Village officials have not taken adequate steps to identify and reduce the significant amount of unaccounted-for water occurring within the Village's system. As a result, unaccounted-for water was 71 percent of water produced. The Board has not established policies for billing and collecting water rents, determining estimated bills, approving and applying adjustments to customers' accounts, or enforcing overdue water bills. Generally, the Clerk-Treasurer properly billed, collected and deposited water rents. However, because the Clerk-Treasurer is able to perform virtually all of her duties with minimal Board oversight, the Village has an increased risk that inappropriate transactions could be initiated and hidden and that errors could occur and remain undetected.

We found that the Board and District officials have not provided adequate oversight of the District's financial operations. The Board could not appropriately monitor the budget because it did not receive budget status reports. Consequently, when expenditures approached budgeted appropriations, the Board did not increase appropriations, as required by New York State Town Law. We found the District routinely overspent their budget from 2011 through 2013. We calculate that the District spent $33,021 (21 percent) more than budgeted in 2013. In order to continue to pay bills during this period, the Board improperly transferred a net total of $40,000 from the District's capital reserve which had not been repaid as of December 31, 2014. The District reported positive operating results for 2014, resulting in a surplus of $22,911 and a cash balance of $30,362. In addition, the Board did not implement appropriate policies and procedures to protect the District's IT assets. The Secretary has full administrative privileges in the financial software. Further, the Board did not provide adequate oversight of the Secretary's work, such as reviewing bank statements, bank reconciliations, and audit logs or conducting an annual audit of the Secretary's books and records.

The Board needs to improve oversight of District financial operations. Although the Treasurer maintained adequate accounting records and the Chair reviewed the Treasurer's work, we found errors in the monthly budget-to-actual reports that the Treasurer provided to the Board. In addition, the Board has not developed policies determining a reasonable level of fund balance to maintain. As a result, the Board has accumulated significant surplus funds in the general fund. Finally, the Board did not ensure that annual financial reports and tax levy limit calculations were prepared and submitted to OSC as required.

Although the Board adopted reasonable budgets that included realistic estimates based on historical or known trends, the District relied on the appropriation of fund balance to finance recurring expenditures and, as a result, the budgets were not structurally balanced. As of June 30, 2014, the District reported an unrestricted fund balance that totaled $35,463 or .33 percent of the ensuing year's budgeted appropriations. Furthermore, the general fund operating cash balance decreased by over $2.5 million because of a financial statement reclassification of cash to restricted cash to agree with the District's reserve fund balances. The continued use of fund balance has resulted in its depletion. However, the Board and District officials have developed a multiyear financial plan to address current and long-term financial trends at the District.

Although the Board generally adopted reasonable budgets, they were not structurally balanced because the Board consistently appropriated fund balance to finance recurring expenditures. The Board's continuing use of fund balance, combined with significant unanticipated expenditures, caused the District's financial condition to decline. As of June 30, 2014, the general fund's unrestricted fund balance totaled $6,036, which was less than 1 percent of the ensuing year's budgeted appropriations. Furthermore, the District's general fund operating cash balance decreased by approximately $370,000 in one year. As a result, the District had to issue a tax anticipation note to meet cash flow needs during the 2014-15 fiscal year. In response to the District's fiscal stress, the Board was compelled to implement various cost-saving and revenue enhancement strategies. However, at the same time, the Board did not develop a multiyear financial plan to address the District's short- and long-term fiscal stability.

The District is experiencing significant fiscal stress. The District had no operating cash on hand and very little fund balance at the end of 2013-14 fiscal year to manage unforeseen events. The District incurred significant operating deficits in fiscal years 2010-11 through 2012-13. The District reported $379,000 of unexpended surplus funds as of June 30, 2014, which is less than 1 percent of the ensuing year's operations. The District is also experiencing cash flow problems. The District issues short-term debt to provide temporary cash flow and has improperly used a total of $7.5 million in reserve fund cash to help with cash flow in fiscal years 2012-13 and 2013-14. Furthermore, the District improperly recognized certain State aid long before it was received, which further impacted the District's cash flow and financial condition. According to District officials, the Board has relied on fund balance to finance operating expenditures because the Board did not want to raise taxes or reduce services despite reductions in State aid. The Board has approved moderate tax increases each year in order to help provide sufficient resources for annual budget increases and rising employee benefit costs, but relied on appropriated fund balance to balance the budget each year, including the 2014-15 fiscal year.

The Board did not perform an effective claims audit to ensure transactions were properly authorized and approved or claims were for proper Village purposes. Instead, the Board annually appointed one Trustee who was solely responsible for auditing all Village claims, which is inconsistent with Village Law. We found Village officials paid 34 claims totaling $32,332 without proper Board approval. Officials also did not ensure that these claims contained all necessary documentation or authorizations to facilitate an effective claims audit. While all the claims we reviewed appeared to be for proper and necessary Village purposes, the Board's lack of a proper claims audit process increases the risk that the Village could pay for expenditures that are unauthorized, excessive or unnecessary. The Board also did not adopt a comprehensive IT policy governing the Village's IT system or establish policies and procedures addressing crucial aspects of IT security, such as an acceptable use policy, data backup procedures or establishing a disaster recovery plan.

The Board did not adequately segregate duties which allowed the former Comptroller to perform duties related to the receiving and processing of cash receipts without oversight. For example, he collected cash receipts, made bank deposits and obtained and maintained bank statements. The Board did not mitigate this risk by ensuring that cash collected by the Comptroller was reconciled with collections remitted to him from other departments. As a result, $168,725 received by the Comptroller's office was not deposited and could not be accounted for. In addition, the Comptroller did not comply with the law. Cash receipts were not deposited within 10 days; some receipts were deposited between 11 to 67 days. (In February 2015, the former Comptroller pleaded guilty to second-degree grand larceny in the theft of $390,178 from the Town. The findings presented in our report are in addition to the $390,178 theft.)

The Board needs to improve its monitoring of the District's fiscal operations. The Board was not provided with the necessary financial reports and information to properly oversee operating and grant activities or to develop realistic or structurally balanced budgets. As a result, the District experienced financial difficulties and borrowed approximately $669,000 from grant funds to help pay operating costs. Although the District has repaid most of these funds, approximately $37,000 remains payable as of September 30, 2013. At the exit conference held on March 23, 2015, District officials stated they have since repaid an additional $12,000 to the grants and will pay the balance of $25,000 when the remaining grants with loan balances are closed. We also found the Board permitted the District to enter into an agreement to provide forestry services on lands outside the District to a business or businesses in which the former Director appears to have been affiliated, resulting in a potential conflict of interest. In addition, the Board did not establish written terms and rates for payment for these forestry services provided by the District, did not maintain records showing all work performed and did not ensure that all services were billed and payments were received. Finally, we found internal controls over cash disbursements were not appropriately designed or operating effectively. The Board did not adequately segregate disbursement duties, audit and approve all claims for payment and ensure that checks were signed by the Treasurer or an assistant Treasurer.

We found that County officials did ensure certain cash receipts were properly collected, recorded and deposited. The Board appointed standing committees to provide oversight of their respective departments' cash receipts processes, and each of the departments we tested also have their own written procedures. Additionally, the specific procedures established within each department are tailored to its operations to ensure moneys are collected, recorded and deposited intact and within a timely manner. We commend County officials for their attention to developing good cash receipts control systems and ensuring compliance with these systems.

Based on the results of our review, we found that the significant revenue and expenditure projections in the preliminary budget are not reasonable. The District's proposed budget for payroll, health insurance, retirement, debt and utilities exceeded the District's supporting documentation for those items. Consequently, the District has overestimated appropriations by $3.3 million. In addition, the District plans to use $2 million of their retirement contribution reserve fund. However, this reserve can only be used to pay for retirement contributions. The 2015-16 estimated cost for retirement are approximately $760,000. Therefore, using the remaining $1.2 million to fund other expenditures of the District is not an appropriate use of this reserve. Our estimate of revenues, excluding the use of fund balance and reserves, is less than our estimate of total appropriations by approximately $2.2 million which would create an operating deficit for the third consecutive year. The District's preliminary budget complies with the property tax levy limit.

District officials continually underestimated revenues and overestimated appropriations when they prepared and adopted budgets for the last three fiscal years, even though this poor budgeting practice was brought to the District's attention during our last two annual budget reviews. As a result, fund balance was higher than needed. Specifically, we found that the percent of unassigned fund balance as a percentage of the ensuing year's appropriations exceeded the 4 percent allowed by statute in two of the last three completed fiscal years. Furthermore, the District's practice of consistently appropriating fund balance that is not needed to finance operations is, in effect, a reservation of fund balance that is not provided for by statute and a circumvention of the statutory limit imposed on the level of unreserved, unappropriated fund balance. Better budgeting would have allowed operations to stay at the intended level with lower taxes. Finally, as of June 30, 2014, two of the reserves totaling $1.14 million appear to be overfunded. Specifically, the unemployment insurance reserve had a balance of $116,459, which is over 16.5 times the average annual expenditures and the capital reserve had a balance of $1,024,119 with no planned future expenditures.

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 for the general, electric, library and parking funds are reasonable. However, the water and sewer funds' tentative budgets are not balanced and include a deficit of approximately $257,000 in the water fund and $155,000 in the sewer fund. Village officials told us they recognized the deficit and planned to raise water and sewer rates and reduce some expenditures in May 2015 to make up the difference. We recommend the Board address these deficits in order to avoid adopting budgets that include appropriations without sufficient financing sources. We had a similar finding in last year's budget review; the Board did adjust the rate structure in both funds and as a result of the actions taken by the Board, the funds are not projected to incur deficits for the current fiscal year. The Village's preliminary budget complies with the property tax levy limit.

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

We found $306,175 in school districts billings were not paid timely because the resident school districts had denied payment due to lack of proof of residency or other enrollment issues. We also found that because the School officials do not prepare the tuition bills on the FTE basis, the School did not receive $120,529 of funds due from the Albany City School District (ACSD) until the School had completed its end-of-year reconciliation. Furthermore, inaccuracies in the end-of-year reconciliation, identified after the reconciliation bill had been paid by the ACSD, led to an excess of $67,574 being billed to the ACSD.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District's proposed budget complies with the property tax levy limit set by statute.

Based on the results of our review, we found the significant revenue and expenditure projections in the proposed budget are reasonable. Based on the 2015-16 proposed budget, the Village will have exhausted 91.32 percent of its taxing authority. The Village's ability to rely on real property taxes as an increased revenue source in the future is limited. The Village's proposed budget includes a tax levy of $64,397,475, which exceeds the allowable tax levy limit. The Village's proposed budget includes the use of $500,000 from the tax stabilization reserve to lessen the real property tax levy. The Board has not yet adopted a resolution to use the reserve.

A delay in State aid reimbursements for the Tuscarora Indian School (School) has caused cash flow problems for the District. The District reports a receivable for this State aid; however, the receivable is not liquid. Without the State aid, the District used general fund resources and cash flow borrowing to finance School operations. The District has also issued a significant amount of short-term cash flow borrowing during the past three fiscal years. Furthermore, the District's poor management of funds in the debt service fund may have resulted in avoidable debt service costs of more than $500,000.

The prior Justice did not accurately record and report money to the Justice Court Fund in a timely manner. Additionally, the prior Justice did not prepare monthly bank reconciliations or accountabilities, properly account for bail money held by the Court or accurately report all fines and surcharges collected to the Department of Motor Vehicles. Further, the Board did not properly audit or document its audit of the prior Justice's records and reports. As a result, there was an overage of $321 in the prior Justice's Court bank accounts. The current Justice is taking corrective action to address these weaknesses.

The Town Board did not properly manage the Town's general fund balance from 2011 through 2014. For those years, the Board adopted unrealistic budgets that were essentially the same budgets year after year. As a result, the Board accumulated general fund balance while raising taxes. However, beginning with the 2015 budget, the Board plans to reduce the general fund balance to benefit taxpayers. To do so, it is cutting the general fund tax levy by 90 percent and appropriating $187,000 of fund balance. However, the general fund tax levy reduction coincides with an increase in the highway fund tax levy of over 30 percent, or $121,942. Additionally, the Board did not ensure that purchases were at the best price and all disbursements were for proper Town purposes. There was no evidence that quotes were obtained from more than one party for foreseen purchases of less than $2,500, or that pre-approval from the Board was obtained for purchases over $2,500, as required by Board resolution. In addition, no one verified that checks were for proper Town purposes or independently reviewed bank reconciliations. Further, the Board did not perform an annual audit of the Supervisor's books and records.