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.

District officials made purchases of goods and services totaling more than $1 million from 10 vendors during our audit period that exceeded the statutory bidding threshold. We found that District officials did not consistently adhere to bidding or competitive offering requirements when procuring goods and services that cost more than the statutory bid threshold. As a result, we question whether the best price was obtained for more than $1.6 million of purchases made. We also found that the Board did not ensure that the Treasurer properly accounted for cash collected and needs to improve its internal controls over cash disbursements. The Treasurer's office did not maintain a record of all funds received. Additionally, the Treasurer deposited 44 checks totaling more than $72,000 from 12 to 196 days after the dates indicated on the checks. Finally, while cash disbursements were properly accounted for, the Board did not ensure that the duties within the Treasurer's office were adequately segregated and did not implement compensating controls.

The Board-adopted 2012-13 through 2014-15 general fund budgets were not structurally balanced because the Board routinely relied on significant amounts of appropriated fund balance to finance operations. The Board also did not adopt a policy establishing the level of unrestricted fund balance that should be maintained for any unanticipated expenditures and/or revenue shortfalls. As a result, for the 2012-13 and 2013-14 fiscal years the general fund incurred operating deficits totaling more than $1.9 million. As of June 30, 2014 the Districts unrestricted fund balance was $287,901, which was 1.4 percent of the ensuing year's appropriations. The District's financial condition will likely decline further if the Board continues to adopt budgets that are not structurally balanced. Further, if no action is taken to address shortfalls in estimated revenues for the 2014-15 fiscal year and control expenditures, the District will have a deficit fund balance as of June 30, 2015. If these trends continue, the District will incur fiscal instability that will negatively affect future District operations.

The Board did not establish adequate internal controls over District operations. There is a lack of sufficient policies and procedures to guide employees in the performance of their jobs. The duties related to billings, collections and record keeping were not adequately segregated. In addition, the Board did not approve water billings or customer account adjustments or perform an annual audit of the clerk's records and reports. Furthermore, the clerk did not maintain adequate customer records or records of billings and collections. As a result, the Town may not be collecting all the revenue to which it is entitled.

We randomly selected three months and reviewed all 145 claims paid during those months totaling $227,176 from the general, water and highway funds. Except for minor discrepancies that were communicated to Town officials, the Board conducted a deliberate and thorough audit of vouchers, the vouchers contained adequate supporting documentation and evidence that the goods or services were received and the vouchers were for legitimate Town purposes. We commend Town officials for designing and implementing this system of controls over the approval and payment of vouchers.

The Board does not provide adequate oversight and management of the Town's finances. Although the accounting records list 19 reserves totaling $657,700 there are no policies or procedures for reserves and the Town is not properly accounting for the reserves within the operating funds that financed them. In addition, the Town does not budget to fund reserves and several reserves have not been properly established, may not be authorized by statute or have a purpose that is unclear. The Board has also not established a budgeting policy, and has consistently underestimated revenues and overestimated expenditures within the town-outside-village funds and has continued its poor budgeting practices through 2015. Furthermore, the Board did not create a comprehensive, multiyear financial or capital plan and did not audit the books and records of the Supervisor. In addition, the Board does not adequately oversee and monitor the operations and finances relating to the provision of Town ambulance services. For example, although revenues and expenditures for the Town's ambulance service function average $127,000 and $123,000 per year, a formal policy has not been developed for the billing, collection and enforcement processes, including the maintenance of an accounts receivable ledger. Further, the ambulance service operates, in several respects, as an independent entity, with its own bylaws, rather than as a Town department.

The Board did not audit and approve any claims during the audit period. Instead, it entrusted the Director to audit and approve claims. The Board, in accordance with its bylaws, delegated the Library's treasury duties to the Director who was responsible for signing all checks, unless a payment totaled more than $1,000. While the Director audited and approved certain types of Library claims, she generally indicated such approval by placing an asterisk on the claims. However, an asterisk does not provide sufficient evidence of approval because it could easily be applied by anyone and does not sufficiently identify the approver, as a signature or initials would. Additionally, the Director did not indicate the date of approval on the claims. In addition, the Clerk did not provide the Board with an abstract listing each sequentially numbered claim, documenting the vendor or claim amount. Instead the Clerk gave the Board a monthly general ledger that showed the check date, check number, payee name, a brief payment description and the payment amount after the claims had already been paid. Informing the Board about claims paid after the fact prevents the Board from properly reviewing the claim before payment is made and precludes the Board from denying a claim's payment.

The Board needs to strengthen internal controls to help ensure that water user charges are properly billed, collected, recorded and deposited. Although water rent revenue totals approximately $450,000 per year, the Board did not adequately segregate financial duties or provide sufficient oversight of billing, collecting and recording of water payments and adjustments to customer accounts. The Deputy Clerk is responsible for preparing customer water bills (which are reviewed by the Town Clerk). However, the Deputy Clerk is also responsible for receiving and recording customer payments, applying penalties to overdue customer accounts and making adjustments in the computerized billing system. The Town Clerk and Supervisor also collect and post customer water payments. All three have administrative access rights in the computerized water billing system, which allow them to adjust customer accounts, even though the Deputy Clerk is designated to record adjustments. There is no review or prior approval required for adjustments to be made in the system. In addition, although the computerized water billing system can generate an adjustment report (log) of user's transactions to identify any potential improper adjustments, it is not reviewed by anyone at the Town.

During the audit period, the Board did not properly allocate the Town's sales tax revenue to the part-town general or part-town highway funds. Instead, the Board consistently allocated sales tax to the town-wide general fund prior to allocating the sales tax to the part-town funds. We also found the Board adopted budgets with unrealistic estimates of revenues, expenditures and the amount of fund balance to be used to finance operations in the part-town highway fund.

We found that the Clerk-Treasurer was not meeting the fundamental expectations of his duties. The Clerk-Treasurer provided the Board with budget-to-actual and incomplete fund balance reports each month which did not enable it to properly oversee the Village's financial activities. Further, the value of these reports was greatly diminished because accounting records were not accurate and bank reconciliations were not performed for all accounts in a timely manner. While the Board has contracted with a certified public accountant to perform an annual audit of the Village's financial records, it is not completed in a timely manner because the inaccurate financial records have delayed it. Further, the Village has not filed its annual update document with the Office of the State Comptroller within the required timeframes. Also, the Clerk-Treasurer did not adequately segregate the financial duties within his office. In addition, the Justices and Board did not ensure that parking tickets were collected, recorded and deposited in an accurate manner. The Court Clerk performs the collection, deposit, reconciliation and enforcement of parking ticket fines with no mitigating controls in place. Furthermore, no one reconciles the tickets issued by the Police Department to the tickets recorded and filed by the Court. While we found immaterial errors with the $5,800 in parking ticket collections we reviewed, we found that 12 uncollected parking ticket late fees totaling $860 had inadequate or no documentation to support why the late fees were not collected. We also found that 74 unpaid tickets issued during our audit period, with fees totaling approximately $7,000, remained outstanding by an average of 181 days.