The Business Officers did not establish adequate internal controls over cash receipts and disbursements to ensure that Department moneys were safeguarded. The Treasurer managed the Department's funds with little or no oversight by any of the other Business Officers. We found that the Treasurer made $18,100 in questionable disbursements that were not supported by invoices or authorized by the Department's membership. Of this amount, checks totaling $7,866 were paid to the Treasurer; checks totaling $6,925 were paid to Total Quality Plus (a business purportedly owned by the Treasurer); and electronic funds transfers totaling $3,307 were made to a credit card company. In addition, cash receipts totaling almost $2,600 were unaccounted for. Further, 14 transfers totaling $14,305 were made from the Le Roy Firemen's Benevolent Association's (Association) bank accounts to the Department's checking account, and four unauthorized transfers totaling $8,600 were made from the Department to the Association. The Department Treasurer is also Treasurer of the Association. The Department's bank balance on October 10, 2013 was $7,824 less than the cash balance in the Treasurer's accounting records. Subsequently, the Treasurer made an unexplained deposit of $7,500 on October 24, 2013 to the Department's bank account, which was composed entirely of cash.

The Board did not establish adequate internal controls over the receipt and disbursement of foreign fire insurance (FFI) tax. We identified $27,738 in questionable disbursements that were not supported by invoices or authorized by the Board. Of this amount, 15 checks totaling $10,197 were payable to the Treasurer; three checks totaling $3,563 were payable to Total Quality Plus (a business purportedly owned by the Treasurer); three electronic funds transfers totaling $13,761 were made to a credit card company; and an electronic funds transfer of $217 was made to a wireless telephone provider. Moreover, an additional $6,727 was unaccounted for. We also found 13 unexplained deposits to Association bank accounts totaling $22,440 that were not recorded in the Association's records or reports. Further, 14 unauthorized transfers totaling $14,305 were made from the Association's bank accounts to the Le Roy Fire Department's (Department) checking account. In addition, four transfers totaling $8,600 were made from the Department to the Association. The bank account balance the Treasurer reported on the 2012 annual report was $27,741 more than what was actually in the bank at December 31, 2012. An unexplained deposit of $24,350 was made on October 28, 2013 to the Association bank account with a check from Total Quality Plus.

We found that the Board and the claims auditor did not ensure that the District only paid for actual expenditures necessarily incurred on official District business and as limited by contract. This resulted in questionable or unsupported travel costs totaling more than $9,000. In addition, while the Board has established a maximum daily rate for meals to ensure that travel is cost-effective and reasonable, the Board has not established maximum rates for lodging. Had the Board and District officials used GSA thresholds for lodging, they could have saved the District approximately $2,400.

The District has five general fund reserves with reported balances totaling about $12.3 million as of March 24, 2014. The District's reserve funds included a capital reserve totaling $5 million, a tax certiorari reserve totaling $4.8 million, a retirement contribution reserve totaling $1.8 million, an unemployment insurance reserve totaling $604,438 and a liability reserve totaling $100,000. We analyzed these reserves for reasonableness and adherence to statutory requirements and determined that all five were properly established. Funding for the capital, tax certiorari, retirement contribution and liability reserves was properly authorized and these reserves were funded at reasonable levels. However, the District's unemployment insurance reserve appears to be overfunded by more than seven times the amount necessary to pay District unemployment claims. District officials initiated steps to reduce the reserve's balance when preparing the 2013-14 budget.

The Treasurers did not appropriately perform the duties of their office. The Treasurers have not established any written procedures for the office's financial processes. In addition to the lack of procedures, the Treasurers did not adequately segregate duties for receipts and disbursements or develop compensating controls to adequately safeguard County assets. For example, the Treasurers did not provide any oversight procedures for collecting general receipts and tax moneys, or disbursing payroll and accounts payable checks. Because of the lack of oversight, the Treasurers could not verify that records were accurate. Also, the Treasurers did not reconcile cash with the accounting records in a timely manner, resulting in inaccurate financial reports that are not prepared in a timely manner. Although the County's public accountants (CPA) have conveyed the material weaknesses resulting from the lack of oversight, the Treasurers did not develop any formal plan to address the recommendations made by the CPA in the annual management letter. Instead, the Treasurers relied on the CPA's annual audit to determine the correct amounts that should be reported.

The Board needs to improve its oversight to ensure that financial resources are adequately safeguarded. The highway department did not maintain perpetual fuel inventory records or take periodic physical inventories, which caused fuel usage to be under-recorded. In addition, the senior center director did not issue duplicate press-numbered receipts, record all receipts and did not remit funds in a timely manner. Also, the Receiver of Taxes (Receiver) did not deposit receipts totaling $21,000 in a timely manner and signed checks for taxpayers who had sent in unsigned checks. The Board did not review the Receiver's bank reconciliations and the Receiver's office also accumulated approximately $66,000 as a result of duplicate payments. In addition, the senior center director accepted donations of assets and the director issued receipts without a documented methodology to determine fair market value and the Board was not informed of this practice. Asset donations totaling $7,960 could not be located, including donations totaling $700 that were made by the director or her husband. Also, the asset inventory in the senior center was inadequate and there was no asset inventory in the highway department. Finally, $552,449 in purchases of goods or services were made without quotes, bids or requests for proposals and $145,527 in professional services were procured without a written contract.

The Board has adopted a code of ethics and purchasing and investment policies as required by statute and policies on key financial areas, such as budgeting, credit card usage, disbursements and reporting. However, the Board does not have any policies or procedures for cash receipts. As a result, District officials did not maintain detailed cash receipts records, including the amounts and dates received, who received the money and its source. Additionally, the Treasurer prepared monthly bank reconciliations and submitted detailed monthly reports and abstracts of claims for payment. However, the Board did not review the bank reconciliations or bank statements on a monthly basis; moreover, the Board did not compare canceled check images to approved abstracts to ensure that District funds were used only for legitimate District expenditures. Instead, the Chairman and the Board reviewed these records every three months, which would not detect errors or irregularities in a timely manner. Furthermore, the Board did not conduct an annual audit of the Treasurer's records. Lastly, the Board audits and approves claims for payment at its monthly meetings. However, it does not meet in August and, therefore, the Treasurer and the Chairman process and pay all of August's claims prior to the Board's audit even though not all of these claims are the type that are statutorily authorized for payment in advance of audit.

The Board has not established adequate policies and procedures relating to maintaining a reasonable level of fund balance. The Town has accumulated excessive fund balances in the town-wide (TW) general, town-outside-village (TOV) general, TW highway and TOV highway funds, resulting, at least in part, from unrealistic budget estimates. In addition, the Board has not developed a long-term financial and capital plan to help address the Town's future needs. As a result, there is an increased risk that more taxes may be raised than necessary.

The Board adopted a policy requiring that no bill be paid unless at least three Commissioners approve the bills as evidenced by at least three Commissioners' signatures on each voucher and as stated in the Board minutes. However the policy does not require the Treasurer to provide the Board with an abstract listing all the claims, which the Commissioners could then review and compare with the individual vouchers when performing the claims audit. Because the Board is not provided with a list of claims, it reviews and approves each individual claim presented. Therefore, the Board cannot be assured that it is reviewing and approving all District claims prior to payment. In addition, we found nothing in the Board minutes to show which claims the Board approved, because all the minutes we reviewed included the general statement “All bills and vouchers were audited and approved.” The minutes also did not include sufficient information showing the total dollar amount of claims authorized for payment.

Village officials do not adequately monitor water operations. Although Village officials were aware of the aging infrastructure and potential for leaks, no one determined whether water was unaccounted-for. Village officials do not have written policies or procedures requiring the reconciliation of the water produced by the water system with the water billed to customers. Further, there are no procedures to estimate the volume of water used for authorized unbilled uses, such as hydrant and water filter flushing and firefighting. We found that the Village has unaccounted-for water totaling 36.7 million gallons annually, or approximately 60 percent of the water produced; the industry standard is at 10 percent. On an annual basis, the Village produced 60.9 million gallons of water but billed its customers for 15.1 million gallons. We estimate the cost to produce the unaccounted-for water to be as much as $53,400 annually, or about 25 percent of the water fund's average expenditures. The Village's average cost for water production per resident is $189, which is more than double the $92 average cost per resident for similar villages.

While the Treasurer does maintain up-to-date and accurate accounting records, the President and Executive Committee did not provide adequate oversight to ensure the Treasurer properly accounted for all of the cash receipts and disbursements. The Treasurer is properly performing all the cash receipt and disbursement duties with little oversight. Moreover, the Treasurer is paying all of the more routine bills as he receives the invoices with no audit performed. However, donations and other unusual expenses are being paid after the membership approves them. Finally, three out of the eight checks over the $2,500 threshold, totaling $19,800, cleared the bank and were not signed by both the President and Treasurer. The President told us he had also discovered these and discussed the matter with the Treasurer. The President believed they may not have notified their bank of the dual-signature requirement. Department officials told us that they were unaware of the need for additional controls over the cash disbursement process (such as an annual audit) as they trusted the Treasurer, and additional procedures may be too cumbersome for members to perform.

Based on our examination, it appears District money is adequately safeguarded. However, despite maintaining comprehensive, accurate and timely records, the Treasurer did not file the District's 2012 annual financial report with OSC until April 13, 2014 or 347 days late. Furthermore, although the Treasurer obtained an extension to file the 2013 annual financial report, this report was not submitted as of the end of our field work. The Treasurer told us he believed he submitted the 2012 report in the spring of 2013 after obtaining an extension. The Treasurer further stated he did not file the 2013 report because he was not sure how to account for bond refinancing in the report. District officials stated that they assumed the 2012 report was filed and therefore did not follow-up with the Treasurer to verify the report was submitted on time. In addition, District officials used a request for proposal process in March 2013 to award the contract for auditing the District's 2012 and 2013 financial statements. However, the audits have not been performed as of the end of our field work.

The Board did not establish adequate controls to ensure the District's financial activity was properly recorded and reported and that District money was adequately safeguarded. The Board did not adequately segregate the Secretary-Treasurer's duties, provide any additional oversight or implement other compensating controls, when segregating duties was not practical. The Secretary-Treasurer also does not provide the Board with any budget versus actual revenue and expenditure reports to help it monitor the District's financial operations. The Board authorizes each claim for payment and indicates its approval by having each member affix his signature on each claim voucher. However, the Board has no process in place to verify it approves all claims that are paid, because no one reviews the monthly bank statements, canceled check images or bank reconciliations. Furthermore, the Board did not perform an annual audit the Secretary-Treasurer's records.

City officials did not ensure that internal controls over payroll processing provided for adequate segregation of duties. The payroll clerk performed all significant phases of the payroll process. She entered new employees, pay rates and employees' time worked from their time records into the computerized payroll system, calculated withholding adjustments and finalized the payrolls. The payroll clerk also prepared, signed and distributed paychecks to employees and payroll withholding checks to outside agencies. The payroll clerk also had unrestricted access to a check-signing machine that she used to imprint the Comptroller's signature onto checks. She also prepared and transmitted the direct deposit file to the bank. In addition, no one reviews the completed payrolls. The Comptroller provides some oversight of the payroll process by performing bank reconciliations and reviewing cancelled payroll checks for reasonableness. However, these oversight procedures would not identify errors or discrepancies on direct deposit payments. As a result, it would not prevent the payroll clerk from paying herself or other employees for time not worked or paying a fictitious employee.

The Board did adopt realistic and structurally balanced budgets based on historical trends. As a result, the Village ended 2011-12 with an unplanned net operating deficit of $372,471. In addition, Village officials need to improve their oversight of the Village budget. Improved monitoring will enhance their ability to react to external influences such as economic downturns and emergencies and to accurately determine the actual amounts that should be charged to each budget line are restricted.

We selected a judgmental sample of 22 vendors which were paid approximately $911,000 during the audit period to determine if goods and/or services from these vendors were properly procured in accordance with the District's policies and procedures and applicable statutory requirements. We found that the District did not properly procure goods and/or services from 16 vendors that were paid approximately $866,000. We also found that the District could have saved up to $1,500 by using a State contract for certain purchases. While the District's purchasing policy does address statutory requirements, it does not state competitive bidding threshold amounts. Also, District officials stated that for day-to-day guidance on the purchasing process, staff should refer to the Business Office Manual (Manual), which contains key purchasing provisions and guidelines and is used by the Business Office on a routine basis. However, this Manual is kept in the Business Office and not readily available for others in the District, such as staff and department heads who are involved in the purchasing process. In addition, this Manual is more restrictive than statutory requirements for purchases subject to competitive bidding requirements.

While District officials have recently taken proactive measures to manage and improve the District's financial condition, their reliance on fund balance and reserves to finance planned operating deficits during the audit period has depleted available funds to dangerous levels. The District's total fund balance decreased over the past three years from $5.1 million to $4.0 million and is expected to continue to decline in the future. For 2013-14, District officials planned another operating deficit, budgeting $600,000 in appropriated fund balance and $384,560 from reserves as a funding source. We project that total fund balance will be $3.2 million at the end of 2013-14 and the available moneys for funding operations will be exhausted by the end of 2014-15. Over the last several years, District officials have developed reasonable budgets and controlled expenditures to offset a significant decline in State aid. The District has also eliminated positions, changed health insurance plans and eliminated student programs and services from BOCES (the Board of Cooperative Educational Services) to reduce expenditures. They continue to be proactive, planning to study consolidation with an adjacent district and working to reduce transportation costs by reducing bus routes. However, it is critical that, having stabilized the District's financial condition, District officials now discontinue relying on fund balance to pay for operations and instead adopt structurally balanced budgets that provide for recurring revenue sources to pay for recurring costs of operations.

The Board does not provide adequate oversight of the Department's financial activities. Although the Department's bylaws specifically detail the Board's responsibilities and the Treasurer's duties, they do not adequately segregate the Treasurer's duties or ensure that the Board provides oversight of the Treasurer. The Treasurer maintained appropriate financial records and disbursements were generally for reasonable Department expenditures; however, we found deficiencies in financial reporting, the audit of claims, and the recording and deposit of cash receipts. In addition, the Board has not adopted written financial policies or procedures addressing cash receipts, disbursements or claims processing. As a result, the Treasurer makes all deposits, disburses cash without the Board's prior approval, performs all recordkeeping functions and prepares bank reconciliations without independent oversight. Further, the Board does not audit the individual claims for accuracy or examine them for supporting documentation. We also found that the annual report provided by the Treasurer did not accurately total revenues and expenditures and that the Treasurer did not file the annual foreign fire insurance report for 2013 as required. Additionally, we were unable to verify when entries were recorded in the financial records because the Treasurer stated that the software allows entries to be post-dated and he sometimes used this feature. Lastly, the Board did not conduct an annual audit of the Treasurer's records, adopt an annual budget or develop a code of ethics.

The purpose of our audit was to determine if counties are controlling inmate hospital costs and paying the appropriate rates for the services provided for the period January 1 through December 31, 2012.

The purpose of our audit was to determine if local law enforcement agencies (Departments) took action to help enforce the State’s Sex Offender Registration Act (SORA) for the period January 1, 2008 through January 22, 2014.