The Board has not provided adequate oversight to ensure that financial activities were accurately recorded and reported in a timely manner, and it has not effectively managed the Town's financial condition. Town officials were unable to determine the Town's true financial condition for each of the Town's funds because the accounting records and reports were inaccurate. Based on our analysis of all funds combined, the Town did not have enough cash to pay all of its bills at the end of fiscal years 2012 or 2013. As of December 31, 2013, the Town had a cash deficiency of about $325,000, or 24 percent of the next year's budget. The former Supervisor did not provide sufficient oversight of the bookkeeper to ensure that the Town's records were reliable and to address the Town's cash flow needs. The bookkeeper used interfund loans and transfers to keep the Town operational, but did not receive Board approval for most of the transactions and did not understand how to record them in the records. This resulted in misstatements, which obscured the Town's true financial condition. In addition, the bookkeeper did not regularly reconcile the Town's bank accounts to identify errors in the records. The Board did not fulfill its oversight responsibilities by performing a sufficient audit of the Supervisor's books and records. Also, the Board has not adopted a comprehensive multiyear financial and capital plan to adequately address the Town's long-term operational and capital needs. Finally, Town officials do not perform a formal needs assessment or cost-benefit analysis prior to acquiring highway equipment

The City's financial outlook, as projected by the City, has not improved in 2014 as a result of inaccurate revenue and expenditure estimates in the 2014 budget. Officials are projecting operating deficits for the 2014 fiscal year totaling $269,904 in the general fund and $5,582 in water fund. An operating surplus of $8,762 is projected for the recreation fund. The unassigned fund balances in these three funds are expected to remain as deficits of $3.9 million in the general fund, $523,679 in the water fund and $528,603 in the recreation and golf fund. The 2015 proposed budget contains significant financial risks that the City Council should consider when adopting the 2015 budget. The City continues to finance operating expenditures with debt when it should be funding such expenditures with operating revenues. In addition, the practice of supporting operating expenditures with unrealistic revenue estimates and one-shot revenues is not prudent. We also found that City officials had not fully implemented the recommendations in our prior budget review letter, issued on October 15, 2013. At that time, we recommended that City officials slow or curtail the use debt as a financing source to cover recurring operating expenditures such as tax certiorari payments, include reasonable revenue estimates, and adjust the City's budget presentation so that all fund activities are budgeted, accounted for and reported in the proper fund.

The Board established a “type” capital reserve to finance the cost of acquiring, refurbishing, constructing and reconstructing District owned buildings and grounds in accordance with GML. The Board funded its capital reserve through annual budget appropriations and by transferring operating surplus from the general fund. The Board approved the Substation 1 facility reconstruction capital project, which was funded with about $2.8 million from the capital reserve fund, without complying with the permissive referendum requirements. Because District officials failed to publish and post a legal notice on the project prior to approval, the Board had to petition the County Legislature to legalize and validate its actions. In addition, the Board did not approve change orders totaling more than $50,000 before the work began. These discrepancies occurred because the District did not have a written capital asset policy outlining the procedures to follow when constructing capital assets.

The purpose of our audit was to determine if actions taken by the county’s Child Protective Services (CPS) units were sufficient to reduce child abuse and neglect recurrence rates for the period January 1, 2011 through December 31, 2012.

Department officials did not establish policies and procedures or provide oversight of Department financial activities. Consequently, the Department's accounting records were not properly maintained, bank reconciliations were not performed and crucial financial reports were not prepared and submitted for Department officials' review. In addition, press-numbered receipts were not issued to provide supporting documentation for the funds collected during our audit period, checks received totaling $19,318 were not deposited in a timely manner and personal checks totaling $400 were cashed using Department funds. Further, Department officials did not review and approve all bills prior to payment or document approval in the minutes. As a result, 23 disbursements totaling $2,819 were not supported by adequate documentation, which would have allowed Department officials to determine if these disbursements were for appropriate Department purposes.

The Clerk and a bookkeeper perform virtually all of the Supervisor's financial duties with little oversight. The Clerk and Supervisor have functions that serve as checks against one another that do not exist unless they are performed by separate individuals. By allowing the Clerk to perform the duties of both offices, and by not properly monitoring the work of the bookkeeper, the Supervisor has weakened internal controls, creating an increased risk that moneys could be misappropriated and improper transactions concealed. Due to this lack of oversight and controls, the Town did not have receipts or source documents for $876,028 in deposits, and it disbursed $126,536 in payments without Board approval. In addition, the Clerk had sole online banking access to as much as $1.3 million. Further, the Supervisor did not submit financial reports to the Board, and the Board did not perform an annual audit of the Supervisor's records and reports, as required by law.

The Board did not fulfill certain key oversight responsibilities. The Board did not audit claims prior to approval for payment during fiscal years 2012 and 2013. In addition, the Board also did not conduct an annual audit of the books and records of all Town officers who received and disbursed cash for fiscal years 2012 and 2013. The lack of statutorily required Board audits of claims and annual accounting records limits the Board's ability to monitor and maintain accountability over financial operations and increases the risk of improper payments or accounting errors occurring without detection.

The Board did not effectively manage fund balance and reserves. District budgets from fiscal years 2010-11 through 2012-13 included the planned use of fund balance averaging $495,000 per year; however, less than $51,000 was actually used. In addition, the District did not plan for the funding or use of reserves, but instead transferred excess surplus moneys to reserves to avoid exceeding the fund balance statutory limit. Regardless, the District's fund balance exceeded the statutory limit for two out of the last three years. Furthermore, District officials overfunded four of the District's seven reserve funds. By accumulating funds without a clear plan for the future intended use, District officials have made tax levies higher than necessary. And while fund balance is greater than necessary, the Office of the State Comptroller's Fiscal Stress Monitoring System identified the District as susceptible to fiscal stress in 2013, primarily due to the decrease in available cash to fund operations.

When implementing a new fingerprint time clock system, the Board did not establish policies and procedures over payroll timekeeping to ensure that employees' work and leave time was accurately accounted for. The Districts' new timekeeping system did not adequately and accurately document the time employees worked. Once the District transitioned to using the fingerprint time clock it resulted in less accountability over timekeeping because it was not used effectively. For example, employees did not consistently use the fingerprint time clock to punch in or out to record the times they reported for and left work, account for missed time clock punches nor did supervisors consistently review or sign employees' time records. Due to these deficiencies we could not determine from the time records we reviewed if all hourly employees worked the scheduled hours. Further, employees' leave accrual records were not reviewed for accuracy after information was entered into the leave tracking software. As a result, some employees' leave was not properly approved and documented on the time records or recorded in the central leave record.

Although the Department members developed good policies and procedures, the bylaws could be improved by adding specific language specifying who is responsible for approving bills for payment and reviewing the Treasurer's work to ensure that all Department cash receipts and disbursements are properly accounted for. We found that the Treasurer performed most accounting duties with limited oversight. Although the Treasurer maintained accurate records and reports, no one reviewed the accounting records or compared the bank reconciliations with the bank statements and cancelled check images. Department members approved some bills and transfers prior to making payment, however no one audited and approved all Department bills before they were paid. Department officers also did not follow the dual signature requirement for 11 identical checks for food at the meetings totaling $495 that were signed only by the Treasurer. Moreover, the Department's bylaws do not contain any specific cash receipts requirements. As a result, there were limited procedures in place to verify cash receipt accountability.

The Board needs to improve its oversight of the District's budget and financial condition. In fiscal years 2010-11 through 2012-13, the District budgeted to use an average of $811,000 of fund balance to fund the ensuing year's expenditures. However, the District did not use these funds as intended because revenues exceeded expenditures by an average of more than $1.7 million in each of these years. As a result, the District's unrestricted fund balance, totaling $3.8 million as of June 30, 2013, was 15 percent of the 2013-14 budgeted appropriations. This was almost four times in excess of the 4 percent statutory limit. Officials also need to improve their oversight of employees' sick leave accrual balances. We found that the sick leave accrual balances in the time and attendance system were not correct for fiscal years ending June 30, 2012 and June 30, 2013. As of July 1, 2013, all 10 employees' sick leave balances reviewed were overstated by a total of 139.25 days, with a value of $44,430. During the audit period, sick leave accrual balances were not accurate and, therefore, District officials could not rely on them.

The District reported year-end unrestricted fund balance at levels that essentially complied with the 4 percent fund balance limit for fiscal years 2008-09 through 2012-13. This was accomplished, in part, by appropriating fund balance and funding reserves at year end. District officials' appropriation of fund balance aggregated to more than $21 million over the past five years, which should have resulted in planned operating deficits. However, because the District significantly overestimated expenditures in its adopted budgets, it experienced large operating surpluses in four of those five years and did not use the appropriated fund balance. The District used surplus funds to finance reserves without including those transfers in the budget process. For the five years reviewed, total actual revenues exceeded expenditures by almost $13 million and only $5 million of the nearly $21.5 million of appropriated fund balance was used to finance operations.

The Board and District officials have made limited improvements in their budgeting and financial practices in response to our prior audit findings. Of the six audit recommendations, one recommendation was implemented, three recommendations were partially implemented and two recommendations were not implemented. In addition, the District's purchasing policies lacked specific provisions required by General Municipal Law. We found that District officials and employees made purchases in accordance with the District's purchasing policy and the goods and services obtained were for appropriate District purposes. Additionally, we found that the District claims auditor appeared to adequately audit the District's claims. However, due to the requirements of Education Law, the individual serving as claims auditor was prohibited from doing so due to performing other conflicting District duties. Finally, we found that the Board needs to improve the District's property disposal policy.

The Board used fund balance as a financing source in the annual general fund budget until it was nearly depleted. Since 2010-11, the District appropriated more than $4.7 million in fund balance to finance appropriations in the general fund. This has resulted in a dramatic reduction in the District's total fund balance. During this same time period, the District increased property taxes an average of $521,000 (2.3 percent) annually. In addition, the District improperly used two reserves to help fund general fund operations during the 2012-13 fiscal year.

The members complied with applicable laws, rules and regulations by adopting a code of ethics and Company bylaws that clearly states the duties to be performed by the Treasurer and the Trustees. However, members did not provide adequate oversight of cash receipt and disbursement activities. The members also did not audit all claims prior to payments being made or conduct an annual audit of the Treasurer's records. The Treasurer maintains complete, accurate and timely records and presents monthly and quarterly reports of most Company activities including total receipts and expenditures and bank account balances to the members and prepares monthly bank reconciliations. However, death benefit payouts and grant activities were not included on any reports submitted to the members.

We found that the Board does not audit District's claims as required by the Act. Instead two Board members audit all claims, the President and the Treasurer. The Director reviews the claims and initials each invoice before the senior account clerk prints the checks and the abstract of claims. The President and the Treasurer audit the claims, sign the checks and sign the abstract that authorizes the Treasurer to pay the claims. The abstract is presented to the Board and the remaining Board members sign the abstract without performing a thorough and deliberate audit of each claim. The Board minutes include a resolution indicating the total number and dollar amount of the claims listed in the abstract. However, neither the resolution nor the abstract states that the Board had audited the claims as required by the Act.

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.