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.

The purpose of our review was to determine whether County officials have established appropriate controls to safeguard and account for court and trust funds for the period January 1, 2011 through January 1, 2014.

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.

We reviewed the District's online banking practices and found that the Board and District officials did not establish adequate online banking internal controls to ensure sufficient protection of the District's assets. We identified areas that need to be improved to reduce the inherent risks of online banking. The District unnecessarily has online banking access for all of its bank accounts. In addition, District officials do not secure user names, passwords and secured tokens. They also do not consistently erase the browser history after online banking. Further, the District did not have agreements with its banks to clearly prescribe the manner in which electronic or wire transfer of funds would be accomplished. District officials also have not enabled necessary alerts and other security measures available from the District's banks.

City officials did not follow appropriate policies and procedures when procuring audit services because they did not solicit written proposals for audit services. The City signed a contract with a CPA firm in June 1996. The City renewed the contract every five years until the City ended its relationship with the CPA firm in 2013. We found no evidence to indicate that City officials ever solicited requests for proposals (RFPs) for audit services during this 17-year period. In addition, the City does not have an audit committee to oversee and evaluate the CPA firm's work. We reviewed the CPA firm's work papers supporting their audit of the City's financial statements for the fiscal year ending December 31, 2012 to determine whether the CPA firm's audit services met generally accepted government auditing standards (GAGAS). The CPA firm's work papers generally met most auditing standards. However, we believe that the audit work papers were deficient in certain key areas including audit documentation, testing and supervision. If the Council and City officials had solicited RFPs for audit services, then perhaps the Council may have selected a different CPA firm that likely would have identified that the City accounting records were in such poor condition and that the City was experiencing significant fiscal stress. The Council and City officials would have had the opportunity to take action earlier to address the fiscal problems facing the City.

Although the Officers developed some policies and procedures, the Officers are not sufficiently ensuring that the Treasurer is properly accounting for cash receipts and disbursements because the Treasurer performs most accounting duties with only limited oversight. For example, the Treasurer collects and deposits money, signs all checks, records receipts and disbursements, reconciles bank accounts and reports monthly and annually to the members. Although the Officers review the Treasurer's reports and bills for payment at monthly meetings and the Board performs an annual audit, the Officers do not review monthly bank reconciliations prepared by the Treasurer or bank statements and the Officers are not receiving canceled check images to ensure that only previously approved disbursements are made as presented. Further, the Officers have not included specific procedures in the bylaws regarding the support for disbursements and process to audit these payments. Moreover, the Company's bylaws do not contain specific cash receipt requirements. As a result, there are only limited procedures to verify cash receipt accountability. For example, two individuals and the Treasurer are responsible for counting fundraising cash receipts after the events but prior to depositing the moneys; however, no one initials the cash sheets used that list the amounts collected or compares the amounts received with the numbers of items sold.

The Clerk did not issue receipts for collections when necessary. The Clerk did not make deposits in a timely manner and in 2013 the Clerk only made four deposits because collections were held for extended periods of time. In addition, the Clerk did not perform monthly bank reconciliations and accountabilities, comparing the available cash to the known liabilities. The Clerk did not submit a monthly report of all moneys she received and disbursed to the Supervisor and did not make disbursements to the Supervisor and State agencies in a timely manner. Finally, the Board did not provide adequate oversight of the Clerk's financial activities and did not provide for an annual audit of the Clerk's records.

The Board ensured that cash disbursements, including payroll, were for proper Library purposes. The administrative assistant was assigned and performed many key financial duties such as reviewing cash drawer receipts and deposits; recording all transactions including payroll, cash receipts and disbursements; and printing disbursement checks. As a result, the Director and Board instituted specific mitigating controls to reduce the risk that payment processing errors and irregularities could occur and not be detected. However, the Director allowed the Library's payroll vendor access to a Library bank account to withdraw funds for payroll and related payments and fees for its services. The Director and Board recognized the associated risks and took steps to prevent any errors or irregularities and detect them in a timely manner. Our audit testing revealed that the mitigating controls Library officials put in place were operating effectively and we found no exceptions with the propriety and complete and accurate recording for the transactions we reviewed.

The Board did not provide proper oversight of the Clerk-Treasurer. The Board did not request adequate reports from the Clerk-Treasurer and was unable to make informed financial decisions. In addition, the Clerk-Treasurer had errors in her accounting records. Her records understated the total fund balance of the general, water and sewer funds by $114,572, $74,000 and $42,300, respectively. Therefore, Village officials are not aware of the Village's true financial position. Furthermore, although water and sewer receipts were collected, deposited and reported accurately, the Board did not ensure the Clerk-Treasurer properly accounted for penalties, that billings were at Board-approved rates and that adjustments were always supported or authorized. In addition, the Village billed $77,000 more in water and sewer capital assessment charges than were legally allowed because they did not establish the proper local law.

The Board did not effectively oversee the Village's financial operations. The Clerk-Treasurer did not perform monthly bank reconciliations or provide the Board with complete and accurate monthly financial reports. In addition, the Clerk-Treasurer has not filed an annual financial report with the Office of the State Comptroller since the 2008-09 fiscal year. Further, the Clerk-Treasurer paid all 44 claims totaling $50,075 during our audit period without prior Board audit and approval. Finally, the Board did not annually audit or cause an audit of the Clerk-Treasurer's records and reports.

The Board did not develop and implement adequate internal controls over the Company's cash disbursement and receipt functions and did not cause the Company's financial records to be annually audited as required by the bylaws. Additionally, the Board did not provide adequate oversight of Company financial activity. As a result, we found approximately $38,000 in unsupported disbursements that may not have been for appropriate Company purposes, including approximately $3,800 paid to the Club Treasurer and about $3,000 paid to the Fire Chief. Additionally, we identified approximately $18,700 in unidentified Club deposits and at least $3,700 in unremitted fund-raising proceeds and hall rentals deposited in the Club's bank account.

We found that expenditures were accurately recorded in the accounting records for our audit period. However, the accounting records and monthly reports contained inaccurate monthly cash balances. Additionally, revenues received in 2014 totaling more than $500,000 (29 percent of the 2014 budget) were not recorded in the accounting records or reported to the Board. These discrepancies occurred because no one compared the reconciled bank balances with the recorded cash balances until after the end of the year and the Budget Officer did not record and report all the revenues received in 2014 to the Board. As a result, the Board cannot effectively monitor the Town's financial operations and there is an increased risk that errors or irregularities could occur and remain undetected and uncorrected.

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.