The Village's procurement procedures need to be improved. Village officials do not require the use of requisitions and purchase orders when purchasing goods and services. Additionally, Village officials did not seek competition when purchasing goods and services that are not subject to bidding and when selecting professional service providers. Furthermore, the Board did not provide sufficient oversight of purchases made with Village credit cards. Finally, the Board needs to improve its oversight of the Village's cash receipts. The Treasurer has incompatible financial duties related to cash receipts, and the Board did not implement compensating controls to address the situation. No one reviewed the Treasurer's work or reconciled the duplicate receipts issued to the Village's accounting records or bank statements. We reviewed 50 receipts totaling $15,671 and found discrepancies with 16 receipts totaling $11,228. For example, nine receipts totaling $10,698 were not recorded in the Village's duplicate receipts book.

We found that the Board needs to improve its oversight of Library operations to protect taxpayer dollars from fraud, waste and abuse. The Board entered into an agreement with an independent contractor to perform the duties of the Treasurer but failed to provide adequate oversight of the Treasurer's work. The Treasurer did not deposit $4,638 in cash receipts that were turned over to her during our audit period and did not maintain accurate and complete financial records. Also, receipts totaling $4,807 were not deposited in a timely manner. The Board did not notice or question the fact that no cash deposits were listed on the Treasurer's report for the five-month period between January 2012 and May 2012. The Treasurer also received payments totaling $6,875 that were not included in her contractual agreement. Further, the custodian, who is the President's nephew, was paid $32,438 for the six month period January through June 2012. Changes were made to the custodian's time entries on 89 of 177 days (50 percent), indicating that he worked during this period. The custodian's time-clock record for this six month period contained 129 changes; 116 of the changes were not supported by any documentation that justified the change. The President made 109 of the 129 changes (84 percent). Therefore, we question whether he was entitled to the $19,534 that he was paid where his time entries were changed. These matters have been referred to the Suffolk County District Attorney's office. We also found other payroll-related issues, including leave time. Finally, we found issues with petty cash, travel expenditures, meals and refreshments and the procurement of professional services.

Because City officials did not consistently seek appropriate competition for purchases, they cannot assure taxpayers that they are obtaining the best price possible, as well as the desired quality and quantity, for goods and services. We found that City officials made purchases totaling $145,759 from three vendors without using competitive bidding or State contract pricing, as required by GML. City officials also did not request quotes for 33 purchases totaling $48,215, as required by City policy. Although the Council adopted policies that require using competitive bidding, written or verbal quotes and requests for proposals to solicit competition, City officials did not ensure that employees complied with these policies.

The West Fort Ann Volunteer Fire Company is a not-for-profit volunteer organization located in the Town of Fort Ann in Washington County. The Company, which is governed by a six-member Board of Directors, contracts with the Town to provide fire protection services to the Town's western region. Disbursements during 2013 totaled approximately $177,500. The Board was not provided with monthly bank statements, bank reconciliations and canceled checks. Company bylaws did not provide guidance for issuing receipts for cash collected and for conducting fund-raising activities. Company bylaws did not provide guidance for using debit and prepaid cash cards.

The Board and membership were negligent in the performance of their oversight of the Department's financial operations. Financial activities were performed predominately by the Treasurer, and the Board did not implement adequate compensating controls, such as routinely reviewing and monitoring the Treasurer's work. This lack of oversight created a weak control environment that allowed the Treasurer and his wife to misappropriate more than $95,000 of Department funds during our audit period. The Treasurer and his wife made personal purchases totaling $53,187 using the Department's credit card. Also, the Treasurer inappropriately wrote checks to himself totaling $23,550 that were not for a Departmental purpose, retained moneys from fund-raising events totaling $16,881 and transferred $1,705 of Department moneys directly from the Department's bank account to his employer to pay for his personal health insurance.

The Justice did not maintain complete and accurate accounting records. Bank reconciliations, month-end accountabilities, and reports submitted to the JCF were not accurate. We also found that the Justice did not maintain adequate case files and did not take appropriate action to ensure that fines and fees were collected in a timely manner. As a result of these weaknesses, Town officials have no assurance that all Court money is properly accounted for. Additionally, the Town may not have realized all the revenue it is entitled to from Court's operations.

District officials need to improve internal controls over nonpayroll disbursements. The accounts payable clerk (Clerk) performed all nonpayroll disbursement processes for the general fund with little oversight or any other compensating controls. The Clerk is responsible for recording all general fund nonpayroll disbursement transactions, initiating check printing, receiving printed checks and distributing checks. The Treasurer performs these functions for the special aid and capital projects funds. Thus, the Clerk and Treasurer control the entire nonpayroll disbursement process. As a result, District officials do not have adequate assurance that all nonpayroll disbursements are approved and for appropriate District purposes.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable, except for appropriations for grant proceeds, contingency appropriations, an allowance for uncollectible taxes and plans related to possible back pay expenditures due to expired union contracts. The City has not included an appropriation in the budget to cover the required contribution for the Community Oriented Policing Services (COPS) program grant. In addition, two federal grant programs will receive full funding in the 2015 fiscal year; however, the revenues and expenditures related to these programs are not included in the City's 2015 budget. We also found that the City continues to budget minimal amounts for contingencies and has not made an allowance for uncollectible taxes in the 2015 proposed budget. The City's proposed budget complies with the tax levy limit.

The Board consistently appropriated excessive amounts of fund balance in the general fund to finance operations which caused this fund to be in fiscal stress at the end of the 2013-14 fiscal year. The Board also intentionally overestimated expenditures for the water and sewer funds with the intention of increasing the levels of fund balance to guard against unforeseen repairs and finance future capital costs. This has led to both funds having excessive levels of fund balance and budgets that are not transparent to the residents. Also, moneys belonging to the water and sewer funds have been improperly retained by the general fund, creating an interfund obligation from the general fund to the water and sewer funds for which the general fund does not have adequate cash levels to repay.

We reviewed the local law adopted by the Board establishing the tax relief rebate program and a sample of tax rebates issued during the 2013 fiscal year. We reviewed 177 rebates totaling $206,883 to ensure the payments were supported by sufficient documentation and in compliance with the terms and requirements of the local law. We noted no material discrepancies in the amounts issued and all payments were supported by appropriate documentation. However, because the State Constitution prohibits towns from loaning or giving money to any private corporation or person, including property owners and residents, we believe the Town lacked authority to issue the tax refunds to property owners without a special act from the State Legislature.

Based on the results of our review, we found that the significant revenue and expenditure projections in the preliminary budget are reasonable, except for the estimated revenues from Federal Emergency Management Agency (FEMA) reimbursements. Although the budget does slightly raise taxes for all funds, Town officials did not include a contingency amount in the budget, which would provide for anticipated events and could help to improve the Town's financial position. The Town has adopted a local law to override the tax levy limit in 2015.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable, except for the possible revenue shortfall related to the expiration of the County mortgage recording tax law. In the 2015 budget, the County has included $3.4 million as revenue from the County mortgage recording tax. However, the law permitting the County to collect this revenue is due to expire on February 21, 2015. The Legislature must pass a law to extend the mortgage recording tax law or the County will face a revenue shortfall of approximately $2.9 million after the law expires. The County's proposed 2015 budget complies with the tax levy limit.

District officials did not obtain quotes or requests for proposals (RFPs) for most professional services during the audit period. The District made payments to eight professional service vendors totaling $153,238 for six types of services. In 2013, the cost of these services consisted of $84,584 for insurance coverage, $11,086 for legal services, $10,675 for physician services, $7,800 for investment management services, $5,000 for external audit services and $650 for engineering services. Through May 2014, these services consisted of paying $27,889 for insurance coverage, $4,679 for legal services and $875 for physician services. The District issued RFPs for the external audit services; however, RFPs, verbal or written quotes were not obtained for any of the other professional services rendered to the District.

The Board did not adopt realistic, structurally balanced general fund budgets or adequately monitor the financial activity of capital projects to ensure fiscal stability. The Board also did not adopt a policy regarding establishing an adequate level of unrestricted fund balance to maintain. As a result, the general fund's financial condition has diminished in recent years. In 2011-12 and 2012-13, the Board appropriated significant amounts of fund balance to finance operations which caused the general fund to realize operating deficits in both years. As a result, the general fund reported an accumulated fund balance deficit of approximately $275,000 at the end of the 2012-13 fiscal year. Furthermore, the Board and District officials failed to properly monitor capital project activity. Consequently, the District expended $741,000 more than the total amounts authorized for two projects causing a fund balance deficit in the capital projects fund in that amount. The District will ultimately need to transfer funds from the general fund to eliminate the capital project's deficit. As of June 30, 2013, the general fund did not have sufficient funds available to do so.

District officials have taken appropriate action to manage the District's financial condition. District officials provided for effective financial planning and management by ensuring unrestricted unappropriated fund balance levels are in accordance with statutory requirements, and budget estimates and reserve balance levels are reasonable.

The Town was categorized as being "susceptible to fiscal stress" in a report issued in September 2104 as part of the Comptroller's Fiscal Stress Monitoring System. The 2015 proposed budget for the Town's five funds totals $1,378,325 and is funded by estimated revenues of $134,785 and real property tax revenues of $1,243,540. Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The Town has adopted a local law to override the tax levy limit in 2015.

We found that the Treasurer did not prepare adequate monthly reports. Our review of Council minutes disclosed that the Treasurer's monthly financial reports consisted of a listing of Department bank account balances. However, the bylaws require the Treasurer to keep a complete record of all funds received and disbursed and furnish a report showing this activity at the Department's regular meetings. While there was also evidence that Department non-Council members performed an annual audit of the Treasurer's records, it would be difficult to perform a thorough audit without the benefit of the cancelled check images to review. Further, for the Department's ox roast fund-raiser held in 2013, the event's committee chairman told the President that he did not maintain an accountability of ticket sales. Finally, because the Council did not approve claims prior to payment, we reviewed all 271 checks listed in the 2013 check disbursement ledger totaling $100,158 and the claims associated with these checks. Our testing revealed no significant discrepancies and we found that the disbursements reviewed were supported with appropriate claims documentation, properly recorded and agreed with images of the checks used to pay these claims.

The Town was categorized as being “susceptible to fiscal stress” in a report issued in September 2014 as part of the Comptroller's Fiscal Stress Monitoring System. The 2015 tentative budget for the Town's funds totals $1,311,410 and is funded by estimated revenues of $370,880, appropriated fund balance of $116,905 and real property tax revenues of $823,625. We project that the general town-wide fund will end the current fiscal year with a deficit fund balance of up to $21,000; Town officials did not consider this when developing the 2015 budget. The allocation of payroll expenditures in the highways funds does not appear to be equitable. The Town's tentative budget complies with the tax levy limit in 2015.

The Clerk did not properly safeguard taxpayer funds. As a result, we could not determine if the Clerk is receiving, recording, depositing, disbursing and reporting all the money owed to the Town and/or paid to her. The Clerk failed to issue duplicate receipts or record the form of payment for any moneys collected and stopped recording tax payments in her records after the second month of the five-month collection period. Further, she did not consistently report the monthly activity to the Supervisor, reconcile her bank accounts with her accounting records or reconcile the amounts she had collected with what was owed to various parties. Finally, the Clerk and Code Enforcement Officer failed to compare the money received for building permits with the building permits actually issued.

The City's proposed budget, while generally reasonable, needs improvement to make it a better tool for prudently managing the City's resources. The sewer fund continues to display a trend of declining financial position and the proposed increases in revenues for the sewer fund's 2015 budget do not appear reasonable. The water fund's cash balance has steadily declined over the last several years and projections indicate that the fund will end 2014 in a deficit cash position. The City's 2015 proposed budget does not appropriate enough money for contingencies to provide adequate flexibility to pay for unanticipated costs. The City's 2015 proposed budget continues to provide minimal funding for capital improvements and, having nearly depleted its capital reserve, is issuing debt to fund capital expenditures. Due to a change in accounting for retirement expenditures, the City will be required to recognize increased retirement costs in future years. The City's proposed budget is in compliance with the tax levy limit.