During the 2014-15 school year, the District paid Dutchess BOCES $852,129 for 1,404 computers obtained through BOCES CoSer agreements, which consisted of 874 desktops, 508 laptops and 22 tablets. Overall, we found that District officials have established adequate controls over the computer inventory that allows computer equipment to be tracked efficiently. Except for minor issues which we discussed with District officials, we found that the District's computer inventory is reliable. We commend District officials for establishing and implementing an effective system of controls over computer equipment.

The District had 24 employees who retired or resigned from the District during our audit period. We reviewed the separation terms for each employee to determine those eligible for a payment and whether the payments were properly calculated according to applicable Board-approved contract terms. We found that five teachers and nine nonteaching staff were eligible for separation payments totaling $111,336. These payments conformed to the terms of the written agreements. In addition, of the nine payments made to nonteaching staff, we found that the Assistant Superintendent for Business did not approve seven payments totaling $11,757, or 10.6 percent of all payments, because it was not standard procedure for the payroll clerk to provide them to her. Although all of the vacation payout payments were correctly calculated, a review process provides additional assurance that any errors would be detected and corrected before the payments are processed.

The Board did not provide adequate oversight to ensure that the Commission's financial activity was properly recorded and reported or that program money was safeguarded. Duties within the cash receipts and cash disbursement processes were inadequately segregated and compensating controls were not implemented. The Director collected, counted and deposited fees for each program but did not provide the Treasurer with adequate supporting documentation to accurately record the program receipts that were deposited. Therefore, the Treasurer was unable to accurately record revenues in the accounting records and the Board did not have adequate information to monitor the Commission's financial operations. The lack of adequate records made it impossible to ensure all money collected was deposited. Furthermore, the Director did not deposit any soccer concession stand money during the 2014 program year. The Board also failed to ensure its bylaws were followed by requiring that all checks be signed by the Chairman and Treasurer. Instead, checks were prepared by the Town of Milton Comptroller and signed by the Town of Milton Supervisor. As a result, the Board failed to oversee the disbursement process. Lastly, the Commission has not filed the required annual financial report with the Office of the State Comptroller since 2004.

The District has consistently overestimated appropriations in the adopted budget. This budgeting practice generated almost $3.1 million in operating surpluses from fiscal years 2010-11 through 2014-15. The District used the operating surpluses to fund various reserves. The District also appropriated approximately $1.9 million of fund balance annually as a financing source in the annual budget but more than 99 percent of this amount was not needed due to the operating surpluses. This practice allowed the District to appear that it was within the 4 percent statutory limit imposed on the level of unrestricted fund balance. However, when adding back the unused appropriated fund balance, the District's recalculated unrestricted fund balance for each year was approximately 8 percent of the ensuing year's appropriations, exceeding the limit. During 2014-15, the District appropriated $1.9 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. In addition, from 2010-11 through 2015-16, District officials increased the tax levy by 17 percent while fund balance and reserves were building. Furthermore, the District maintained an inappropriate liability reserve of approximately $942,000 and overfunded the employee benefit accrued liability reserve by $820,000 (15 percent). Finally, the District has not used its debt reserve to fund debt payments, as required. These practices all contributed to taxes being higher than necessary to fund operations.

We reviewed the Library's policies and procedures over the investment of cash. We also reviewed all the bank statements during our audit period to determine the amount of interest earned and the service fees charged. Except for minor discrepancies which we discussed with Library officials, officials generally managed cash effectively, monitored the interest earned and service fees charged to achieve optimal return, maintained a minimum number accounts required for operations and periodically sought competition for banking services.

District officials did not always comply with the District's non-bid purchasing policy and procedures when procuring professional services. Therefore, the Board does not have adequate assurance that services were procured in the most economical way and in the best interests of the District. We reviewed the procurement of all professional service providers contracts (nine), totaling $194,500 in payments during the audit period. The District awarded two professional service contracts after issuing RFPs for energy performance services and auditing services, with payments totaling more than $75,000. However, District officials did not seek competition for seven professional services or insurance contracts with payments totaling more than $119,000. The Board also did not formally approve professional services contracts for three of these seven providers, including general liability/casualty insurance, architectural service and financial advisor services. In addition, there were no written agreements that stipulated the contract period, the services to be provided and the basis for compensation to three professional service providers, including architectural services, Clerk of the Works and legal services.

The Authority monitors the amount of water produced and compares the production to the amount of water sold to customers on a monthly basis. The Authority also monitors additional water used for other municipal purposes and has implemented a leak detection program to identify and reduce water loss. Although the Authority is proactive in identifying and addressing unaccounted-for water, 43 percent of the water produced in 2014 was unaccounted-for. The variable costs of the water loss in excess of the 10 percent goal is $339,000.

When the Village of Keeseville dissolved, the Town of Ausable (Town) and the Town of Chesterfield entered into a verbal agreement to provide for the continuation of water and sewer services to residents who previously received these services from the Village. We commend the Town for engaging in inter-municipal cooperation to ensure the continuation of water and sewer services in an efficient manner. However, the verbal agreement entered into by the Town was not sufficient to ensure Ausable Water District 2 (AWD2), Ausable Water District 3 (AWD3) and Ausable Sewer District 1 (ASD1) were properly managed. The Board did not develop individual budgets and the Supervisor did not maintain separate accounting records for these districts. As a result, Town officials could not monitor each respective district's financial operations or determine if each district was self-sufficient. In addition, the Town designated the responsibility of billing, collecting and enforcing water and sewer charges for AWD2, AWD3 and ASD1 to the Town of Chesterfield, but did not enter into a written inter-municipal agreement with the Town of Chesterfield or request or receive adequate supporting documentation from the Town of Chesterfield to allow Town officials to provide proper oversight of the districts' operations. Consequently, the Board did not receive or approve the water and sewer billing registers. Further, the Town of Chesterfield did not assess penalties to delinquent accounts. As a result, the Town did not properly enforce all delinquent accounts. In addition, Town officials were unaware that $14,914 in collections that were recorded as being received by the Town of Chesterfield had not been remitted to the Town.

The Board needs to improve its budget development practices. The Board consistently budgeted to appropriate more fund balance in the town-wide general fund than was actually available to finance operations. These practices caused deficits of $15,192 in 2014 and a projected deficit of $8,437 in 2015. The Board also appropriated substantial fund balance in the town-wide highway fund to finance operations, which caused this fund's unrestricted fund balance to decrease by $98,592, or 52 percent, from 2013 through 2015. The Board must be careful when appropriating fund balance in future budgets to ensure that it does not get depleted. Additionally, the Board has not developed a multiyear financial and capital plan to address the Town's long-term priorities. Lack of this plan diminishes the Board's ability to manage Town finances.

The District's purchasing policy does not require District officials to use competitive bidding for any purchases. As a result, District officials did not adhere to General Municipal Law bidding requirements for purchases of goods and services. Also, District officials did not always comply with the District's purchasing policy by obtaining written quotes for purchases. Consequently, the District paid $27,411 more than necessary when procuring goods and services.

District officials do not require the use of purchase orders when purchasing goods and services. Additionally, District officials did not always seek competition for goods and services that fell below the bidding thresholds and when selecting professional service providers. Therefore, the Board does not have adequate assurance that services were procured in the most economical manner and in the best interest of the taxpayers.

We found that District officials properly billed and collected for tuition. For the past three fiscal years, the District billed an average of $7.5 million in tuition, and due to the timely collections, funds were sufficient to cover the District's cash-flow needs. The District's billing and collection process expedites the collection of tuition, which allows the District to remain financially solvent. We commend District Officials for developing and implementing a good system of controls over tuition billing.

We identified significant internal control weaknesses over the Authority's billing and collection of tenant rents. There were no comprehensive written policies and procedures, billing and collection duties were not properly segregated and no one internally reviewed the rent and additional charges posted to tenants' accounts by the housing assistant supervisor and the account clerk/typist. Further, we found collections were not always deposited intact because eight personal checks totaling $1,980 were cashed using Authority funds. We also found that users' access rights within the tenant accounts module of the computerized financial system were not properly restricted, and Authority management did not generate and review adjustment or voided-payment reports from the system. As a result, unauthorized changes could be made to the financial data or inappropriate transactions could be initiated to conceal the misappropriation of funds.

The Board adopted budgets for 2011-12 through 2014-15 that appropriated a total of $16.7 million in fund balance to finance operations. Because the District consistently overestimated expenditures over the four year period, most of the appropriated fund balance was not used. Furthermore, District officials did not have resolutions establishing two reserves totaling $1.7 million or resolutions that included the intent and/or funding levels for three reserves totaling $4.1 million. In addition, District officials have overfunded the unemployment reserve.

The Parks and Recreation Maintenance Supervisor did not ensure the accuracy of the hours worked by golf course employees, which resulted in improper payments. Two golf course employees were compensated over $16,000 in a three-year period for hours paid that were unsupported by time records. Furthermore, the Supervisor did not adequately segregate payroll duties or establish sufficient compensating controls, which increases the risk that funds could be misused without being detected.

The Board and BOCES officials generally ensured that the extra-classroom cash receipts and disbursements were properly safeguarded. However, while the central treasurers follow State Education Department (SED) guidance, they do not have detailed procedures in place to formally reconcile the potential sales from fundraising activities to the amount collected and deposited. For example, we tested five fundraising activities and found that no one reconciled final fundraising activity, comparing the amount of items purchased and sold to the amount of cash collected and recorded. BOCES officials told us they did not perform the fundraising activity reconciliations because these were not specifically required by SED. For the past several years they tried to gradually improve controls but did not want to overly burden the faculty advisors or central treasurers all at once.

District officials have established adequate procedures over the claims processing function to ensure that claims were for appropriate purposes, adequately supported, and audited and approved prior to payment. The Board has delegated its claims auditing responsibility to a claims auditor. We commend District officials for establishing and implementing effective procedures over the District's claims processing function.

Although the Board and District officials actively monitor the District's financial condition, the District has experienced some fiscal problems during the last six years. As of June 30, 2015, the District reported a fund balance deficit of $175,000 (2 percent of the ensuing year's budget). The District relies on short-term debt to alleviate cash flow problems, but District officials do not monitor cash flow during the year to ensure there will be sufficient cash on hand to satisfy current obligations. Furthermore, as of June 30, 2015, the District had approximately $932,000 in accounts receivable. Although the Treasurer takes appropriate action to ensure all tuition due the District is collected in a timely fashion, the Board has not adopted written policies and procedures to help guide the billing and collection process.

We analyzed the District's reserves for reasonableness and adherence to statutory requirements and determined that all seven reserves were funded at reasonable levels. While the tax certiorari reserve balance exceeded the District's average historical settlement as a percentage of the original claim amount, the excess amount is reasonable. We encourage the Board to continue its funding of reserves at levels deemed reasonably necessary based on all information available during the budgeting process, and to ensure the appropriate use of those funds.

The Board and Authority officials did not establish an adequate system of internal controls over water charges. For example, no one independent of the billing clerk reviewed the billing registers and collections in the form of cash were not deposited in a timely manner or properly secured prior to deposit. In addition, Authority officials did not properly limit users' access within the billing and collection software. As a result, there was an increased risk that cash collections could be lost or misused and that unauthorized changes could be made to the financial data or inappropriate transactions could be initiated and remain undetected.