As a result, 1,974 trash bags valued at $2,885 could not be accounted for and Program cash collected per registration records could not be traced to receipts or bank deposits, totaling $310. In addition, deposits of collections for trash bag sales were not made within 10 days as required by law. Program fees and clothing payments in excess of $300 were not collected and the Program Director took home and accumulated recreation fees before turning them over to the Treasurer. As a result, the Village has an increased risk of loss of revenue. In addition, the Board's oversight of Village operations needs to be improved. The Board does not receive interim financial or operating reports, bank statements or bank reconciliations from the Treasurer and does not provide for an annual audit of the Treasurer's financial reports. In addition, Board minutes do not contain a resolution listing employee wages and salaries, nor does the budget include a schedule of wages and salaries as required by New York State Village Law. The Board also did not hold reorganizational meetings to publicly appoint non-elected officials and designate an official newspaper and bank.

The purpose of our audit was to determine whether local governments ensured that they complied with the Long Island Workforce Housing Act for the period January 1, 2009 through December 31, 2014.

We commend District officials for establishing an effective policy to ensure claims are adequately documented and properly supported, for legitimate purposes and approved prior to payment by an authorized District official. The policy requires the Board to conduct a thorough audit of each claim and verify that the goods or services on the claim were received and the claim does not exceed the available appropriation, is mathematically correct, does not include previously paid charges and agrees with the purchase order or contract on which it is based. Establishing and adhering to an effective claims auditing policy decreases the risk that fraud, abuse or errors may occur and go undetected.

We reviewed the general ledger accounts for each fund and found that interfund loan balances, reserve fund accounts and capital projects fund balances were not accurate, complete and up-to-date. The Business Administrator indicated he does not periodically review each fund's general ledger but relies on the external auditors to provide ledger balances by fund when they issue the audited financial statements. Without accurate and current ledger account balances, it is difficult to properly assess each fund's financial condition. In addition, the District did not always pay employees at the proper pay rate and payroll was not always adequately supported or calculated. We reviewed payroll for a sample of 64 employees over four pay periods and found that 11 employees were overpaid by $3,125 and four employees were underpaid by $1,629.

Although District officials use a computerized fuel inventory management system, they need to improve their oversight of fuel use. The Board has not ensured that policies and procedures are in place to control fuel assets. District officials do not review fuel transaction reports generated from the computerized fuel inventory system or reconcile fuel purchased to fuel consumed to identify anomalies regarding quantities dispensed, fueling times and vehicle or equipment used. As a result, the District's fuel inventory record was overstated by 452 gallons of gasoline and 297 gallons of diesel fuel, with a total value of $1,725. In addition, District officials assigned one employee to manage the District's fuel inventory system with limited or no management oversight. Finally, records for 34 of the 95 keys used to dispense fuel have been erroneously deleted and the cameras installed at the District do not provide a view of the license plates of the vehicles being fueled.

The water fund balance continues to be in a deficit position. For the past three years the Board has adopted budgets that generally covered ongoing operations even though there were favorable and unfavorable revenue and expenditure variances during this period. However, the overall trend for water fund has been a long-term decline. As of May 31, 2015, the water fund deficit is $907,036. Because of the fund's fiscal stress, the fund has experienced cash flow problems forcing it to repeatedly borrow money from the general and sewer funds; the total balance of the outstanding interfund loans was $1,198,495 as of May 31, 2015. Because the interfund loans have not been repaid, funds belonging to the general and sewer fund have been improperly retained by the water fund, creating an interfund obligation that the water fund does not have adequate cash to repay. Furthermore, the Board has not developed a multiyear financial or capital plan to address the water fund balance deficit, aging infrastructure or the repayment of interfund loans. The 2012-13, 2013-14 and 2014-15 adopted budgets contained contingency appropriations that exceeded the 10 percent contingency appropriation limit by $24,081, $27,503 and $1,834, respectively.

While District officials use sound budget preparation methodology, the District realized operating surpluses for seven of the 10 years reviewed, ranging from $638,000 to $2.3 million. Though each yearly surplus was immaterial, the accumulation of these surpluses over a long period of time resulted in a steady increase in total fund balance. However, the Board did not adopt any formal plans for funding reserves or for the planned use of fund balance. This surplus eventually was consumed by several significant one-time events during the 2013-14 fiscal year. If not for these events, the District most likely would have excessive fund balance. In 2014-15, the District is projected to return to the pattern of operating surpluses, with a projected surplus of $149,000. Additionally, District officials stated that excess reserve moneys will be transferred to unassigned fund balance to pay for current retirement expenditures and unemployment benefits in the 2015-16 fiscal year. Also, excess amounts will be transferred from the tax certiorari reserve to unassigned fund balance to make those funds more readily available. The 2014-15 operating surplus and transfer of reserve funds will increase unassigned fund balance to $1.9 million at the end of the 2014-15 fiscal year, which is an increase of $1.6 million from 2013-14 fiscal year. The year-end fund balance for 2014-15 is projected to be approximately 8 percent of total expenditures. Without having formal plans for the funding and use of reserves and fund balance, the District may again accumulate surpluses without a clear plan for its use.