The debit card disburses funds from the District's bank account upon its use and therefore does not allow for the required Board audit of claims prior to the disbursement of funds. Therefore, we reviewed all 11 debit card transactions totaling $2,403 made during our audit period. Nine transactions, consisting of eight transactions totaling $2,021 for conference and travel expenditures and a $66 charge for District purposes, were all supported by itemized receipts. The remaining two charges totaling $316 did not have supporting invoices to determine the purpose of these purchases. The vendor payments were made to a company that makes plaques and trophies and to a fire equipment store and as such, appeared to be for appropriate District purchases. In addition, despite maintaining adequate records and preparing monthly reports, the Treasurer has not filed an annual financial report with OSC since August 6, 2011 for the year ended December 31, 2010.

The Board did not provide adequate oversight of the Company's financial operations and did not ensure that cash disbursements were for valid Company purposes. As a result, the Chief made $5,858 in improper purchases and misappropriated a $1,863 refund check from a vendor that was due to the Company. In addition, the Company spent $12,815 on questionable purchases, including $8,496 for firefighting equipment purchased from the Chief and $4,319 purchased from other vendors. Also, the Company paid $982 in questionable fuel costs because the Chief fueled his personal vehicle at Company expense in excess of the limits permitted by the Company's fuel usage policy. The Board also does not ensure that vending machine receipts are given to the Treasurer, and as a result, $1,100 of vending machine receipts were not deposited into a Company bank account or recorded in the Company's financial records. In total, we identified $22,618 in improper and questionable transactions. In addition, the Board does not provide adequate oversight of the Treasurer's recording and reporting duties. As a result, the Company's financial records are inadequate.

We found that the Secretary-Treasurer maintained adequate financial records and the Board generally provided adequate oversight of District financial activities. The Secretary-Treasurer performed monthly bank reconciliations and submitted periodic financial reports to the Board. However, the Secretary-Treasurer has not filed an annual financial report with OSC for the last four years (2010-2013). While it is the Secretary-Treasurer's responsibility to file the annual financial report with OSC, the Board should monitor the performance of this duty to help ensure it is performed in a timely manner. In addition, the Board did not conduct an annual audit of the Secretary-Treasurer's records for the 2013 fiscal year.

The Board adopted budgets that relied too heavily on appropriated fund balance as a financing source. Furthermore, the Board did not require the bookkeeper to submit estimates of year-end fund balance and did not adopt a policy to determine the amount of unrestricted, unappropriated fund balance to maintain. This has led to significant reductions in the Town's fund balances from the beginning of 2011 to the end of 2013. Total general fund balance declined 78 percent (from $156,784 to $34,592), and the highway fund balance declined 47 percent (from $124,882 to $66,226), during this period. Additionally, the Board has not developed a multiyear financial and capital plan to address the Town's long-term priorities. As a result, the Town's ability to react to external influences, provide basic services and plan for capital needs is diminished.

Based on our limited procedures, it appears that the District has fully implemented the two recommendations made in our audit report.

The Board needs to improve its oversight of District financial activities. The Board did not ensure that complete and accurate accounting records were maintained, bank reconciliations were performed, annual financial reports were prepared and filed in a timely manner and that the Treasurer's records were annually audited. Furthermore, because the records were in such poor condition, the Board was precluded from fully understanding the District's financial condition. The District's fund balance as of December 31, 2013 totaled almost $186,000 or 128 percent of 2014 budget appropriations. In addition, the Board did not perform a thorough audit of District claims. Finally, the Treasurer was not paid using the payroll method customarily used to compensate District officers and employees.

The Board did not adopt structurally balanced budgets based on reasonable estimates. District officials repeatedly overestimated revenues by a total of approximately $8.2 million and appropriations by a total of approximately $11.2 million during the 2011-12 through 2013-14 budgets. Although District officials understood that these estimates were out of line with historical results, they intentionally continued these budgeting practices. For example, District officials told us they overestimated revenues by including in the revenue estimate all of the upcoming years' basic State aid expected to be received by the District without separating the amounts intended to fund the St. Regis Mohawk School. The Board also appropriated fund balance as a funding source in the 2011-12 and 2012-13 budgets, but the District did not use these funds because it ended each year with an operating surplus. As a result, the District retained more fund balance than was legally allowable and levied unnecessary taxes. We project the District will have a surplus for the 2013-14 fiscal year, and the Board continued these same budgeting practices in its proposed 2014-15 budget.

Although all three Justices deposited and disbursed Court money properly during our audit period, they did not always ensure it was completely collected or accurately recorded and reported. Of 78 cases reviewed, we found various deficiencies among 39 cases. Justice B performed all of her financial functions without implementing mitigating controls or receiving adequate oversight. Justice A relied on her court clerk to perform all of the financial functions without implementing sufficient mitigating controls or providing adequate oversight to the court clerk. Furthermore, while Justices A and B reconciled their accounting records to bank balances and liabilities for fines on a monthly basis, they did not compare their list of liabilities for bail (i.e., being held by the Court until the case is resolved) with the reconciled bank balances; In addition, the Justices did not have anyone reviewing the supporting material for their reconciliations, which increases the risk that errors or irregularities may occur without detection. Moreover, the Board did not provide adequate oversight of Court financial operations. The Board just completed the audit of Justice B's Court records for fiscal years 2012 and 2013, and has yet to perform an audit of the retired Justice's Court records for those same years.

The Town of Broome is located in Schoharie County and has a population of approximately 960. The Town is governed by an elected five-member Town Board. The Town does not have a centralized purchasing function; instead each Department is responsible for making purchases. The Town maintains a Justice Court with one Justice. The Justice reported collecting approximately $13,750 in fines, fees and surcharges during 2013. Town officials did not ensure that purchases were made at the lowest cost, in compliance with the Town's procurement policies and used for proper Town purposes. The Board did not require Department heads to keep complete records that would be used to determine the purpose of purchases. The Board did not provide oversight to ensure the Justice recorded, deposited and disbursed all Court moneys accurately and timely. The Justice did not perform monthly accountabilities and we found unidentified funds of $1,550 in the Court's accounts.

We found that the records maintained by the Surrogate's Court and County Clerk were generally up-to-date and complete, and we did not find any material discrepancies. Pursuant to Section 600(1)(a) of the New York State Abandoned Property Law (Abandoned Property Law), moneys which have remained in the hands of the county treasurer for a period of three years, together with all accumulated interest thereon, less the treasurer's statutory fees, are deemed abandoned property. The treasurer should, after public notice, pay all such abandoned moneys to OSC by the 10th of April of the next succeeding year, according to Abandoned Property Law, Section 602(1). We identified 18 actions totaling $66,637 that have not been turned over to OSC as abandoned property, even though the funds have been in the custody of the Treasurer for more than three years.

The Board does not ensure the joint water project (JWP) is operated in accordance with the intermunicipal cooperation agreements. The Board does not require the City to make its quarterly estimated payments for operating costs and the annual reconciliation of expenditures for 2013 was not completed until July 22, 2014. In addition, JWP funds were not deposited into a separate bank account and there is no rationale to support the 4 percent administrative fee that the City charges the Town for maintaining JWP financial activities. Finally, there is no provision for contingency funds in the JWP budget. The JWP does not have sufficient funds to pay its expenditures in a timely manner, causing, for example, 70 percent of the 271 invoices we reviewed to be paid late, with late fees totaling $13,121. Further, neither the City nor the Town know the actual JWP liabilities and there is a risk that the JWP might not have sufficient resources in the event of an emergency.

We found that the records maintained by the Surrogate's Court were generally up-to-date and complete, and we did not find any material discrepancies. However, we found that the County Clerk (Clerk) is not maintaining up-to-date court and trust fund records. New York State County Law requires the Clerk to maintain a record of all moneys and securities paid, transferred or deposited, or ordered to be paid, transferred or deposited to a court. Although the Clerk maintains this record, it is incomplete. One of the five court and trust deposits made to the Commissioner through the Clerk's office in 2013 was not listed on the Clerk's record. In addition, pursuant to New York State Finance Law Section 184, the Commissioner is required to submit a report on an annual basis to OSC accounting for all money, securities and other properties deposited to court and ordered into her custody. We found that the Commissioner did not report the condition of all court and trust funds to OSC as required by law. Although the Commissioner's report on the condition of court and trust funds was correct in total, it did not include detailed descriptions of the projects closed during the 2013 fiscal year.

The Board did not design and implement an adequate system to monitor CCIDA approved projects. For example, CCIDA 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 two projects overpaid PILOTs totaling $78,879 and six projects underpaid PILOTs totaling $63,510. Furthermore, CCIDA officials did not comply with the UTEP requirements for monitoring the sales and use tax exemptions used by approved projects because the officials did not obtain copies of ST-340 forms or detailed records from all project owners to verify the amount of sales and use tax exemptions claimed. The CCIDA also did not have an effective process in place to monitor and evaluate agreed-upon job expectations, which may have helped avoid a shortfall of 100 jobs for eight of the 10 projects we reviewed. The CCIDA also did not have a process in place to monitor projects to ensure that properties were reconveyed in a timely manner. Six of eight project properties that we reviewed were not reconveyed in a timely manner. The failure to reconvey properties in a timely manner resulted in reduced annual total taxable assessed values for Clinton County, the Town of Plattsburgh and the Beekmantown Central School District. We found that a combined total of $1,695,538 in real property taxes would have been paid to Clinton County, the Town of Plattsburgh and the Beekmantown Central School District if the four TDC projects' properties had been returned to the tax rolls upon the expiration of their PILOT agreements. This also resulted in the Town of Plattsburgh annually receiving a reduced share of sales tax moneys distributed from Clinton County.

Overall, we found that the Authority's controls were appropriately designed and operating effectively to ensure tenant rents were properly billed, recorded and deposited. Except for minor deficiencies, which we have discussed with Authority officials to help them improve controls, we found no significant deficiencies in the records we examined.

We found that the records maintained by the Surrogate's Court were generally up-to-date and complete, and we did not find any material discrepancies. However, we found that the County Clerk (Clerk) is not maintaining appropriate court and trust fund records. Although the Clerk maintains scanned copies of all court orders filed in his office, the Clerk does not make an entry into the court and trust fund register of the money ordered to be paid into a court. We found that the Treasurer established adequate procedures, maintained appropriate records and properly reported the condition of court and trust funds to the State Comptroller as prescribed by statute. However, we identified two actions totaling $507 which improperly remained in the Treasurer's custody and should have been turned over to the State Comptroller as abandoned property. After we brought these actions to his attention, the Treasurer agreed to take immediate corrective action.

Since early 2000, the District's financial condition has been negatively impacted by commercial property owners' successful tax certiorari claims against the District and related local governments. For example, one major commercial taxpayer had its real property tax liability reduced from approximately $46 million to $1.6 million in 2014 and each of the succeeding six years, ending in 2020. In 2007, District officials issued $194 million in debt to pay tax certiorari claims. The repayment of this debt started in April 2008 and cost the District more than $12 million the first year and will cost approximately $11.5 million annually for each succeeding year through 2037. In addition, the District has received an average of 26 percent less in State Foundation aid since the 2009-10 fiscal year, which is a major source of its revenues. These increased costs and decreased revenues have deteriorated the District's financial condition. To keep the District's financial condition from declining further, District officials told us they closely monitored expenditures and restricted departmental budgets each year. In addition, they consolidated the use of school buildings, closed two schools and reduced staff to help maintain the District's financial stability. District officials told us that they were able to accomplish these reductions in operating costs while maintaining crucial services to 8,000 students. Instead of significantly increasing property taxes, the Board maximized the use of fund balance each year and reduced the need for reserves. However, the District's fund balance has been consistently reduced each year.

The Board does not have an effective system of internal controls over private source funds money. The Board does not report the receipt or disbursement of private funds in its reports to either SED or OSC. Because Library officials did not report moneys received from private sources, taxpayers, SED and OSC do not have an accurate picture of the Library's financial condition. The Board also gave the former Director a $5,000 gift from the private funds as a reward for her over 30 years of service. Board minutes did not indicate Board approval of this gift. We also identified an additional $1,500 in gifts or awards that the Board approved to be paid from private funds, which included a $150 longevity award to the former Director. In addition, the Board has established policies related to payroll and leave accruals for both part-time and full-time Library employees, including the Director. However, Library officials have not established procedures to effectively record and monitor employee leave accruals, including vacation, sick, personal and compensatory leave. Without a standard procedure for recording and tracking employee leave-time accruals and periodic reviews by the Director and the Board to verify that employees leave-time accruals are accurate and adhere to Board policies, the Library is at risk of paying employees leave accruals to which they are not entitled. For example, when the former Director retired in September 2013, she was inappropriately paid for 12 days of unused leave, or $3,180, because she was able to earn comp time in excess of limit set by the Board's policy.

Town officials need to improve internal controls over the Town's payroll function. Because there were no comprehensive written policies and procedures over processing payroll and leave time accruals, the Secretary performed virtually all payroll functions with limited oversight and insufficient compensating controls in place. Although our review of payroll processing did not reveal any material discrepancies, because the Town lacked adequate internal controls errors could occur and remain undetected. Additionally, the Secretary and the building maintenance worker earned and used 174.50 hours of vacation and sick leave, when there was no Board approval authorizing these benefits. Finally, employees' leave accrual records were not accurately maintained. As a result, three employees' leave accrual records contained errors totaling 149.50 hours, valued at $3,020.

District officials did not develop reasonable budgets. Revenue estimates were generally close to the actual revenues received. However, over the last three fiscal years, the District spent nearly $5 million less than planned and did not use any of the appropriated fund balance that it budgeted to finance operations (an average of $1.5 million over the last three years). From 2011-12 through 2013-14 the District's total fund balance increased by more than $885,000 (25 percent), while the real property tax levy increased by about $536,000 (10 percent). District officials reported year-end unrestricted funds at levels that essentially complied with the 4 percent statutory limit. However, by consistently overestimating expenditures and appropriating fund balance that was not used to fund operations, the District's actual unrestricted fund balance totaled almost three times the amount allowed by law. Consequently, the District's real property tax levies were greater than necessary to fund operations.

We found that the District's retiree health insurance reserve with $444,545 is not a legally permissible reserve. Currently, there is no statutory authority for a district to establish a reserve for post-employment benefits that are not based on employees' earned and unused leave time. The District established this reserve to fund the District's portion of retiree health insurance premiums based on the recommendation of its external auditors. The District's Business Manager stated that they were not aware that there was no authority for the establishment of such a reserve because the District's external auditors suggested it. Because there is no statutory authority for this type of reserve, the improperly restricted amounts must be included in the District's unrestricted fund balance. Had the funds been properly reported, the statutory limit would have been exceeded for all five years reviewed. As of June 30, 2014, the District had unrestricted fund balance totaling $506,554, and the reserve fund had a balance of $444,545. If the funds were properly reported, unrestricted fund balance would have totaled $951,099, which is 7 percent of the ensuing year's budgeted appropriations, exceeding the statutory limit of 4 percent by more than $435,099, about 80 percent more than allowed.