The Board did not provide adequate oversight and did not establish appropriate internal controls over the Department's financial activities. The Department's bylaws provide very limited guidance regarding the Board's responsibilities and the Treasurer's duties. In fact, one of the bylaws' few specific financial requirements is the adoption of an annual budget at its October meeting. However, prior to our audit fieldwork, the Board had not proposed and the membership had not approved an annual budget. In addition, the Board had not adopted written financial policies or procedures addressing cash receipts, disbursements, purchasing or claims processing and approval. Absent detailed guidance, the Board had not taken steps to adequately segregate the Treasurer's duties or provide adequate oversight of the Treasurer. The Treasurer makes all deposits, disburses cash without the Board's prior approval and performs all recordkeeping functions without adequate oversight. Further, we found that while Board members review most of the bills, they typically do so after the payments have already been made, and their approval is not documented in the minutes. Lastly, the Board did not conduct an annual audit of the Treasurer's records.

The Board needs to improve its claims auditing procedures. We found the entire Board did not authorize payment of claims by resolution, but instead allowed claims to be paid before its meetings after approval by any three Commissioners. The Board also did not require the Treasurer to provide it with an abstract listing all the claims, which the Commissioners could then review and compare with the individual claim vouchers when performing the claims audit. We found no evidence documented in the Board minutes that the Board approved an abstract before the Treasurer paid the February and March 2014 disbursements. The Board also needs to improve controls over payroll to ensure that pay rates are properly authorized and time and attendance is properly recorded. During 2013, salaries and wages totaled about $455,600 or 18 percent of total District budget appropriations. However, District officials were unable to provide any documentation showing Board approval for the 2013 salary and wage increases for six District employees. In 2014, District officials gave 3 percent raises to all District employees without Board approval and no documentation was maintained to determine if the Board approved the Treasurer/Secretary's annual $65,000 salary. Finally, while the District has a time clock system, not all District employees were required to use it or sign and certify that the hours reported on the time cards was accurate.

The School's Business Manager and Office Manager are responsible for most of the financial transactions. However, procedures have been structured so that the Office Manager and the Business Manager serve as a check on each other's work. In addition, the Director, Administrative Assistant and Board members provide additional oversight. These independent checks serve to mitigate the risk of errors or irregularities in most aspects of the School's cash disbursement processes. However, we found that the School could strengthen controls over payroll transfers and journal entries.

District controls were not adequate to ensure that financial activity was properly recorded and reported and that District moneys were safeguarded. As a result, the former Treasurer misappropriated $9,224 in District funds and made an additional $709 in questionable payments to her husband. The former Treasurer misused District funds by writing herself extra salary payments, paying for personal items with District funds and issuing checks for a variety of unsupported payments made either to herself or her husband. Reimbursements by the former Treasurer amounted to $748 at the completion of our fieldwork. The former Treasurer was able to use District funds inappropriately because the Board did not provide adequate oversight of her duties. The Board failed to properly segregate her duties or establish mitigating internal controls. On September 24, 2014 the former Treasurer was charged with grand larceny in the third degree for stealing from the District.

The purpose of our audit was to determine if local government officials’ use of municipal resources resulted in an effective enforcement of the Fire Code (i.e., fire safety of buildings) within their jurisdictions for the period January 1 through December 31, 2013.

The Supervisor relied on the CPA to maintain the Town's accounting records without providing any oversight, resulting in the Town not having accurate, complete and up-to-date accounting records. Furthermore, the CPA erroneously commingled debt and grant proceeds totaling $1,866,359 for capital projects with the Town's operating funds. Therefore, debt proceeds of $115,906 were not used as intended or reserved for future debt repayment, capital projects were overexpended by $169,500 and the water districts' debt of $166,617 was improperly paid by the general fund. The Supervisor provided the Board with financial reports that were not accurate and reflected fund balances that were significantly different than what was actually recorded in the Town's accounting records. For example, the total fund balance as of December 31, 2013 was approximately $326,000 less than what was reported to the Board and the total fund balance as of December 31, 2014 was approximately $173,000 more than what was reported to the Board. In addition, the Board did not annually audit, or cause to be audited, all of the Supervisor's records, as required. The Board did contract with the CPA to audit water districts #2, #4 and #5 for 2012 and 2013. However, because the CPA provided accounting services to the Town for the same years, we question the CPA's independence to perform these audits.

The Board did not provide adequate oversight and management of the Village's financial operations. It did not conduct or provide for an annual audit of the Clerk-Treasurer's books and reports, which places the Village at an increased risk of errors and irregularities that go undetected and uncorrected. In addition, the Board did not adequately monitor the financial condition of the Village's funds. As a result, at the end of the 2013-14 fiscal year, unrestricted fund balance in the main operating funds was excessive, equivalent to 90 percent of budgeted appropriations in the general fund, 137 percent in the water fund and 110 percent in the sewer fund.

The Board's consistent practice of appropriating fund balance to finance recurring annual operations, along with significant unplanned costs to repair the Village's water tower, have caused substantial financial decline in both the water and sewer funds. The Board also adopted budgets that appropriated more fund balance than was actually available in the water fund to finance operations for the 2013-14 and 2014-15 fiscal years. Furthermore, the water fund balance went into a deficit position at the end of the 2013-14 fiscal year because of the Board's reliance on appropriated fund balance to fund operations. The declining financial position of the water and sewer funds have also caused each fund to rely on loans from the general fund to pay their obligations. This will negatively impact the general fund if additional loans are necessary, or the water and sewer funds are unable to repay their loans. Lastly, the Board has not developed multiyear plans, which would have allowed for better planning to ensure adequate revenues would be available to finance recurring costs. Such plans also could have helped to prevent the water and sewer funds' financial decline.

Overall the Board properly managed the Town's finances. However, we identified improvement opportunities and areas the Board should continue to monitor. For example, the Supervisor indicated that he and the Board did not use the prior years' budget versus actual operating results when preparing and adopting the budget, but primarily relied on the prior years' budgets. As a result, budget estimates did not closely mirror actual revenues and expenditures and the Board appropriated more fund balance than necessary each year to fund the next year's operations. In addition, from 2009 through 2014, the Board consistently relied on fund balance to finance a portion of highway fund operations by appropriating approximately $75,000 each year. As a result, unexpended surplus funds decreased from more than $331,500 as of January 1, 2009 to less than $110,000 as of December 31, 2014. Although the highway fund appears to have a reasonable amount of unexpended surplus funds (more than 16 percent of the 2015 adopted budget), because the Board continually relied on fund balance to fund highway operations the highway fund's financial condition could eventually deteriorate. The Board appropriated $50,000 of fund balance to finance a portion of 2015 highway fund operations.

Based on the results of our review, we found that the significant revenue and expenditure projections in the adopted budget are reasonable. The adopted budget relies on a 16 percent property tax increase to finance the general fund budget deficiencies because there are no other sources available to reduce the property tax levy, such as fund balance. The Board of Trustees has adopted rate increases of approximately 5 percent in water and sewer rents because the revenues generated have not been sufficient to finance yearly appropriations. The sewer fund budget also includes proceeds of bonds totaling $1,262,500. Village officials have stated that they plan to issue deficit financing bonds to alleviate the unassigned deficits in the operating funds. The adopted budget for 2015-16 has an approved tax levy of $10.54 million, representing an increase of $1.4 million or 16 percent over the 2014-15 levy. The Board adopted a local law which allows the Village to override the tax levy limitation.

The purpose of our audit was to assess municipalities’ compliance with their Parkland Alienation legislation for the period January 1, 2011 through December 31, 2013.

We identified a cash shortage of $38,136 in the Clerk's office; $29,322 from the tax collection account and $8,814 in Clerk fees. If the Board had conducted the required annual audit of the Clerk's records it may have been able to detect these shortages. The Clerk was responsible for all Town tax and fee collections, deposits and recordkeeping. No one else was involved in the recordkeeping or depositing. Our audit determined that certain tax collections were not deposited or recorded in the Clerk's cash receipts journal. We identified numerous questionable deposits that were made into the tax account and may have been made by the Clerk in an attempt to conceal the shortage in tax collections. We also identified numerous checks deposited into the Clerk's fee account that were not recorded in the cash receipts journal nor included on the Clerk's monthly report.

The City's proposed budget for the School District has a budget gap of $25.8 million. The District's budget request did not include an appropriation for textbooks, which cost the district $3.5 million in 2013-14. The City plans to issue a bond anticipation note for the textbook expenditures, which will incur additional debt and interest costs. The District's budget request underestimated pension costs by approximately $400,000. In addition, the City has appropriated $37.5 million, or approximately 52 percent of the available fund balance, in its general fund in the 2015-16 proposed budget. The City's use of fund balance to close gaps in the budget decreases the fund balance that is available to cover unforeseen shortfalls in revenue or unexpected expenditures. The City will also have to increase rates for metered water and sewer rents by 31 percent and 50 percent, respectively, to realize additional amounts included in the proposed budget. Further, the City may need more funds to pay tax certiorari claims in the 2015-16 fiscal year than have been budgeted. The proposed budget includes $500,000 for payment of tax certiorari claims, while the City settled claims for approximately $6.2 million in 2013-14 and approximately $11.9 million as of March 31, 2015. The City's proposed budget does not include an appropriation for contingencies. The City's proposed 2015-16 budget complies with the tax levy limit.

The Justices did not ensure that Court moneys were accounted for. We found that the Court had bail money totaling $35,955 on deposit, of which only $8,550 was for current court cases; bail deposits totaling $13,550 were in a fine account rather than the bail account; and bail deposits were not always returned to individuals who posted them. Additionally, receipts were not deposited in a timely manner and all receipts were not accounted for. Finally, the Court did not properly prepare bank reconciliations or prepare an accountability analysis, resulting in excess funds in the Justices' bail and fee accounts which could not be accounted for. While this amount was not significant, routine bank reconciliations and accountabilities are important controls for the Court in detecting errors or irregularities.

The Board did not establish procedures to ensure that the Middle School project costs were within authorized limits. The project was completed in May 2012, eight months after the original targeted completion date, at a total cost of $10.9 million which exceeded the authorized cost by $2.6 million. In addition, we reviewed the selection process for the general contractor and professional service providers for the project and determined that School officials did not seek competition for approximately $6.8 million in project-related expenses to the general contractor, the architect and the owner's representative. The Board also needs to improve its oversight of the Company's activities. Our examination of the School's financial activities disclosed that the School does not have custody of its funds until after the Company pays most of the School's bills and deducts their expenses. The Company then transfers the remaining funds into the School-controlled bank account. We also found that the Board and School officials do not receive or review bank statements and bank reconciliations. We also reviewed the Company's agreement and determined that the School was operating under an expired contract.

Both the Clerk-Treasurer and her deputy were able to perform all cash disbursement functions and have full access rights to record financial transactions in the accounting system. The deputy was responsible for entering invoices and payroll information, making bank transfers and printing and distributing checks. The Clerk–Treasurer was also responsible for making bank transfers and online payments, recording journal entries and reconciling the bank accounts. Although the Clerk-Treasurer reviewed the deputy's work, no one reviewed the Clerk-Treasurer's work. As a result, errors and irregularities could occur without detection.

The Board needs to improve controls over the District's cash disbursement process. The Board did not audit each claim before payment or provide oversight of disbursements related to the District's line of credit, payroll or petty cash. District officials did not receive and review more than $200,000 of line of credit invoices before disbursements were made. Additionally, no District official reviewed the processed payroll reports before disbursing payroll checks. Further, two service providers had direct access to the District's bank accounts and withdrew more than $517,000 for payroll and payroll related expenditures and monthly fees associated with the District's capital fund-raising campaign. Finally, District officials have not established a secure petty cash process to ensure that more than $12,300 used to fund petty cash was appropriately accounted for.

The City's proposed budget includes estimated one-time revenue of $1.3 million from the sale of City property. However, City officials could not provide documentation to show that this revenue will be realized in 2015-16. The proposed budget includes estimated revenue of $2.3 million in federal aid. However, the City has not yet submitted the application to the federal agencies. Overtime salaries are budgeted at $2.1 million, despite costs averaging over $2.9 million for the last five completed fiscal years. The proposed budget includes revenue estimates for metered water sales and sewer rents of $4.4 million each. These estimates include amounts that are expected to be realized from a 2 percent increase in metered water rates, which the City Council has not yet authorized. The City's proposed budget complies with the property tax levy limit set by statute. We also determined that City officials generally implemented our recommendations included in our budget review letter issued in May 2014.

The Board does not ensure that all financial activity is properly recorded and reported and that money is properly accounted for. As a result, the Treasurer does not prepare and present detailed financial reports to the Board or reconcile the bank balances to the cashbook balances and present them to the Board in a timely manner. In addition, the Board does not perform an annual audit of the Treasurer's records. We also found that the Board does not properly audit claims. At each meeting, claims to be paid are read aloud to the membership by the Treasurer for approval, but there is no list in the minutes of what claims were approved by the Board. Furthermore, during fundraisers, purchases are made from the collected cash receipts before they are deposited, circumventing the claims approval process. We also found that while summaries of revenues from fundraisers are prepared by the chairperson and presented to the membership, there is no reconciliation of tickets sold to cash deposited to ensure that all fundraising revenues are accounted for. The Board has also not adopted a code of ethics. Between April and November 2013, the Company paid $10,714 to a vendor that was owned by the Company president. A written code of ethics would provide clear guidance and ensure transparency for related party transactions.

Based on the results of our review, except for the following matters, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. Although District officials increased real property taxes within the amount allowed by law, District officials could have instead used amounts from their excessive reserves and/or appropriated additional fund balance to finance operations. Therefore, District officials could be imposing a higher tax burden on District taxpayers than is necessary to provide educational services. Furthermore, because District official's presented the tentative budget to OSC for review prior to the adoption of the State budget, District officials should make appropriate changes to their State aid estimates based on the information that has since been provided. The District's preliminary budget complies with the property tax levy limit.