We commend Authority officials for designing and implementing appropriate procedures establishing employee salary rate schedules. Authority officials implemented specific procedures to ensure the individuals paid through the payroll process were paid at the Board-established pay rates and employees were paid the salaries and wages to which they were entitled.

The Board did not adopt a financial management policy and Town officials have not developed procedures to address the level of unexpended surplus funds to be maintained. The Board consistently overestimates expenditures in the general town-wide and highway town-wide funds, which results in operating surpluses. Additionally, the Board did not develop a formal, comprehensive multiyear financial plan. As a result, the Town's general town-wide and highway town-wide unexpended surplus funds have increased to levels which are excessive in comparison with the Town's expenditures for those funds.

The Committee needs to enforce the requirements of the Company financial policy. The policy requires that the audit committee perform an audit of each bill prior to payment to ensure that it is for a valid purpose, the goods and services have actually been received, no sales tax is being paid and that the transaction is adequately documented by an itemized invoice. The audit committee is also responsible for reviewing the Treasurer's records on a monthly basis. This includes the review of the cash receipts, bank statements, bank reconciliations and verifying the timeliness and accuracy of the financial transactions and reports. We found that the audit committee did not audit the bills or review the Treasurer's records. There was also no review of the bank statements, cancelled checks or bank reconciliations. Furthermore, we noted that the audit committee included the Treasurer which negates the internal controls intended by having an oversight committee monitor the Treasurer's work. Additionally, although the Company obtains an annual independent financial audit, it is not an adequate substitute for the regular and detailed oversight called for in the Company's financial policy. Finally, the Treasurer performs virtually all duties related to the Company's financial transactions including; preparing, signing and mailing checks; depositing and recording receipts; reconciling the bank statements and preparing financial reports.

The Board and District officials need to improve their oversight of the District's budget process and financial condition. District officials adopted budgets that included plans to use fund balance totaling $1.4 million between 2008-09 and 2012-13. The District did use $612,399 of this amount in the 2008-09 and 2009-10 fiscal years while it incurred planned operating deficits in trying to avoid increasing its tax levy and the taxpayers' burden during the economic downturn. During these two years, the District depleted its unexpended surplus funds to 1 percent of the subsequent year's budget, and it also used more than $500,000 from its reserve funds. However, the District incurred operating surpluses from 2010-11 through 2012-13 that resulted in it not using the remaining $787,601 of appropriated fund balance. Beginning in 2010-11, the District gradually increased its tax levy and budget. In each of the three years from 2010-11 to 2012-13, the District incurred operating surpluses and grew its fund balance from 1.1 percent in 2010-11 to 5.6 percent in 2012-13. The District's external auditor informed officials that they exceeded the statutory limit of 4 percent in 2012-13, despite transferring more than $350,000 to reserve funds. When considering unused appropriated fund balance the effective unexpended surplus fund balance was 5.7 percent in 2011-12 and 7.5 percent in 2012-13.

The Board and District officials could have adopted more reasonable budgets. The budget estimates for revenues and expenditures have not been aligned with historical or actual needs of the District. This resulted in putting an unnecessary burden on taxpayers. From 2009-10 to 2012-13, the District spent an average of $6 million less than budgeted and received $2.3 million more in revenue than budgeted. While District officials planned for operating deficits from 2009-10 through 2012-13 averaging $6.4 million, to be funded by unexpended surplus funds, the budgets have provided surpluses. Therefore, these funds were not needed. Although District officials have taken steps and have lessened operating surpluses from $3.4 million in 2009-10 to less than $615,000 in 2012-13, unreserved fund balance has continued to grow. As a result of poor budgeting practices, unexpended surplus fund balance as a percentage of the ensuing year's budgeted appropriations has grown from 8.4 percent as of June 30, 2010 to 17.6 percent as of June 30, 2013 and is likely to continue to rise. Adding the overfunded amount of the reserve balances would further increase this percentage. Furthermore, due to another unexpected operating surplus in 2013-14, this percentage will likely be even greater, and the $5.5 million of appropriated fund balance in the 2013-14 budget would not be needed and if it had been included in surplus fund balance, this percentage would be 24.5 percent.

The Board has not provided adequate oversight to safeguard Town assets. We found that the Board has not adopted adequate policies to ensure Town resources are protected. Additionally, the financial duties in the Supervisor's office were incompatible because they were completed by the Supervisor's bookkeeper, who was also the Clerk. The Board also has not annually audited, or contracted for audits of, the Clerk's or the Supervisor's records as required. Further, the Board has not adopted comprehensive, multiyear financial and capital plans. The Board did not ensure that the Town had valid, comprehensive written contracts for fire protection and emergency medical services or that the shared services contract was kept current to reflect changes in the arrangement. The Board also has not deliberately and thoroughly monitored adherence to the provisions in these contracts. The Board also acted outside its authority when it provided the Highway Superintendent with bonuses totaling $1,200 for services already rendered. Town officials did not maintain controls over scrap metal and did not record $8,913 in revenues from its sale. The Board inappropriately allowed the Highway Superintendent to use approximately $6,000 in proceeds from the sale of the Town's scrap metal to fund Christmas parties over the years. Town officials could not account for the remaining $2,900 in estimated scrap metal proceeds, which increases the risk that these funds could have been used for non-Town purposes.

The Board did not adopt realistic budgets from fiscal years 2008-09 through 2012-13. While District officials maintained unexpended surplus funds in compliance with the statutory limit each year, they consistently overestimated expenditures and appropriated fund balance that was not used. This negated any benefit the appropriation of fund balance would have in reducing fund balance or the property tax levy. These budgeting practices were not transparent to taxpayers. Consequently, the District's effective unexpended surplus funds ranged from 4.6 percent to 6.9 percent during the audit period, which exceeded the 4 percent statutory limit each year.

The Board did not properly allocate operating costs between District 1 and District 2. If costs were allocated in accordance with regulations, District 1 would have had a $30,963 deficit. In addition, the Board's adopted budgets for District 1 were unreasonable, resulting in annual operating deficits and declining surplus. The Board also approved two extensions to District 1 without ensuring that the Town complied with all legal requirements, and the Board did not properly allocate project costs to benefited properties, which contributed to the declining financial condition of District 1. In addition, the Board has not adopted a multiyear financial plan to address the water districts' future financial needs. Finally, the Board also did not comply with one of its own resolutions when it failed to bill other municipalities for legal services provided to the municipalities by the Town's Attorney. As a result, the Town forfeited between $3,000 and $6,000 in revenues.

We found that the Board and Company officers generally provided adequate oversight of the Company's financial activities. However, the Board does not provide adequate oversight over purchases costing less than $1,000 and the corresponding cash disbursements because this authority was delegated to the committees. As a result, there was a lack of segregation of duties over authorizing and making purchases and approving payment for those purchases because the same committee members were able to perform all these phases of the purchasing process. Further, five committees comprise one member. As a result, these committees did not function as committees, but as one individual making decisions for the entire Company without sufficient oversight in approving purchases and the corresponding payments.

The Board needs to improve its oversight of the District's financial activities. The Board did not ensure that complete accounting records were maintained, that bank reconciliations were performed, that its annual financial report (AUD) was prepared and filed in a timely manner and that an annual audit of the Treasurer's records was performed. As a result, the Board does not have adequate assurance that cash has been properly accounted for. In addition, the Board, the Office of the State Comptroller and District residents are deprived of a tool to monitor District operations. In addition, the Board has not adopted a budget in the format prescribed by OSC or followed the statutory requirements for adopting the budget and computing the tax levy limit. Finally, it may have levied taxes in excess of what was needed.

We reviewed budget-to-actual results for fiscal years 2010-11 through 2012-13 and found that District officials did not follow sound budgeting practices. District officials used a roll-over budget process by taking the prior year's actual revenues and expenditures and adding a percentage to that figure without taking into consideration prior year's trends and future conditions. This resulted in underestimated revenues and overestimated appropriations and subsequently, accumulated fund balance. Over these three years, District officials underestimated revenues by a total of $5.2 million and overestimated appropriations by a total of $9.7 million in the adopted budgets. In addition, the District's fund balance has declined as a result of planned operating deficits and appropriating fund balance to finance the planned deficits. Specifically, the District's fund balance has decreased from approximately $16.5 million beginning in fiscal year 2010-11 to about $10.3 million in fiscal year 2012-13. The Board and District officials have more accurately estimated revenues and appropriations in recent adopted budgets. However, given the significant reduction in fund balance, the Board and District officials must accurately estimate revenues and appropriations in future budgets.

We commend District officials for the steps they have taken to increase educational productivity and reduce the costs associated with instructional materials and program delivery. During the budget development process for fiscal year 2011-12, District officials decided to control expenditures and improve student achievement by using technology and bringing most special education programs in-house. In fiscal year 2010-11, approximately 47 percent of the District's students in Grades 3-8 received academic intervention services (AIS), including those enrolled in special education programs. District officials took action in March 2011 to raise students' standardized test scores using teaching and learning technologies. As a result, from 2010 to 2013 the District's test score ranking increased by almost 43 percent. District officials also decreased special education costs by using State and BOCES aid to finance additional teaching and learning technology, while at the same time reducing the District's real property tax levy.

The City currently has a stable financial condition. The City's general fund unassigned fund balance has increased from $1.6 million to $6.1 million from fiscal years 2011 through 2013. However, two funds − the capital projects fund and the internal service fund-workers' compensation − reported deficits in 2013. Although the workers' compensation fund deficit decreased from $1.3 million in 2012 to $597,743 as of December 31, 2013, the capital projects fund's deficit increased from $1.9 million in 2012 to $5 million in 2013. City officials do not report cash assets earned in each fund's cash account. All cash is deposited in a concentration account and recorded as an asset in the general fund. Instead of cash assets, the City's other funds include amounts “due from other funds” while the general fund includes a significant “due to other funds.” As of December 31, 2013, the general fund financial statements showed cash assets of approximately $22 million and “due to other funds” of $14.8 million, while other City funds, which received significant amounts of cash from operations, showed minor petty cash balances and significant “due from other funds” balances. As a result, the City's financial statements are not as transparent as they could be. While all funds have direct access to cash from the concentration account for payments of payroll and vendor invoices, City officials did not maintain separate cash accounts in the individual funds.

Village officials did not develop structurally balanced budgets for the general fund and did not ensure that sewer rates generated sufficient revenues to cover sewer fund costs over the last six fiscal years. As a result, the general fund balance declined from $219,000 to a negative balance of $19,000 and the sewer fund balance declined from $94,000 to $18,000. The significant declines in fund balances were contributed to by a reliance on surpluses in the general fund and fluctuations in sewer rent revenues. These declines, combined with a lack of a long-term plan could have a significant impact on the Village's financing of future budgets and the ability to maintain current service levels.

The Board has not established adequate policies and procedures for providing guidance on maintaining a reasonable level of fund balance. As a result, the Town has accumulated excessive fund balances in the general fund and sewer district fund that resulted, at least in part, from unrealistic budget estimates. In addition, the Board has not developed a long-term financial or capital plan or established reserves to help address the Town's future needs.

The Board has not implemented adequate compensating controls to address the lack of segregation of duties performed by the Treasurer. The Treasurer performs virtually all of the Village's financial operations without Board oversight and compensating controls. Although the Treasurer performs all aspects of processing payroll including adding and deleting employees, recording hours worked, maintaining leave records and signing checks, Village officials do not adequately review payroll records, including the Treasurer's timesheet, prior to payroll checks being printed. For 10 of the 35 (29 percent) bi-weekly payroll periods we reviewed, the Treasurer had either over- or underreported her hours worked. In addition, the Board does not review individual claims during the audit of claims to ensure that the Treasurer is making disbursements for Village purposes. Further, we were unable to determine if water and sewer deposits were made intact. The Board did not audit the Treasurer's records and reports during our audit period. In addition, the Village does not have policies and procedures in place to safeguard IT assets, including an appropriate use policy, a breach notification policy and a disaster recovery plan. Additionally, Village officials have not implemented adequate controls and restrictions over user access to the financial system. Lastly, the Board has not adopted comprehensive data back-up policies and procedures.

From January 1, 2011 through December 31, 2013 the Department received over $80,000 in revenues. However, the Committee did not establish policies and procedures for financial transactions. As a result, the Treasurer's monthly financial reports lacked information for units within the Department, such as the rescue squad and the ladies auxiliary, and the Treasurer did not prepare annual reports for the Committee to summarize financial activities or reconcile financial records. Furthermore, the Treasurer disbursed moneys without explicit prior authorization and there was no evidence that the audit committee reviewed the Treasurer's books and records to ensure they fairly represented fiscal events. Furthermore, fund-raising chairpersons and the Treasurer did not provide receipts for donations and the Treasurer did not file Internal Revenue Service Form 990 with the United States Treasury Department and reports of receipts, expenditure and balances of fire insurance premiums with the Office of State Comptroller.

The prior Justice did not establish adequate internal controls over the Court's financial operations. She did not prepare monthly accountabilities and did not deposit cash receipts in a timely manner, properly account for bail money held by the Court or submit the required monthly reports to the Justice Court Fund in a timely manner. Further, the Board did not properly audit the prior Justice's records and reports or document that such an audit occurred in the Board minutes. As a result, there is an apparent overage of $8,802 from the prior Justice. The current Justice, who was in office for less than one month when we began our onsite fieldwork, had not yet taken corrective action to address these control weaknesses.

The District reported unrestricted fund balance of more than $3 million as of June 30, 2010. District administration developed, and the Board adopted, budgets that included plans to use nearly $2.5 million of fund balance to finance operations during the 2010-11, 2011-12 and 2012-13 fiscal years. As a result, the District's unassigned fund balance declined by about $1.53 million or about 94 percent. The District also reduced fund balance by nearly $477,000 because of a prior period adjustment recorded during the 2010-11 fiscal year to write-off some accounts receivable and adjust accrued interest for a bond anticipation note issued during the 2009-10 fiscal year. The Districts' unrestricted fund balance as a percent of the next year's budget declined from more than 8 percent to less than 1 percent over this same period. The 2013-14 budget planned to use nearly $1.2 million in fund balance as a financing source. Moreover, the Board has not developed a comprehensive multiyear financial plan to address the use of fund balance to finance a significant long-term building project.

The Board adopted general fund budgets that were not structurally balanced because the Board routinely relied on significant amounts of appropriated fund balance to finance operations. The Board also did not adopt a policy establishing the level of unassigned fund balance that should be maintained to prepare for any unanticipated expenditures and/or revenue shortfalls. As a result, for the 2011-12 through 2012-13 fiscal years the general fund incurred operating deficits totaling more than $934,000, unassigned fund balance declined by 98 percent and cash balances declined by 47 percent. Further, at the end of each fiscal year 2010-11 through 2012-13, the general fund's cash balance was so depleted that District officials did not have sufficient cash to pay bills and other obligations when due. The District's financial condition could decline further if the Board continues to adopt budgets that are not structurally balanced. If the 2014-15 fiscal year's actual revenues and expenditures mirror the budget, the District will have limited unassigned fund balance as of June 30, 2015. Finally, the District's school food service fund was not self-sufficient and required subsidies from the general fund through interfund transfers and advances. At the end of the 2012-13 fiscal year the school food service fund owed the general fund accumulated advances of more than $167,000, which were not repaid by the end of the fiscal year, as required.