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.

Village officials did not adequately monitor financial operations to ensure fiscal stability. The Village has experienced extraordinarily high legal costs in fiscal years 2013-14 and 2014-15, resulting in unplanned operating deficits of approximately $1 million each year. As a result, we estimate the Village will have a fund balance deficit of approximately $933,000 at the end of fiscal year 2014-15. Village officials have not developed a multiyear plan to address these deficits. In addition, the Board allowed budget line items to be routinely overexpended and budget transfers to be made after the end of the fiscal year rather than throughout the year when needed. Further, the Board does not receive audited financial statements in a timely manner. As a result, the Board does not have a clear picture of the Village's true financial condition so that it can make informed decisions.

Authority officials need to improve controls over payroll and employee benefits to ensure that employees are paid the salaries and wages and receive the benefits to which they are entitled. We reviewed compensation paid to Authority employees totaling approximately $315,500 during our audit period and did not find any discrepancies. However, because the Director did not verify the accuracy of work hours the Accounts Manager reported to the Authority's payroll service provider, errors and irregularities could occur and remain undetected. The Authority's process for maintaining leave accrual records also needs improvement. We found that 73 percent of employee leave balances were inaccurate. Authority officials have not entered into contractual agreements with the officers providing Authority security, who were paid more than $166,900 in wages during our audit period, stipulating the terms of services to be provided. In addition, Authority officials have not established procedures to determine how the hours these officers work are to be submitted for payroll processing. Finally, Authority officials need to improve internal controls over debit card transactions to adequately safeguard Authority assets.

District officials have established adequate procedures to ensure employees are accurately compensated and deductions made from the employees' pay are authorized and correct. We commend District officials for designing an effective system that ensures the accuracy of compensation paid to employees and the deductions made from their pay.

We commend District officials for establishing 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 audit policy, which required the claims auditor to examine all claims and ensure funds were available and the claims are substantiated. The policy states that claims shall be paid by the Treasurer only upon the approval of the claims auditor. Additionally, the Otsego Northern Catskills Board of Cooperative Educational Services developed written guidelines for the claims auditor to follow. These guidelines required the claims auditor to ensure the claims were mathematically accurate, not for goods or services already paid for, itemized and contained evidence the District received the goods and services. The claims auditor was also required to provide a standardized monthly report to the Board. These procedures ensured the claims auditor followed the Board's policy.

The Board did not adopt realistic, structurally balanced budgets in the town-wide general and part-town highway funds. It did not accurately estimate revenues and expenditures, relied too heavily on appropriating fund balance as a financing source and planned to appropriate more fund balance than it had available. As of December 31, 2014, the town-wide general fund had a deficit of $438,470 and the part-town highway fund had a deficit of $74,046. Consequently, in 2014, the Town had to issue a $310,000 tax anticipation note (TAN) to pay general fund operating expenditures. In addition, the Town's budget format lacked necessary information to allow the Board to make informed decisions when estimating revenues and expenditures and determining how much fund balance it could appropriate to finance the ensuing year's operations.

The Board did not ensure that goods and services were procured in an economical manner. We reviewed 68 purchases totaling $335,122 and found that aggregated purchases for heating oil and diesel fuel were not competitively bid as required by General Municipal Law. Had Town officials purchased this oil and fuel using a county contract, they could have saved more than $5,300 (5 percent) during our audit period. Town officials also made 19 purchases totaling $42,558 without obtaining the necessary verbal or written quotes as required by the Town's purchasing policy. This occurred because the Board did not monitor and enforce compliance with statutory requirements and the Town's purchasing policy. Additionally, the Board did not provide adequate oversight of the use of Town credit cards. In addition, the Clerk did not properly account for the sale and inventory of transfer station tickets and permits. Finally, we identified significant internal control weaknesses in the Justice Court's financial operations. The Justices did not perform monthly accountabilities or bank reconciliations.

District officials need to improve their record keeping for fuel inventory to ensure that all fuel is accounted for and records are accurate. District officials have not adopted a policy for fuel inventory accountability and there were no written procedures to provide guidance to employees. Fuel records maintained by the Department were incomplete and did not provide sufficient accountability over fuel use and inventory. Officials did not reconcile fuel pump readings to physical inventory or require all employees to account for the fuel pumped.

The District's overtime costs have risen from approximately $428,000 to $591,400, or 38 percent, over the last three fiscal years due a lack of effective controls and oversight. District officials do not require pre-approval of overtime or the use of alternate work schedules to reduce the need for overtime. In addition, the Board is not given accurate information regarding overtime to make informed decisions. For example, one of the reports provided to the Board underreported overtime for buildings and grounds employees by $42,000 for 2014-15. In addition, the Board does not properly analyze and question the information it receives, such as an overtime report for July/August 2015 that presented snow removal and salting of road ways as some of the reasons for the overtime incurred. Additionally, District officials did not provide the payroll clerk with written procedures for processing the payroll. As a result, the District incurred payroll costs that were unnecessary including overpayments to employees.