The former Treasurer did not maintain appropriate, accurate, complete or timely financial records and reports. The Board did not perform an audit of the Treasurer's records for the 2011, 2012 and 2013 fiscal years until April 2014. Upon performing the audit in April 2014, the Board realized the accounting records were in poor condition and had to be reconstructed. The former Treasurer subsequently resigned on April 22, 2014 and the Board appointed a new acting Treasurer. Since this time, the current Treasurer and Board have been continually developing and improving the Department's financial processes and procedures. Although oversight and documentation procedures have improved over the course of our audit period, the Board still needs to formalize its improved procedures with written policies and procedures and make additional improvements to adequately safeguard the Department's assets.

The District is serving nutritious meals to its students. However, the meals cost more to prepare than the revenue generated by the meal sales. In addition, the District's productivity level for meals per labor hour (MPLH) is within the industry averages. Although the industry averages may not always be achievable given certain District conditions, District officials can use the industry averages to monitor operations and work towards increasing productivity, when necessary. The District reported deficits in its school lunch fund totaling more than $14,000 over the last three fiscal years. Although the fund had approximately $21,500 in assigned unappropriated fund balance at the end of the 2013-14 year, minimizing deficits in future years will be critical. Ultimately, if fund balance is no longer available, the fund will require a subsidy from the general fund. This subsidy could materially affect the tax levy growth allowed under the New York State Real Property Tax Cap Law.

Based on the results of our review, we found that revenue and expenditure projections in the proposed budget are reasonable. The amount of appropriated fund balance in the general and highway fund budgets represent 21 and 50 percent, respectively, of the projected year-end fund balance. The continued reliance on appropriated fund balance to fund Town operations will eventually deplete fund balance and adversely affect the Town's financial condition. The Town's preliminary budget complies with the property tax levy limit.

The Board has not adopted written computer-related policies to address user access, remote access, password security and management, or data backups. Additionally, Village officials improperly assigned administrative privileges, created generic user accounts and provided excessive access rights to the Village's financial and real property tax software. For example, there are six generic user accounts on the Village's computer network, including two with administrative access. In addition, the Treasurer has administrative rights to the financial software giving her the ability to add new users, create and change user access rights and make or delete evidence of payments without restriction. Further, the Clerk has supervisor level access to the real property tax software, giving her the ability to add, modify and delete property tax information, and add, modify and delete user accounts. Finally, the Board has not adopted a comprehensive disaster recovery plan. As a result of these control weaknesses, Village officials' ability to determine responsibility for system activities is limited and the Village's IT system and its data are subject to an increased risk of corruption, loss, or misuse.

The Board needs to improve its oversight and management of the Village's budgeting and financial operations. The Board did not conduct or provide for an annual audit of the Treasurer's records and reports, which places the Village at an increased risk for errors and irregularities to occur that could go undetected and remain uncorrected. In addition, the Board has not adopted policies and procedures governing the budget process or a fund balance policy establishing the level of fund balance to maintain. As a result, at the end of 2014-15 the general fund had unrestricted fund balance that exceeded a reasonable cushion for the next fiscal year. In fact, unrestricted fund balance was 56 percent of 2015-16 appropriations. Finally, the Board has not developed a comprehensive multiyear financial plan. As a result, Village officials are less able to assess various approaches to address financial issues, such as using surplus fund balance to finance operations or funding reserves for future capital expenditures to provide transparency to taxpayers.

The City's proposed budget includes contingency appropriations totaling $305,828, an amount that represents only 1 percent of total anticipated general and water fund expenditures. Other classes of local government are allowed by law to set the maximum dollar amount for contingency accounts at 10 percent of the fund budget, which can serve as a general guideline for the City. The City has three different contracts with employee union which have expired and has not included the potential financial impact of contract settlements in the proposed budget. The proposed budget also does not include a tax overlay, which could create a shortfall in 2016. The proposed budget includes overtime appropriations for police totaling $200,000, which is less than the $338,526 expended for the first nine months of the current year. Further, the water rent revenue estimate could be overstated by approximately $400,000. The Common Council will adopt a local law to override the tax levy limit in 2016.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The Town's 2016 tentative budget complies with the property tax cap levy limit.

We found that the District had more than $2.9 million in excessive accrued liabilities and moneys in reserve funds. District officials employed budgeting practices that generated operating surpluses while simultaneously appropriating fund balance in the budgets. This caused fund balance appropriations to be unneeded. As a result, the District's corrected unrestricted fund balance was approximately $4.1 million, or 14 percent of the 2013-14 budget, while the statutory limit for fund balance is 4 percent. The District overfunded its employee benefit accrued liability reserve (EBALR) and tax certiorari reserve by more than $1.4 million. District officials also retained excessive balances in the workers' compensation, unemployment insurance, retirement contribution and insurance reserves.

The Board did not routinely audit and approve claims prior to payment. Instead, claims were audited and approved for payment by the Director, who also signed the disbursement checks to pay the claims. The Board subsequently reviewed a check register that showed the check dates, check numbers, payee names, brief payment descriptions and the payment amounts. However, this review was after the claims had been paid and was incomplete. The Board did not review each claim to determine if they were properly itemized and included appropriate supporting documentation. The Secretary ensured that the Board's review was documented in the minutes. Internal controls are compromised when the same person who audits and approves the claims for payment also signs the checks to pay those claims.

The Board does not provide adequate oversight of the District's cash disbursements. The Board has not adopted policies or procedures for cash disbursements. Furthermore, although the Board reviewed and approved each claim before the Treasurer made payments, the Board did not ensure that claims were supported by adequate documentation. The Treasurer did not maintain a ledger, checkbook register or other suitable record to account for cash disbursements and the balance of cash on hand. The Treasurer also did not prepare monthly bank reconciliations or reports, or prepare and file the District's annual reports with OSC for the past two years.

The District is serving nutritious meals to its students. However, the meals cost more to prepare than the revenue generated by the meal sales. District cafeteria staff produce the meals in a productive manner. The District's productivity level for meals per labor hour (MPLH) is within the industry averages. District officials should actively monitor the MPLH to ensure that operations remain productive. In addition, the District reported deficits in its school lunch fund totaling more than $146,000 over the last three fiscal years. During this same time period, the fund's assigned unappropriated fund balance declined to $0. Ultimately, the fund will require a subsidy from the general fund, which may affect the District's ability to maintain a level of tax levy growth allowed under the New York State Real Property Tax Cap Law and continue to fund school operations.

Based on the results of our review, we found that the significant revenue and expenditure projections in the preliminary budget are reasonable. The Town took appropriate action to implement or resolve recommendations contained in the 2014 budget review report issued in November 2014. The Town's proposed budget complies with the property tax levy limit.

The Clerk did not record, deposit or remit tax moneys collected in a timely and accurate manner. An audit and investigation by our office led to the arrest in July 2015 of the Clerk, who pleaded guilty to two counts of attempted tampering with public records on August 7, 2015, admitting she falsified her personal Town and County tax payments for 2011 through 2014 totaling $4,303. This amount is composed of the Clerk's 2012-2014 tax payment shortages totaling $3,262 as of November 2014 plus an extra cash deposit of $1,041 on May 15, 2012 that the Clerk told us was payment of her 2011 personal taxes. As part of the plea agreement, the Clerk resigned from her position and agreed to pay $4,303 in restitution. We also found other deposits that were not made timely and intact. Finally, the Board did not perform an annual audit, or retain an independent auditor to audit the books and records of the Clerk. Consequently, the Board did not provide appropriate oversight or comply with the Town Law.

Authority officials have appropriately managed the Authority's financial condition. The Board meets monthly with the Executive Director and Deputy Executive Director for detailed discussions and to review financial information. These meetings include examining budget-to-actual reports, occupancy rate reports, cash reports and other relevant financial information. During these meetings, Authority officials closely monitor revenues and expenditures to ensure that revenues are keeping pace with expenditures. The Board also approved the Authority's five-year plan, which includes details on making capital and safety improvements and enhancing the overall community. We commend Authority officials for taking the appropriate actions and maintaining their strong financial condition.

While Library officials have attempted to lower costs and increase interest in the Library, their costs remain high while their patrons and circulation remain low. According to information reported to the New York State (NYS) Education Department by all of the libraries in NYS, the Library's costs were generally higher and generally required higher real property tax levies per resident patron than other libraries. Also, the Library's circulation per full-time equivalent was well below the other libraries for 2012-13. The Library's higher costs are part of the Library's trend of increasing expenditures and real property taxes. Contributing factors include fixed costs for operating its three buildings (Jeffersonville, Narrowsburg and Callicoon) compared to the majority of the other libraries operating one building. Also, the Director and Board President told us they require two staff members each at the Jeffersonville and Narrowsburg buildings and three staff members at the Callicoon building during the buildings' hours of operation. Other than comparing salaries to other libraries, Library officials did not perform any comparative cost analysis of Library operations, nor did they segregate cost information by building. Therefore, we performed a cost analysis for the Library and 119 other libraries. We found that the Library would need to reduce costs (excluding capital costs) by approximately $180,000 to be in line with the average of the total costs per patron of the other 119 libraries. In addition, the Library would need to increase its circulation by approximately 58,000 to be in line with the average of the total circulation per FTE of the other 119 libraries and by approximately 25,000 to be in line with the average of the total circulation per capita of the other 119 libraries. Finally, the Library would need to increase its patrons by approximately 3,370 to be in line with the average of the total patrons per capita of the other 119 libraries.

The Board passed a resolution in 2013 to construct a new fire station to replace fire station No. 3 that was damaged by Hurricane Irene. After review and study of the project, the Board decided on a maximum cost of $4.5 million to be funded by issuance of a $3.4 million bond and $1.1 million from reserve funds. We reviewed the process used to construct the station and found that the Board followed applicable laws. We also reviewed construction related expenditures and found that the expenditures were within the Board-approved amount. However, the District did not use competition to procure professional services totaling $568,289 obtained from seven providers related to the fire station project. In addition, the District did not have written agreements with four professional service providers that the District used during the fire station project.

We found that the Board provided sufficient oversight of the Company's cash disbursements. However, Company officials could improve the process because the Treasurer made certain disbursements that were not made in accordance with the bylaws. The Board also did not establish effective internal controls to address a lack of segregation in the Treasurer's cash disbursement duties. The Treasurer has access to check stock, prepares checks, records disbursements in the accounting records and receives the bank statements. In addition the Treasurer has custody of a debit card, receives and reviews bank statements and canceled checks, and does not provide the Board with bank statements or reconciliations. Debit card use posed a significant risk because the Treasurer had direct access to the Company's bank accounts and any unauthorized use may not be readily detected. In addition, because the Treasurer used the card to pay for purchases without prior Board audit and approval and the payments were not made by checks signed by two Trustees, the Company's bylaw requirements were circumvented.

Over the last three fiscal years, District officials have not established structurally balanced budgets. This resulted in artificially low tax levies since at least the inception of the property tax cap made possible by the use of $1.3 million in fund balance. The District's original 2015-16 proposed budget included a 30 percent tax increase to maintain its current level of services. The voters did not approve this budget, but upon re-vote, approved a 17 percent tax increase made possible by budget cuts of $89,000 and a $294,000 donation. The failure to establish structurally balanced budgets will lead to possible future cuts in services and the continued deterioration of the District's fund balance.

The Board needs to improve its oversight of the Clerk-Treasurer's financial duties. The Board did not adequately segregate the Clerk-Treasurer's duties or implement compensating controls to properly oversee her work. Also, the Clerk-Treasurer did not provide the Board with comprehensive financial reports so that it could properly oversee the Village's financial activities. In addition, the Board did not ensure that the Clerk-Treasurer filed the Village's annual financial reports in a timely manner. Lastly, the Board did not annually audit the Clerk-Treasurer's records. Although our audit testing did not disclose any instances of fraud, these deficiencies increase the risk that inappropriate payments and/or errors could be made and remain undetected.

The Board needs to improve its budget process. We reviewed the Department's budgets and operating results from 2012 through 2014 and found that revenue estimates were generally close to the actual amounts received because the majority of the Department's revenues were from contractual amounts billed to the Town and Villages for fire protection services. However, the Department headquarters and four component companies presented, and the budget committee approved, budgets that underestimated expenditures each year. Department officials said they attempted to reduce expenditures by reducing the amounts appropriated in the budgets that were presented to the component units and the public. Department officials intended to use unrestricted net assets to fund any purchases that exceeded the budgets. As a result, the Board's adopted budgets have not accurately portrayed expected Department operating costs to the companies and the public. Furthermore, by relying on net assets to fund budget shortfalls, the Department is not adopting structurally balanced budgets and is instead funding recurring expenditures with one-shot uses of accumulated net assets. Although the Department has unrestricted net assets totaling $1,620,024 as of December 31, 2014 (41.6 percent of the subsequent year's budget), continuing this practice will eventually result in net assets being depleted and, ultimately could cause the Department to go into a deficit position.