The Board has not developed adequate policies and procedures for the procurement of goods and services, credit card use, cash receipts, cash disbursements or the audit of claims. The Treasurer's duties are not adequately segregated and the Board does not require the Treasurer to submit an annual report and does not conduct an annual audit of the Treasurer's records as required by the bylaws. In addition, the Treasurer does not prepare monthly financial reports and the Treasurer's profit and loss report for 2013 showed a net loss of $14,300 when the Company had a profit of $4,280. Furthermore, the Treasurer does not reconcile bank accounts in a timely manner or issue press-numbered duplicate receipts. In addition, fund-raising deposits were less than collections in March 2013, disbursements totaling $10,515 had no supporting documentation to identify their purpose and checks totaling $52,976 had no evidence of approval of Board or Company members.

The Board did not make sound, transparent financial decisions regarding payments to District administrators. The Board appointed administrators, changed administrators, and entered into and changed agreements with no documented plan, reason or clear benefit to the District. The Board approved a confidential separation agreement with the former Superintendent and was not transparent when adopting the resolutions for the current Superintendent's salary. Most Board decisions were made at special or emergency meetings. The Board's actions in these matters resulted in the District simultaneously paying two Superintendents a total of $449,604 during the 2012-13 school year. In addition, because the Board did not provide clear guidance, a former Deputy Superintendent inappropriately received two unauthorized payments for 50 vacation days totaling $34,375. Finally, the Board appointed a Board Assistant, who was paid $94,658 in vendor payments from July 8, 2011 through September 28, 2012. District officials could not state with certainty what work this individual performed for the District. In addition, the Board has not instituted procedures or scheduled sufficient meetings to ensure that all of its decisions and deliberations are performed in a transparent and public manner. The District also needs to improve controls over its personnel practices. District officials did not always ensure that students' special education evaluations were performed properly and did not adequately monitor the services provided to students to ensure that they received all services specified in their IEPs. Finally, District officials have not ensured the security of the District's IT system.

We found that the Treasurer maintained appropriate accounting records and submitted monthly financial reports to the Board. However, the Treasurer did not receive all Department cash receipts, as required by the bylaws. For example, in 2014, the Department collected $11,181 in cash from the carnival, but gave the Treasurer only $3,685 of this amount to be deposited. The Department President used the remaining $7,496 in cash to pay for various expenses, including carnival ground cleaning services ($3,800), food and supplies for a party for the carnival workers ($1,924), and carnival setup costs ($704). Although these expenditures were supported by invoices and handwritten documents, because the President paid for them in cash, the Board was not given the opportunity to review and approve the payments before they were made. In addition, the Ladies Auxiliary (Auxiliary) collected and deposited all of the Department's banquet, hall and pavilion rental revenues into its own bank accounts. This practice is not mentioned in the bylaws, and there is no written contract between the Department and Auxiliary. Furthermore, the Board did not properly authorize all disbursements prior to payment. Finally, the Board did not obtain an audit of the Department's records by an independent public accountant, as required by law.

The Board and Directors have attempted to provide oversight of Department financial activities, but some of these oversight processes could use improvement. Although the Department's bylaws specifically detail the Board's and Directors' responsibilities, and the Treasurer's duties, these guidelines do not adequately segregate the Treasurer's duties. In addition, the Board and Directors have not adopted adequate written policies or procedures addressing cash receipts and disbursements, procurement or claims processing. As a result, the Treasurer makes all deposits, disburses cash and performs all recordkeeping functions. While the Treasurer provides monthly reports to the Board detailing receipts, disbursements and cash balances, the Treasurer has not prepared proper bank reconciliations. Although we did not find significant deficiencies with the bank reconciliations we performed for the audit period, failure to perform bank reconciliations will allow errors to remain undetected and uncorrected. The Board minutes noted that the Audit Committee completed quarterly audits; however, there was no formal documentation of the procedures performed during these audits and the records reviewed. Department officials provided consistent explanations of the procedures performed during quarterly audits, but these procedures typically only included the review of cash disbursements; they did not include a review of cash receipts or deposits. In addition, the Board and Directors have not adopted a code of ethics.

We found that the records maintained by the County Clerk and the Commissioner's office were generally up-to-date and complete, and we noted no material discrepancies. We found that the Surrogate's Court, however, did not maintain all required records as the Surrogate's Court Clerk did not keep a court and trust fund register. The Surrogate's Court Clerk has not kept the required Register since 2003. As a result, the Surrogate's Court Clerk was unable to readily identify all assets ordered to be paid into a court, and the Surrogate's Court Clerk's records could not be used to verify that all court-ordered deposits had been properly received and deposited by the Treasurer.

The District did not prevent employees serving as active volunteers from earning points for responding to calls during their regularly scheduled work hours. In 2013, the District used a procedure where employees who were also volunteers would sign in for calls and other LOSAP-eligible activities using an alternative badge number when those activities occurred during regularly scheduled work hours. Although this procedure allowed the District's LOSAP computer program to identify which activities were performed during work hours and, therefore, ineligible for points, these volunteers still earned points for all calls in which they participated. In November 2013, the District changed their procedure to require that employees also serving as volunteers no longer have an alternative badge number. The new procedure requires them to clock out of work in order to sign into a call, and then make up the missed work hours by the end of the pay period. However, this new procedure still did not prevent these individuals from earning LOSAP points for activities performed during their regular work hours. Due to this weakness, we reviewed LOSAP and call attendance reports from January through March 2014 for the District's five employees with regularly scheduled work hours who also serve as volunteers. We found that these volunteers attended between 41 and 83 percent of fire and EMS calls during their regularly scheduled work hours.

The Board entered into “deferred compensation” agreements with a former sanitation supervisor (Supervisor A) and his successor (Supervisor B) and made payments from the District's general fund, despite having no legal authority to do so. These agreements were not in accordance with a deferred compensation plan as authorized under State Finance Law and New York State Deferred Compensation Board regulations. As a result of these unauthorized agreements, the Board has improperly paid more than $391,900 to Supervisor A over the past 15 years and $421,353 to Supervisor B during our audit period. In addition, the Board has not established a thorough claims audit process to ensure that all claims are audited by the Board and that the Treasurer disburses District moneys only upon receipt of a signed warrant. Finally, District officials have not established sufficient internal controls over the procurement of professional services. The District hired three professional service providers, paid a total of $263,277, without issuing requests for proposals or using any other form of competition. District officials also did not enter into adequate written agreements with these service providers.

Company controls are adequate to ensure moneys are safeguarded and financial activity is properly recorded and reported. The Company adopted bylaws and established procedures to ensure receipts were deposited and accurately recorded and disbursements were for legitimate Company purposes. We only found minor exceptions which we verbally communicated to the Company officers.

The Board and Committees did not ensure that financial activities were properly recorded and reported and moneys were adequately safeguarded. In addition, the bylaws were not consistently followed. The Financial Secretaries did not approve vouchers in a timely manner and the Treasurers often disbursed moneys before the expenditures were approved for payment. Furthermore, the Financial Secretaries also did not consistently record receipts in press-numbered duplicate receipt books and, therefore, we were unable to determine if the Treasurers' deposited all the moneys collected. Lastly, the Board and Committees failed to perform adequate annual audits.

The Board did not develop adequate procedures that required the solicitation of competition for the procurement of professional services and the District's procurement policy does not require competition to hire professionals. As a result, District officials did not solicit competitive proposals for eight of the nine professionals who provided services totaling $150,800 during our audit period. In addition, the District did not enter into written contracts with four of these professionals. Although three other professionals had signed contracts at the beginning of their engagements, these contracts were not renewed or updated for future periods when the District continued to use their services. In addition, the Board has not adopted a comprehensive IT policy, resulting in a lack of guidance regarding the District's IT processes. The Board has not adopted a policy and implemented procedures for remote access and breach notification and has failed to implement procedures to periodically produce and review audit logs that could be generated by the accounting software. The District also does not have a formal disaster recovery plan.

The Board implemented procedures that require selected Board members to review the Treasurer's work on a monthly basis. This includes reviewing bank statements and cancelled check images, ensuring revenues recorded in the general ledger are deposited and providing for an annual audit. However, they did not ensure that the monthly budget-to-actual reports provided by the Treasurer were complete and that miscellaneous revenues collected, other than taxes, were recorded and deposited. The Treasurer accounted for the District's financial activities and submitted monthly financial reports to the Board and annual reports to OSC. However, the budget-to-actual reports did not include revenues or a complete accounting of expenditures. For example, the reports failed to reflect expenditures that were not a part of the adopted budget. Those expenditures were reported separately to the Board during the month incurred. This practice circumvents the purpose of a budget-to-actual report and therefore could mask the fact that the District is spending more than originally planned. Finally, the Board attempted to segregate the cash receipt duties by having the Treasurer open the mail and forward all money received to a Board member for deposit. However, there was no audit trail beginning with the initial point of cash collection to show the amounts the Treasurer actually received.

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 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.

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.

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.