We found that the Board generally provides adequate oversight of the District's financial activities, but should make certain improvements. The Board has adopted a code of ethics and purchasing policy, as required by statute, but not an investment policy. Additionally, the Treasurer prepared monthly bank reconciliations but did not bring the reconciliations and bank statements to Board meetings; therefore, the Board did not review them. Moreover, the Board did not compare canceled check images to approved abstracts (lists of claims to be paid) to ensure that District funds were used only for legitimate District expenditures. Lastly, the Board did not complete, or contract with an independent accountant to complete, an annual audit of the District's records.

The Board has also established controls that ensure that financial activity is properly recorded. For example, on a monthly basis, the Board reviews financial records including the original bank account statements, the associated bank reconciliation, and a listing of all receipts and disbursements during the month. However, the Board does not review canceled check images because they are not returned with the Department's bank statement. The lack of these images prevents the Board from verifying all disbursements were made as intended and only for appropriate Company purposes. In addition, three Board members are responsible for reviewing the financial records. The Board also has access to financial records, disbursements listings and all claims packets. Additionally, the Treasurer presents the receipts and disbursements listing to the Board and the membership during monthly meetings. The Treasurer posts the listing of receipts and disbursements in a public and conspicuous area of the Fire Station. However, the Board has not adopted written financial policies or procedures addressing cash receipts and disbursements. As a result, the Department relies on informal rather that written policies and procedures.

HIDA officials developed a Uniform Tax Exemption Policy (UTEP) for project selection, but the method of determining the benefits to be provided is not well defined or required to be documented. Therefore, it is possible that not all project applications of the same type were evaluated using the same objective criteria. The Board did not design and implement an adequate system to monitor HIDA approved projects and did not develop an adequate recapture policy to allow for the recovery of previously granted benefits if job creation, economic goals or other terms of the agreements are not met. Further, HIDA officials do not verify the amounts provided by businesses when applying for financial assistance or verify the annual reported data that could be used to evaluate project performance. For example, HIDA officials did not have a system in place to track the amounts directly billed and collected by taxing jurisdictions for PILOTs. As a result, we found that 21 businesses were overbilled PILOTs by a total of $17,870 and 25 were underbilled PILOTs by a total of $38,850. Also, HIDA officials did not establish a process for monitoring and tracking sales and use tax exemptions.

Based on our limited procedures, it appears that the Town has made progress implementing corrective action. Of the six audit recommendations, two recommendations were fully implemented and four recommendations were partially implemented.

Based on our limited procedures, it appears that the Town has made progress implementing corrective action. Of the six audit recommendations, two recommendations were fully implemented and four recommendations were partially implemented.

To assess the effectiveness of the controls over cash disbursements, we tested a random sample of 30 disbursements totaling $23,301 and found all were adequately documented and for legitimate Department purposes. The claims were approved by a Department official prior to the Board's audit and approval and the Treasurer accurately recorded the disbursements in the accounting records. We also traced the claims to the related canceled checks and found they were in agreement. Additionally, we tested a random sample of 10 electronic bank payments totaling $1,387 for electric and gas charges at the Department's three fire stations. We found that the Treasurer authorized the payments, and the payment amounts agreed with the utility bills and were accurately recorded. Finally, we reviewed all 20 bank statements covering our audit period to determine if any unauthorized or undocumented electronic withdrawals or payments were made from the bank account; we did not note any questionable withdrawals or payments.

Village officials did not always comply with GML and the Village's procurement policy. We found that Village officials made nine purchases totaling $647,522 without seeking competitive bids and 11 purchases totaling $19,338 without obtaining quotes, as required by the Village's procurement policy. As a result, Village officials did not receive these goods and services at the lowest cost. Village officials could have saved at least $59,735 if they had utilized State contracts for certain purchases or sought competition through competitive bids or quotes.

The Board needs to improve its oversight of Village operations. The Board has accumulated unexpended surplus funds totaling $2.4 million without a long-term plan for its use. Because the Board did not always adopt budgets with realistic estimates of revenues and expenditures, only 16 percent of the $1.5 million of unexpended surplus funds appropriated over a four-year period to reduce the tax levy was actually used. Also, the Board has not annually audited, or caused to be audited the records maintained by the Clerk-Treasurer and the Justice, diminishing its ability to effectively monitor the Village's financial operations. In addition, the Board did not audit claims prior to payment. We also found that the Clerk-Treasurer released payments for 65 percent of the claims that we reviewed, totaling $7,915, from five to 36 days prior to the Board approving the abstract for payment. Finally, it appears the Village improperly entered into a contract for publishing services, totaling $7,190 during the audit period, in which a Trustee had a prohibited interest. Although it would not have cured the prohibited interest, the Trustee also did not publicly disclose her interest in the contract as required by law and the Village's code of ethics.

The District has not consistently generated sufficient revenues to finance recurring expenditures. District officials have instead relied on the use of fund balance and reserves to close budget gaps, which has negatively affected the District's financial positon. The District reported a general fund operating deficit of $824,815 and zero unassigned fund balance as of June 30, 2013, after the appropriation of $820,187 for the 2013-14 budget. The District incurred an even greater operating deficit in 2013-14 of $1,060,295. While nearly 80 percent of these operating deficits were planned through fund balance appropriations, they significantly reduced total fund balance. The repeated use of fund balance to close budget gaps instead of making necessary amendments to revenue or expenditure estimates quickly caused the fund's financial condition to deteriorate and, if continued, will lead to fiscal stress. Furthermore, the Board's adopted budgets did not include realistic estimates for revenues, expenditures and the amount of fund balance that would be available and used.

The Board did not take an active role in overseeing the Library's financial operations and monitoring the Treasurer's work. The Board did not establish policies and internal controls over investments and certain other key financial areas. Library officials do not review or approve financial transactions before they occur, and instead, rely on Fairport Central School District employees to both process and approve all financial activity. Furthermore, the Board did not establish formal financial plans or budgeting policies to guide Library officials and inform taxpayers of its financial goals and related budgetary decisions. Thus, the Board cannot assure its taxpayers that all Library resources are adequately safeguarded and appropriately used, or planned for use, in furtherance of the Library's established goals, or that fund balance levels and tax levies are not higher than necessary.

Internal controls over the claims audit process were not appropriately designed. The Director and staff are responsible for signing and dating claims to indicate the goods or service being billed for have been received, which is a good internal control. However, the Board assigned the responsibility to audit and approve claims for payment to the Board President (President), which is not a good practice because it does not provide for an audit of claims by the entire Board. Furthermore, the Board policy was not followed because claims were reviewed and approved for payment by a Trustee serving as Board Treasurer (Treasurer) instead of the President. The Treasurer stated that she assumed the task of reviewing and approving claims from the prior Treasurer approximately four years ago. However, Library officials could not provide a Board resolution assigning her this role. Allowing the Treasurer to review claims and sign the checks for payment reduces the Board's ability to properly oversee financial activity and increases the risk of inappropriate transactions.

The Board needs to improve the claims auditing process. The District's claims auditor did not properly review claims to ensure that they were accurate, properly supported and for valid District purposes. The District paid 1,909 claims totaling about $31.2 million during our audit period. We reviewed 72 of these claims totaling approximately $874,900 to determine if they contained sufficient documentation, were properly authorized and approved, sufficiently itemized and for valid District purposes. We found deficiencies with 49 of these claims (68 percent) totaling approximately $317,175. These deficiencies included purchase orders issued after the goods were received and a lack of adequate supporting documentation. These deficiencies occurred because the claims auditor did not conduct a thorough audit as required by the District's policy.

The Justices did not ensure that Court funds were properly recorded, deposited and reported. Court clerks performed incompatible duties related to cash receipts and the Justices did not provide effective oversight of their work. As a result, bank accounts for one Justice had unaccounted-for funds in both the fine and bail accounts each month averaging $14,627 and $6,703, respectively. In addition, the Court was in possession of stale bail from 21 individuals totaling $5,935. Also, bail records were inaccurate and cash receipts were not always deposited within 72 hours as required by law. Because of this lack of oversight, the Court has an increased risk that errors and irregularities could occur without being detected, placing public resources at risk. Similar findings were cited in a previous audit.

Department personnel need to improve their monitoring of service contracts. Contract agencies did not always submit performance and financial reports and records that indicated how they met their performance targets and whether they adhered to the program budget, as required by contract. When agencies did submit those reports, Department officials did not always verify the information. Specifically, in 2013, four agencies running six programs for a total of $525,755 did not submit any performance reports; two agencies that provided services for a total cost of $65,747 submitted all the required quarterly performance reports, but they did not provide required supporting documentation; one agency submitted all required performance reports but did not meet four out six performance targets; and one agency submitted reports for only six months. In addition, the Department paid agencies a total of $1,191,319 without receiving the required financial reports and/or supporting documentation. We also found that the County did not follow its own procurement policy and seek competition, such as requests for proposals (RFPs) for some services that the Department contracted for. County officials contracted with four agencies for six programs totaling $525,755 without using the RFP process.

District supervisors did not provide adequate oversight of IT Department field employees working out of the Service Center. There were no written procedures in place to allow IT Department supervisors to track their field employees' work locations. This lack of supervision appears to have been a contributing factor in allowing an IT Department employee to work overlapping hours for another school district while he was on the District's payroll. We estimate the District compensated this Audio Visual Equipment Technician more than $180,000 in salary and benefits from December 6, 2011 through April 30, 2014. The evidence we reviewed suggests that the District compensated him for time he never worked. While we found that the Plant Department kept track of its field employees' work locations, field employees in the IT and Plant Departments did not maintain time records documenting their actual time worked. Instead, clerks in the IT and Plant Departments prepared “statements of service” for these employees, which did not show the hours the field employees worked; they indicated only whether employees used leave time during a pay period. Time statements were not signed by the employee and were certified by an IT or Plant Department official who did not directly supervise these employees. Further, overtime was not always preapproved. In addition, IT Department officials did not adequately monitor the work performed by a vendor's technical support specialists. Over a three-month period, we estimate that the District may have overpaid the vendor $59,616 because there was no documentation to indicate that the 13 specialists performed any work for the District on 368 (47 percent) of the 778 days billed.

The Town has not maintained separate accounting records for a $4.1 million capital project to construct a waste water treatment plant and sewer district to service 49 users within the Town. The Supervisor has assigned accounting duties to the bookkeeper but has not provided sufficient oversight to ensure that she maintained complete, accurate and timely accounting records. Consequently, we found deficiencies with the Town's accounting records for both the waste water capital project and sewer fund. Specifically, the bookkeeper accounted for all the waste water capital project activity in the sewer operating fund instead of in the capital projects fund. The comingling of revenues and expenditures for both the capital project and the sewer district's operations prevents the Board from adequately monitoring the capital project activity and determining the financial status of both the project and the sewer fund. Furthermore, the proceeds from debt issued to fund the project were deposited in the same bank account used for depositing sewer rents. The Board also did not establish an adequate receipt process to ensure that the Clerk recorded and deposited the money collected for cottage rentals in an accurate and timely manner. The Clerk does not accurately document the method of payment (cash or check) on the receipts and does not reconcile the amount of moneys collected to the amounts reported each month to the Supervisor. Further, the financial system used by the Clerk allows receipts to be altered or deleted without an audit trail documenting who made the change.

The Board and Justices did not provide adequate oversight of Court operations to ensure that Court cash receipts were properly collected, accounted for and deposited, and disbursements were for proper Court purposes. Instead, they relied on the head court clerk to perform most of the recordkeeping duties and failed to establish procedures or provide adequate oversight of the work she performed. For example, the Justices did not ensure that the head court clerk maintained sufficient accounting records or performed bank reconciliations or accountability analyses to account for all Court funds. As a result, the reconciled cash balance for the bail account exceeded the Court's records of outstanding bail by $7,633. In addition, the Justices did not ensure that the head court clerk had formal procedures to ensure all outstanding moneys owed to the Court were pursued and collected, with any deletions or adjustments to the records being sufficiently supported. As a result, there were 819 unpaid parking tickets (approximately 23 percent of the total tickets issued during our audit scope period), totaling $27,301 for our audit period. The Court also had up to $1.1 million of unpaid parking tickets dating back to 1986. The Court's accounting software also identified a combined total of $406,000 in unpaid Vehicle and Traffic Law, Village ordinance and penal tickets dating back to 1991. Had the Board performed an annual audit of the Court, the weaknesses in Court operations could have been identified and corrected in a timely manner.

The Board did not provide adequate oversight of the Town's financial operations and Town officials did not ensure adequate controls were in place over the billing and collecting of water and sewer rents and the Town's fuel use. As a result, the bookkeeper made decisions regarding water and sewer operations without proper authority, including processing water and sewer bills without Board-approved rates, making adjustments to bills without approval, not collecting penalties for payments received after the due date and not re-levying unpaid bills. In addition, the Highway Superintendent did not properly account for Town fuel. Specifically, 6,600 gallons of purchased fuel (valued at $22,000) was not recorded on the fuel log.

The Board and Town officials have not developed multiyear financial plans, policies or procedures to establish financial goals and govern budgeting practices and the level of unrestricted unappropriated fund balance to maintain. Lacking sound budgeting policy guidance, the Board has routinely adopted budgets with unrealistic estimates, which resulted in the accumulation of surplus funds and higher tax levies than necessary. The Board enacted a local law in 2013 to override the property tax cap in the 2014 budget and exceeded the 2014 tax cap by $23,000. Town officials said they needed to exceed the tax cap to address increased costs for workers' compensation and New York State and Local Retirement System benefits. However, we found that the Town already had sufficient surplus funds to cover these increases and did not need to exceed the tax cap. The Board enacted another local law to override the property tax cap in its 2015 budget and exceeded the tax cap by $4,900. It is important that the Board monitor fund balances and adjust the budgets accordingly to avoid unnecessary tax increases. Beginning with the 2015 fiscal year, overriding and/or exceeding the tax cap can result in the loss of potential real property tax credits by Town taxpayers, in accordance with 2014 Property Tax Freeze Credit legislation.

The Board and the administrative staff have taken appropriate action to manage the District's financial condition. District officials recognized the need to be proactive in budget development and expenditure controls. District officials and the Board met regularly to monitor and evaluate the current year's budget and available fund balance and to plan for future years' budgets. This planning included an ongoing evaluation of the District's spending trends and projected future fund balance. We reviewed the District's budgets for fiscal years 2011-12, 2012-13 and 2013-14 and found that District officials developed reasonable budget estimates and monitored the budgets throughout the year to properly manage the District's financial condition. For 2013-14, variances between budgeted and actual results were minimal. District officials also managed fund balance responsibly in accordance with statute. The New York State Real Property Tax Law allows a school district to maintain up to 4 percent of the ensuing year's budget as unrestricted fund balance. The District has maintained approximately this amount of unrestricted fund balance for the three fiscal years that we reviewed. The District's adopted 2014-15 budget complies with the property tax cap limit.