The Superintendent made inappropriate personal purchases totaling $68,501 without detection by the controls in place at the Town. He was able to accomplish this by attaching the invoices for these personal purchases to Department claim vouchers that often listed Department equipment as the recipient of the parts. However, these personal purchases included parts and oil for repairs to his personal farm equipment. This was further covered up by the Superintendent because he failed to maintain complete and up-to-date maintenance records for Department equipment and inventory records for consumables such as gasoline, oil and supplies. Additionally, the Town has no assurance that consumable inventory purchases totaling $25,044 were used for Town purposes. These acts occurred because the Board did not establish an adequate system of internal controls over Department purchases, including adopting a procurement policy or providing an adequate review of Department claims prior to approving them for payment.

County officials failed to properly manage the Golf Course Contract (Contract). County officials indicated that they were unfamiliar with certain Contract provisions and chose not to enforce numerous other provisions, without properly amending the Contract. For example, County officials did not require daily deposits of golf-fee revenues into County bank accounts and did not require and review timely interim and annual reports from the Operator, as specified in the Contract. In addition, the County did not ensure that the Operator made all contractually-required capital and maintenance expenditures annually or met all requirements related to staffing levels and the qualifications and training of the Operator's employees. As a result, the Operator did not perform or pay for a number of required contractual duties, as well as expenditures that the Operator implicitly expressed to County officials that it would make, and retained funds totaling over $246,000 that should have been spent on the golf courses. Further, the County failed to provide adequate oversight of the Operator's performance and operations to ensure that the County was receiving all revenues to which it was entitled based on the Operator's sales revenues. Given that cash receipts are highly susceptible to loss or theft, provisions such as daily deposits were especially important to safeguard the County's interests.

It appears the former Treasurer was able to misappropriate approximately $22,000 from January 2009 through December 2013 without detection by Department officials. In addition, during this period, the former Treasurer was able to process and pay 188 claims totaling approximately $33,000 without maintaining adequate supporting documentation. While Department officials believe the majority of these payments were for Department expenditures, because proper supporting documentation was not maintained, they could not ensure the validity of these payments. These discrepancies occurred because the Department's governing body did not adequately safeguard Department funds. Specifically, it did not develop and implement adequate internal controls over the Department's cash receipts and disbursements functions and did not annually audit the Treasurer's records from 2009 through 2013. The former Treasurer did not maintain reports of Department financial activities, report to the governing body, or prepare monthly bank reconciliations.

The Board has not adopted a disaster recovery plan or an acceptable use policy. While computer policies do not guarantee the safety of an entity's computer system or the electronic information entrusted to it by taxpayers, customers, employees and others, the lack of policies significantly increases the risk that data, hardware and software systems may be lost or damaged by inappropriate access and use.

Town officials did not adopt realistic budgets based on historical or known trends for the Town's three sewer districts. In addition, the Board did not effectively monitor the budgets throughout the year and did not require the Town Comptroller to present accurate and reliable financial information on a regular basis. As a result, the sewer fund's financial condition has deteriorated in recent years. As of December 31, 2012, the sewer fund reported an accumulated deficit of $160,150 and its accumulated deficit for 2013 was approximately $249,000. As a result, the sewer fund has had to rely on the general fund to subsidize its operations, which causes a taxpayer inequity. As of December 31, 2013, the sewer fund owed the general fund $406,579.

The Board and District administrative staff initiated some significant steps to reduce expenditures and maintain financial stability beginning in the 2010-11 fiscal year. However, the Board-adopted budgets for the 2010-11, 2011-12 and 2012-13 fiscal years were not structurally balanced to include recurring revenues to finance recurring expenditures. Additionally, officials used more than $1 million of fund balance to finance District operations over this three-year period. The District also lost other revenue sources from 2010-11 through 2012-13. Even though the District currently has fund balance, if these trends continue it could result in diminished fund balance levels in the future.

We found that the District was not transparent in its use of Project funds and potentially could have spent less on the Project. The District has set aside over $6.6 million for general construction and site work contracts which was not part of the Project's original scope. Additionally, the Board President did not approve all change orders and allowance disbursement forms, as required by the New York State Education Department (NYSED). In addition, none of the allowance disbursement forms were approved by NYSED. Finally, we found a Project purchase for which competitive bids were not obtained.

The Board did not adopt reasonable budgets. Budgeted appropriations were significantly higher than needed. As a result, the District's reported fund balance increased from approximately $8 million for the fiscal year ended 2009 to more than $14 million as of the fiscal year ended 2013. This significant increase in fund balance was caused by the District spending an aggregate of about $13.3 million less than budgeted. According to District officials, much of this operational surplus was planned to address the onset of large potential liabilities related to contract negotiations. Beginning in the 2008-09 fiscal year, the District was subject to very large claims to reduce the assessed value of properties within the District. In addition, one of the District's collective bargaining agreements expired twice, both times for more than a year. This left the District open to significant liabilities if the assessed values were reduced or if retroactive salaries needed to be paid upon the settlement of the collective bargaining agreements. While it was prudent for District officials to plan for potential liabilities, they did not develop a plan for the use of the surplus funds that may become available if the liabilities were not realized.

Department officials did not always ensure compliance with the Department's by-laws. In addition, the by-laws assign all of the financial duties to the Secretary-Treasurer. The Department does not provide any oversight of the Secretary-Treasurer's duties, and compensating controls have not been established. The Secretary-Treasurer prepares reconciliations on an infrequent basis and the current Secretary-Treasurer does not maintain adequate accounting records for review, such as financial statements or accounting ledgers. The Department has no process in place for an independent review of bank reconciliations to help mitigate errors or irregularities. The Secretary-Treasurer did not have the books audited for fiscal year 2012. The President indicated that the Department plans to have an audit completed for 2013. However, as of June 3, 2014, the Department has not taken the steps to retain an auditor. While the Department adopted by-laws to dictate the manner in which it should conduct operations, Department officials do not provide adequate oversight to ensure the adherence to the procedures prescribed in the by-laws.

The Board planned operating deficits in its budgets for the 2009-10 through 2012-13 fiscal years and appropriated fund balance to help finance the ensuing year's operations. However, it underestimated revenues and overestimated expenditures when developing budgets, which caused the District to have operating surpluses totaling approximately $1.2 million for these four years rather than deficits. As a result, the District did not use the appropriated fund balance as intended and instead accumulated unexpended surplus funds at levels that were about 10 to 12 percent of the ensuing years' budgets, up to nearly three times greater than the amount allowed by law. We also found that the Board retained excessive amounts in the District's unemployment insurance reserve. These budgeting practices have resulted in taxpayers paying more than necessary to sustain District operations.

The Treasurer did not adequately fulfill his role as the Village's chief financial officer. The Treasurer did not provide Board members with financial information such as budget status reports or bank reconciliations; as a result, the Board is not adequately informed of the Village's fiscal affairs. The Treasurer did not propose budget modifications prior to overexpending budget lines. Additionally, the Treasurer signed only three of 454 checks that we reviewed for a six-month period. Although there is no Board authorization for a petty cash fund, the Treasurer issued six petty cash checks during our audit period totaling $1,814. None of the checks and supporting documentation were presented to the Board for audit. Further, the Treasurer failed to obtain adequate documentation to support the petty cash reimbursements. We also found that Board members and Village employees are using Village credit and purchase cards without Board authorization. In addition, the Treasurer has not required adherence to the credit card policy and credit and purchase-card bills have been routinely paid without adequate documentation to support the nature and validity of each purchase. We found that $48,585 of the $50,531 in purchases made with the credit and purchase cards had inadequate documentation. This increases the risk that the Village may pay for purchases that are not for valid Village expenses.

The Board did not perform a proper audit of vouchers prior to payment or ensure that adequate supporting documentation was attached. Consequently, 18 vouchers totaling $23,605 were not approved by the Board prior to payment, six vouchers totaling $24,899 had no invoice attached, and 62 vouchers totaling $151,796 had no receiving or other supporting documentation attached. In addition, credit card purchases totaling $2,146 were not supported by documentation and credit card purchases, totaling $1,051, were not approved by the Board. Finally, 17 vouchers totaling $51,730 did not include verbal or written price quotes. As a result of these deficiencies, the Board did not have adequate assurance that goods and services were purchased at the lowest cost, were actually received, and were for proper District purposes.

The Board did not properly segregate the Treasurer's duties or provide sufficient oversight of her work. The Treasurer did not maintain accurate and up-to-date financial information and did not prepare monthly bank reconciliations. As a result, she did could not provide the Board with a budget document in the proper format with accurate budget information or accurate and timely monthly financial information which limited the Board's ability to monitor the budget. In addition, the Treasurer did not file the Village's annual financial reports with the State Comptroller's Office in a timely manner. Finally, the Board did not conduct an annual audit of the Treasurer's records. The Village's financial condition has deteriorated because of the Board's decisions when developing and adopting annual operating budgets and its failure to appropriately monitor financial operations. These budgeting practices and the negative restatement of fund balance of $21,532 contributed to the decline in general fund balance from an unexpended surplus of $318,821 at May 31, 2009 to a reported fund deficit of $147,734 at May 31, 2013. In addition, the Village experienced a cash flow shortage in the 2012-13 fiscal year. The Board is also not properly overseeing the Village's financial operations. While the Board has adopted certain policies, it has not ensured that they were adhered to or updated to reflect their original intent. For example, the Board did not update its procurement policy to include the Village's method of soliciting competition for procuring services from professional service providers and did not adequately enforce its own policies relating to documentation and authorization necessary to justify travel expenses. Additionally, the Board has not adopted a policy that provides guidance for the proper use of credit cards. Finally, the Board also does not conduct a deliberate and thorough audit of all claims.

Village officials have not adequately monitored the Village's financial operations to ensure fiscal stability. The Treasurer did not maintain accurate and timely accounting records, which caused the general ledger to be out of balance by nearly $7 million and the annual financial reports for May 31, 2009 through 2012 to be filed nine or more months late. Village officials consistently overestimated expenditures in the water and sewer budgets by an average of $80,860 and $108,555, respectively. The Board has not developed a multiyear financial plan or capital plan. As a result, there is an increased risk that more user fees or taxes may be assessed than necessary.

The District had a fund balance deficit of $1.4 million at the end of the 2012-13 fiscal year due to operating deficits over multiple years. Over the past four fiscal years (2009-10 to 2012-13) and for the 2013-14 fiscal year, the Board has relied on fund balance to finance the budget, appropriating approximately $5 million each year. The Board and District officials overestimated expenditures and underestimated revenues, which allowed them to rollover unspent appropriated funds to fund the ensuing year's budget. However, these budgetary practices have reduced unexpended surplus funds from $2.5 million in the 2009-10 fiscal year to the point that the Board appropriated $1.4 million more than was available for the 2013-14 fiscal year. Because the Board has relied on fund balance over the past five years, the District had a recurring structural budget deficit. Although the Board reduced appropriations by over $2 million in the 2014-15 fiscal year budget, there is a risk that a significant structural gap remains that will need to be addressed. Finally, the Board has not developed a multiyear operational plan to provide a framework for future budgets and facilitate management of financial operations.

The Board routinely adopted budgets that did not provide sufficient revenues to fund expenditures and relied on fund balance to finance operations. As a result, fund balance declined in the general town-wide, highway town-wide, refuse and garbage, and water funds. The town-wide general fund balance decreased by approximately $399,000 (55 percent) during our audit period. In addition, the Board adopted budgets that appropriated funds in excess of fund balance, which caused the refuse and garbage fund to have a $17,090 deficit in 2012 and a $14,090 deficit in 2013 and the highway town-wide fund to have a $13,654 deficit in 2013. The Board has not developed a multiyear financial and capital plan to address the Town's long-term priorities.

District officials have consistently overestimated expenditures by a total of $19.7 million and increased the tax levy by 11.5 percent over the five-year period ending June 30, 2013. These budgeting practices generated approximately $14 million in operating surpluses, which caused unexpended surplus funds to exceed statutory limits in each of those years. For example, as of June 30, 2013, unexpended surplus funds exceeded statutory limits by approximately $10.8 million. Although District officials appropriated at least $2 million in each year to reduce the tax levy, the Board overestimated expenditures between $2.6 and $4.5 million annually, thus negating any benefit the appropriation of fund balance would have in reducing fund balance or the property tax levy. District officials also used some of the operating surpluses to fund five reserves that, as of June 30, 2013, totaled $4.4 million. Two of these reserves are overfunded.

The Board and District officials did not properly manage the financial condition of the general and school lunch funds. The general fund had deficits in the last three years while the school lunch fund had deficits in the last two years. We also project both the general and school lunch funds to end the 2013-14 fiscal year with deficits of $1.8 million and $89,000, respectively. The District consistently appropriated fund balance and used a portion of the appropriated amount in the last three fiscal years. The general fund could become financially stressed due to the recurring operating deficits, potential litigation, potential buy back of retirement services, improper payments being made from the employee benefit accrued liability reserve, subsidies to the school lunch fund and loans to the school lunch fund that are unlikely to be paid back to general fund. District officials also did not provide sufficient oversight of cafeteria operations and therefore, school lunch receipts were not properly recorded, collected and deposited and inventory was not properly accounted for. The Food Service Director was inappropriately adding 10 free meals per day to the record of meals to increase participation figures. We identified unpaid balances of $36,600 for meals provided. Transactions were voided without being reviewed or approved. Bank deposit amounts did not always agree with the District's records and no one followed up on the discrepancies. In addition, the Food Service Director did not maintain a perpetual inventory record. Although a monthly inventory was performed, it was not accurate. Finally, over the past three fiscal years, although the price of food did not increase, the cost to provide meals increased significantly, which could be an indication that inventory supplies were wasted or misused.

The District did not always maintain reasonable fund balances. The District accumulated a significant surplus of fund balance from 2008-09 to 2011-12. Although District officials included a budgetary provision to use some of the accumulated surplus to finance operations, the surplus was not used because the District spent less than the revenues received in those years. Most of this accumulation was the result of significant overestimations of expenditures from several years ago. For example, in 2008-09 the District overestimated expenditures by approximately 9 percent. Over the last three fiscal years, the Board adopted more reasonable budgets with actual revenues and expenditures coming within estimates by an average of 1 percent and 6 percent, respectively. We also determined that District officials have accumulated excessive balances in the liability and compensated absences reserve funds that can be used to offset budgetary shortfalls in the near term.

The Board and Supervisor are not properly managing the Town's fund balances. From fiscal years 2011 through 2013, fund balance available for use in each of the four major operating funds has either increased significantly or remained at a high percentage of the ensuing year's budget. In addition, the Board has not adopted long-term financial and capital/infrastructure plans to set forth the Town's objectives and goals. The Board also has not established any policies or procedures to govern the level of fund balance to maintain for each fund.