The Board did not properly oversee Village operations. The full Board did not audit all claims, which totaled approximately $19 million, as required, to ensure that moneys were not used for non-village purposes. The Board also did not ensure that Village officials maintained accurate and up-to-date accounting records and, therefore, did not receive timely and accurate reports. Such reports were needed to determine the Village's financial position and to make sound financial decisions. As a result, the Village is experiencing cash flow issues, and received notices regarding insufficient funds totaling over $147,000 for Village bank accounts. In addition, Village officials are not ensuring they are receiving all money that is due the Village – in fact, real property tax or utility payments and/or penalties totaling more than $40,000 were not collected, including $213 for six accounts belonging to Village officials. Furthermore, officials do not know the amount of cash available to fund operations, the amount owed to the Village for real property taxes, or the Village's overall fiscal health. All of these conditions place the Village's financial operations at high risk of abuse or errors and jeopardize the Village's ability to provide services to its residents.

Village officials need to improve internal controls to ensure that water, sewer and electric user charges, totaling approximately $2.7 million annually, are properly billed, collected, recorded and deposited. The duties for billing, collecting and recording payments are not segregated. In addition, customer account adjustments are not independently approved and the computerized billing system does not provide an audit log or change reports to show the adjustments that have been made. Although a control account is maintained for the water and sewer charges, it is separate from the Village's accounting records and cannot be reconciled, with differences ranging from $5,000 to $7,000 per month. Furthermore, there is no control account for the electric charges.

While the Board reviewed and initialed each claim presented for audit and approval, as well as discussed individual purchases and asked clarifying questions, the Board did not ensure that claims included the necessary documentation. Paid claims lacked proper itemization and documentation to indicate they represented actual and necessary Town expenses and lacked evidence that Town officials complied with the adopted purchasing policy. For example, original invoices were not attached to claims, invoices also included prior balances that were not supported by additional invoices or receipts, and credit card claims only had the credit card statement attached and were missing the original vendor receipts.

Internal controls over the claims audit process were not appropriately designed to protect and account for Library assets. The Board's procurement policy assigned authority for the approval of claims to the Director. The Board does not have any other policies or procedures to ensure claims are adequately documented, audited and approved. Furthermore, delegating authority for auditing and approving claims to the Director was not appropriate because it did not achieve an independent audit of claims and segregate the incompatible duties of making purchases and approving claims for payment. The Board did not properly audit or approve claims. Library officials did not number claims sequentially or require employees to document the receipt of goods or services being billed for on each claim. Furthermore, claims were approved either by the Director or by the Library Clerk. In some instances, claims were remitted directly to the Treasurer for payment without review or approval by the Director or the Library Clerk. Although one Board member reviewed claims as a part of the check-signing process, they were not reviewed by any other members of the Board. Additionally, the Board member who reviewed the claims did not document his review and approval by signing the claims. The Board member also did not verify that the Director or Library Clerk signed the claims that they audited.

During our fieldwork, District officials were in the process of developing a reserve plan, which the Board was expected to adopt following the completion of our fieldwork. This preliminary plan addresses the District's seven reserves that were previously established and funded and totaled approximately $5.8 million as of June 30, 2013. We reviewed the District's preliminary reserve plan. We found that for five of the seven reserves, totaling more than $4.3 million, the District's preliminary plan failed to include a clear and detailed rationale for maintaining the reserve, the detailed objectives of the reserve, needed funding levels, sources of funding and the conditions under which the reserve's assets will be used or replenished. While we commend the District for developing a written plan, without these key elements, the District cannot ensure taxpayers that all reserves are properly established, used for appropriate purposes and funded to reasonable levels with appropriate sources. In addition, our last audit report identified that District officials failed to adopt comprehensive policies and procedures that ensured the financial activity for extra-classroom activities was properly collected, recorded and subsequently deposited. We commend District officials on their progress and the steps taken to address the deficiencies previously identified by our office.

We commend the Justices for establishing strong internal controls over Court operations. The Justices implemented specific controls to ensure Court money collected was properly recorded in the Court records, deposited in a timely manner and accurately reported to the Justice Court Fund on a monthly basis. The Justices also implemented various control procedures over the Court's financial activities that provided adequate supervision and oversight.

We found that internal controls over cash receipts in the Culinary Arts Department (Department) are properly designed; however, they were not operating effectively. The Board adopted a policy that provides specific guidance to College employees responsible for collecting, recording and depositing cash but the Department's employees have not complied with the policy. The cash handling policy requires employees to submit all cash received to the Bursar in a timely manner. We found that the 23 cash collections totaling $18,620 from the Dining Room were appropriately posted to the records and submitted timely and intact to the Bursar as required by the Board's policy. However, of 166 cash collections from the baking class, the bakery and the butchery, totaling approximately $21,400, 149 totaling $20,569 were not submitted to the Bursar in a timely manner. The collections we tested from the baking class, the bakery and the butchery were not always remitted to the Bursar intact. Because cash collections were not deposited timely and intact, and cash collections were used to fund purchases, the internal control structure established by the Board is weakened.

We found that District officials have established adequate internal controls over separation payments. When an employee leaves District service, the Board approves the retirement or resignation, and the payroll clerk reviews leave records and produces an attendance report showing the employee's leave accrual balances. The payroll clerk also reviews the employee's collective bargaining agreement (CBA) to determine the amount of unused leave time and the rate of pay the departing employee is entitled to, if applicable, in order to calculate the separation payment, and notes the calculation of the separation payment on the attendance report. The payroll clerk then provides the attendance report with the separation payment calculation to the Treasurer, who reviews the employee's leave accrual balances and the CBA to verify that the amount of eligible leave time and the rate of pay used in the calculation are accurate. Finally, the Treasurer approves the calculation and the payroll clerk processes the separation payment.

We found that the Board was not sufficiently aware of its many legal and administrative requirements and responsibilities as Trustees of a School District Public Library, and therefore, did not provide adequate oversight of Library operations. In fact, for various aspects of operations, Library officials seemed to believe that, and operate as if, the Library was a not-for-profit (NFP) corporation, instead of a public entity. For example, the Library did not file the required annual financial report with the Office of the State Comptroller, and may have incurred unnecessary costs to have an outside accountant annually prepare and file IRS Form 990, which is generally not required for governmental entities. While such confusion may have contributed to some of the deficiencies we identified related to legal compliance, the Board also failed to establish and enforce basic internal controls over Library operations, which would be essential for any entity to operate effectively. Although the Board had adopted an investment policy pursuant to statutory requirements, it did not follow or enforce the policy. Instead, it allowed Library moneys (totaling nearly $1.2 million as of June 30, 2013) to be improperly deposited in types of investments which are not allowed by law, putting Library resources at a greater risk for loss. In addition, the Board had not developed written policies and procedures covering most other aspects of financial operations and had not adopted a code of ethics. The lack of detailed policy and procedural guidance for staff, with very few internal controls in place, left much at the discretion and control of the former Director (who had run the Library for nearly 30 years).

The Board did not adopt comprehensive written policies and procedures to provide proper guidance and internal controls over leave accruals. There was minimal oversight of the employee leave accrual records maintained by the payroll clerk. The payroll clerk receives records containing employees' absences, which she uses to deduct the amount of leave time taken from each employee's leave accrual balances. However, we found that the cafeteria manager, head custodian and committee on special education secretary submit records of their leave time used to the payroll clerk without any independent approval. In addition, other than the payroll clerk providing the leave accrual balances to the employees on an annual basis, there are no periodic reviews performed by a District official to ensure the accuracy of the leave records maintained by the payroll clerk.

We reviewed budget-to-actual general fund results for the 2011 through 2013 fiscal years and found that City officials had adopted realistic budgets. The City Manager reviewed budget-to-actual comparison reports throughout the year and kept expenditures within budgeted appropriations. However, heavy reliance on appropriated fund balance as a financing source in the 2011 and 2012 fiscal years resulted in a significant reduction in the City's general fund balance and unassigned fund balance. Beginning in the 2013 fiscal year, City officials took steps to replace fund balance. Based on the City's 2013 revenue increases and cost-saving measures adopted in 2013, it appears that City officials are properly managing the City's financial condition. City officials should continue to implement cost-saving measures and reduce the City's dependence on using unassigned fund balance as a source of financing operations.

Over the past five years, District officials consistently overestimated expenditures by a total of more than $8 million, resulting in operating surpluses totaling $6.3 million. To reduce fund balance and stay within the year-end statutory limit for unexpended surplus funds, District officials transferred money to District reserves and consistently appropriated unexpended surplus funds to reduce the tax levy. However, because of the District's operating surpluses, almost $3 million of fund balance appropriated over the five-year period was not used. These practices gave the appearance that the District's fund balance was within the legal limit when in effect it exceeded the limit each year. We also found that the District routinely funded its retirement contribution reserve with operating surpluses at year end, instead of funding the reserve through the annual budget process, which would have been more transparent to taxpayers.

The Board and District officials overestimated expenditures by a total of $21.3 million and underestimated revenues by a total of $2.3 million during the last four completed fiscal years. Although District officials appropriated fund balance in each year to reduce the tax levy, most of these funds were not needed because of the poor budget estimates. Consequently the District generated a total operating surplus of approximately $9 million, which was used to increase the District's reserve funds. We found that the District has approximately $2 million in excess reserve fund moneys.

The District reported year-end unexpended surplus fund balance at levels that essentially complied with the 4 percent limit for fiscal years 2009-10 through 2012-13. This was accomplished by appropriating fund balance. The Board's appropriation of fund balance aggregated to more than $11 million over the past four 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 two of the four years and needed less than $270,000 of the appropriated fund balance. For that period, total actual revenues exceeded expenditures by more than $4.7 million. Had District officials used more realistic budget estimates they could have avoided the accumulation of excess fund balance.

The Town's procurement process was generally effective for obtaining goods and public works contracts subject to the policy's bidding thresholds. In most instances the Town purchased equipment and commodities through State or County contracts or by competitively bidding. However, we found one instance where Town officials did not follow these procedures and paid $2,200 more than necessary for road sand from a local vendor. Additionally, Town officials did not always ensure that written documentation was maintained for the quotes obtained for purchases that were not required to be competitively bid. Finally, officials did not develop and follow formal procedures for obtaining professional services and did not have written contracts in place with all professional service providers. For example, Town officials paid an engineering firm approximately $117,000 without the benefit and protection of a contractual agreement. As a result, the best value for goods and services may not have been obtained, resulting in unnecessary costs to Town taxpayers.

The Board has not developed policies or procedures which clarify how comp time will be appropriately administered. Officials use informal, undocumented procedures that are not consistently applied. For example, there is no established deadline when a request to earn comp time form should be submitted for approval. As a result, request forms are not always submitted timely and the supervisor approving the form may not be able to verify the time that was presumably worked. In addition, policies should provide clarification to contract provisions, such as, specifying the circumstances when comp time can be earned, the maximum number of hours that can be accumulated and any restrictions on the use of accumulated comp time. We found that some District employees have been accruing comp time during normal work hours. Therefore, some employees were compensated twice for the same hours which could potentially cost the District $82,000.

We found that the Clerk remitted tax collections to the Town and the County up to two months late and returned duplicate payments eight months after the payment was made. The Clerk did not routinely indicate the form or date of payment on tax stubs/receipts and made deposits on average nine days late. We also found that the Clerk did not properly receive, deposit timely, or remit and report Clerk cash receipts. Further, the Clerk did not deposit receipts for town hall rentals totaling $325 intact and refunded hall deposits in cash. Therefore, there is a risk that that all collections were not recorded and deposited. In addition, the Board has not performed an annual audit of the Clerk's records.

District officials need to improve internal controls over time and attendance procedures and leave accruals for non-instructional employees. We identified discrepancies in 27 of 33 non-instructional employee accrual records maintained by the District. Available records were not sufficient or adequate to verify the leave accrual balances of another five employees. Time and attendance records are not submitted by all employees and are not completed with consistency to capture start/end times and hours worked. Because of these deficiencies, District officials do not have assurance that non-instructional employees are being paid for time actually worked and earning leave accruals to which they are entitled. In addition, District officials have not developed a comprehensive acceptable use policy or procedures to ensure the security of the District's IT system. We found improper assignment of administrative privileges and excessive access rights in the District's financial system. Finally, although audit logs are available through the financial software, they are not generated and reviewed by District officials.

The Treasurer's office did not identify the balances in selected trust and agency funds to ensure the timely disbursement of moneys owed. The Treasurer could not determine the source or purpose of moneys held in several trust and agency funds totaling more than $75,000 as of October 31, 2013. Several factors resulted in these various trust and agency accounts accruing unidentified balances, including the loss of staff knowledgeable about the origins of past balances, destruction of physical records and deletion of data due to software upgrades. Much of the unidentified balances in the accounts existed before all current staff members had been hired or transferred into the Treasurer's office and other County departments. Accounting records dated prior to 2007 were destroyed in accordance with the County's records retention policy. Also, the County changed the computerized accounting system in 2006, which resulted in the loss of all previous electronic records.

District officials consistently overestimated budget appropriations for fiscal years 2008-09 through 2012-13 by more than $6.7 million, which resulted in combined operating surpluses totaling $1.3 million. Therefore, the majority of the $5.8 million in Board-appropriated fund balance was not used to fund District operations. As a result, the District's unexpended surplus funds exceeded the 4 percent statutory limit in each of these years. Additionally, the District's last five independent audit reports cited the District for having unexpended surplus funds in excess of the statutory limit. District officials also could not demonstrate a planned need for approximately $4.4 million held in reserve funds. Finally, District officials could not explain why over $250,000 of District money was held in an agency fund rather than the general fund, which could be used to benefit District taxpayers. By routinely following these practices, District officials withheld significant funds from productive use and compromised the transparency of District finances to taxpayers.