The Board did not ensure that the former Highway Superintendent followed the Town's procurement policy or competitive bidding statutes. We reviewed seven procurements totaling $190,269 that equaled or exceeded the Town's bidding requirements and identified $100,854 of purchases that were not publicly advertised for bids or purchased through OGS or county contracts. In addition, purchases totaling $45,283 lacked adequate support and/or authorization. In addition, we found no documentation to support that the former Highway Superintendent obtained written or verbal quotes for 12 purchases totaling $41,342. As a result, the Board has no assurance that all Highway Department purchases were adequately supported and authorized.

Department controls are not adequate to ensure that financial activity is properly recorded and reported and that Department moneys are safeguarded. At the monthly Committee meetings, the Treasurer provides the Committee with a verbal report that includes the Department's beginning cash balances, total cash received and expended, and ending cash balances; however, the Treasurer does not provide the Committee with monthly or annual written financial reports. Department officials provided no evidence that the Auditing Committee routinely reviewed the Treasurer's monthly bank statements, canceled checks and bank reconciliations to verify that bank account balances agreed with the records and transactions were appropriate. The minutes for five of 19 months stated that bills were approved by the membership but there was no written evidence that the Auditing Committee had reviewed any bills during the period. Moreover, the Department made 282 debit card purchases totaling $29,724 during our audit period. Debit cards violate the Department's bylaws because purchases are made before approval is given. Because the Department does not retain a record of which of its members were part of the E-94 or Standby Crews, Department officials have no way of determining if the meals provided were only for Department members and for a Department purpose. Finally, Because there are no records showing how foreign fire insurance money was spent by the members, Department officials have no way to determine how much of the $9,400 paid to members was a legitimate use of the money and how much may have been used for personal expenses.

Although the Board believed it was effectively managing the District's financial condition, budgeting decisions to reduce the unrestricted unappropriated fund balance from fiscal years 2010-11 through 2012-13 have made the District susceptible to fiscal stress. The Board consistently balanced its budgets by appropriating unrestricted fund balance, a nonrecurring source of funding. As a result, by the end of the 2011-12 fiscal year, the District had an unrestricted unappropriated fund balance of $6,309, or .01 percent of the ensuing year's budget. This left the District with little cash on hand at the end of the fiscal year and very little financial cushion for managing unforeseen events. In the 2012-13 fiscal year, the Board took necessary steps to improve the District's financial condition.

Some County service providers are not providing services in accordance with agreements; therefore, the Department may be paying for services not received. Although service providers submit reports that indicate how they met their performance measures, Department officials do not verify the information. As a result, the County may have overpaid providers by $562,864. Further, although the majority of payments reviewed were correct, the Department needs to improve its review of contractual invoices and monitoring of services provided. We reviewed 227 invoices with payments totaling $8.1 million and found discrepancies with 58 invoices (26 percent) with payments totaling $2.2 million (28 percent). Because the Department relies on supporting documentation for reimbursement for various funding, there is an increased risk that the Department may not be collecting all reimbursements to which it is entitled.

District officials have not implemented the District's reserve fund policy for the funding and use of the District's reserves. Over the past five fiscal years (2008-09 through 2012-13), District officials added approximately $9 million to reserves and increased the real property tax levy by approximately 9 percent. We analyzed the balances totaling $9,988,638 in the District's eight reserves as of June 30, 2013 for reasonableness and adherence to statutory requirements. One reserve, the Unemployment Insurance Reserve, was not supported by a plan or other documentation validating the amount retained. The $956,640 balance in this reserve as of June 30, 2013 was 14 times the amount of the District's $68,000 average annual unemployment costs. Further, the District has paid for its unemployment costs from the general fund. Therefore, the amount in this reserve is excessive.

Internal controls over the Court's accounting and reporting of financial activity are not adequate. The Justice did not consistently perform bank reconciliations, maintain timely and accurate cash records, and submit monthly reports to the Justice Court Fund on time. In addition, the Justice used computerized receipts that could be altered or deleted and did not deposit all collections in a timely manner, as required by law. Also, the current Justice has not properly reviewed the former Justice's pending case files. Because of these weaknesses, there is an increased risk that errors and irregularities could occur without being detected and corrected, which puts public resources at risk.

Village officials do not have written procedures for reconciling the water produced by the Village's water system, as measured by master meter readings, with the water billed to customers. Although the Operator prepared the Water Withdrawal Report to be submitted to the New York State Department of Environmental Conservation (DEC), he did not prepare formal reconciliations comparing the amount of water produced to the total amount metered and estimated amounts for authorized unbilled uses. This type of reconciliation would have allowed Village officials to determine the amount of water loss, compare the rate of loss to industry standards and take steps to correct identified problems. For the audit period, the Village could not account for 34 percent of the water produced. The Village produced 263 million gallons of water but billed its customers for 173 million gallons. After deducting the EPA's standard 10 percent allowance, unaccounted-for water was 24 percent, or 64 million gallons, of the amount produced. Based on the estimated cost of approximately $0.59 to produce 1,000 gallons of water, the Village would save about $38,000 if water production was reduced by 64 million gallons.

The Board did not properly authorize salaries and benefits for all Town officers and employees as required. We also found questionable compensation payments to members of the Supervisor's family. Further, the Board did not include the compensation paid to the Supervisor for services as cemetery official in the notice of public hearing each year. Additionally, Town officials could not provide adequate documentation of authorization for any leave benefits provided to Town employees, or for health insurance and a health insurance buyout for full-time employees. The Town paid $104,000 in 2012 and $113,000 in 2013 to provide the Highway Superintendent, four Highway Department workers and the Supervisor with fully paid health insurance benefits that were not properly authorized. Also, there is no evidence that the Board authorized vacation, sick and holiday leave benefits for Highway Department employees. In addition, the Board also has not established policies or procedures for the billing, collection and enforcement of ambulance fees, and has not segregated the duties of the ambulance bookkeeper or provided additional oversight as a compensating control. As a result, the Board was not aware that for the first half of our audit period, the ambulance bookkeeper paid bills out of the ambulance bank account without Board audit and approval of the related claims totaling $4,507, and that the ambulance bookkeeper changed the fee schedule in November 2012. Finally, the Board did not audit the ambulance bookkeeper's records during our audit period and did not require her to complete monthly bank reconciliations.

We examined 483 claims totaling $770,545 to determine if they were listed on the abstracts and contained appropriate supporting documentation, were for proper Town purposes and if the Board properly approved them for payment. All vouchers tested had proper Board approval and adequate documentation to support that the disbursements were proper and reasonable. Although we identified minor deficiencies which were discussed with management, we determined that internal controls over the claims audit process are designed to ensure claims are adequately supported and appropriate prior to payment.

Town officials provided little oversight of the Receiver's water function duties. For example, the Receiver failed to perform bank reconciliations and submit monthly reports to the Board. Additionally the Receiver deposited more than $740,000 of water fees from two to six weeks late and remitted more than $208,000 to the Supervisor from three to seven weeks after it was collected. Finally, the Comptroller did not record biannual water billings in the water receivable control account and failed to annually audit the Receiver's financial records and reports as required by law. As a result of these weaknesses, the Board did not have reasonable assurance that Town resources were adequately safeguarded, properly accounted for and used only for Town purposes.

The Board is not adopting realistic budgets or ensuring the prudent use of District funds. The Board is making significant financial decisions related to equipment needs without sufficient information. Over the last five years the Board consistently adopted budgets that included real property tax increases to finance the Department's requests for new equipment, and/or upgrades and repairs to existing equipment, much of which the District did not actually purchase. Repeatedly raising tax dollars to finance purchases that never occur results in unnecessarily high tax levies to fund current operations. As a result, the District's real property tax levy increased 21 percent between the fiscal years 2009 and 2013. During this same period of time, the District's activities did not increase, and actually remained flat in terms of emergency call responses.

The Board is not properly overseeing the Town's financial operations. As a result, the Town's financial condition has declined over the last several years. Over the last four years, the Board has routinely relied on appropriated fund balance to finance town-wide (TW) and town-outside-village (TOV) operations. The Board continually adopted budgets that did not provide sufficient revenues to fund expenditures. As a result of these planned operating deficits, the unassigned fund balance remaining at year end in the TW funds is not sufficient to cover appropriations budgeted for 2014 and the TOV funds have just $7,182 as a financial cushion, leaving the Town vulnerable to unforeseen financial circumstances. In addition, the Board has not adopted or developed a written multiyear financial plan to identify, prioritize and strategically address future financial issues. Finally, the absence of Board-adopted cash receipt and disbursement policies and procedures contributed to a poor control environment in the Clerk's office.

Revenue estimates for sales tax, City income tax surcharge, metered water and sewer rents may not be achievable. The budget does not include an appropriation for textbooks and the appropriations for employee pension costs, tax certiorari settlements and firefighter overtime may not be adequate. The City continues to rely on fund balance for recurring expenditures. The City's proposed budget does not include an appropriation for contingencies.

From fiscal year 2008-09 through 2011-12, the Board adopted unrealistic budgets that caused large deficits in the moneys available to be appropriated for the ensuing year's budget or for contingency or emergency needs (unexpended surplus funds). The Village has experienced deficits in its unexpended funds in the general, sewer, and water funds from 2008-09 through 2011-12. While the general fund had its most severe deficit in its unexpended funds in 2008-09 totaling $674,575, the sewer fund experienced its most severe deficit in its unexpended funds in 2011-12 totaling $847,486. The water fund has had significant deficits in its unexpended funds in 2008-09 totaling $625,625 and $608,039 in 2011-12. These deficits were caused by unrealistic budget estimates and the Board's insufficient monitoring of financial operations throughout the year.

We reviewed the District's reserve fund balances from fiscal years 2010 through 2012. The District accumulated over $1.2 million in five separate reserve funds as of December 31, 2012. The capital reserve fund accounted for almost 70 percent of the total reserve funds held by the District. According to the Board resolution, the capital reserve was established in 1982 for the purpose of purchasing fire apparatus and equipment with an estimated $100,000 maximum funding level. The capital reserve account had a balance of $889,327 at December 31, 2012. The former Board Chairman told us that the reserve's balance is much greater than the $100,000 maximum established in the resolution because the amount in the resolution was just an estimate. In addition to the budgeted $325,000 for fiscal years 2010 to 2012, the District funded the reserve with $225,000 that was not budgeted. These are significant amounts when compared to the size of the District's budgets. Had the excess funds not been placed in the reserve, the funds could have been appropriated for the next years' budget to lower the tax levy.

We found that the Board could improve its oversight of the District's financial activities. Although the Board has adopted a code of ethics and purchasing and investments policies as required, the policies are not regularly reviewed and are outdated. Further, the Board has not adopted other policies or procedures for financial operations such as cash receipts and disbursements, claims processing and information technology. As a result, the Board did not adequately segregate the Treasurer's duties or implement sufficient compensating controls. The Treasurer performs all recordkeeping functions, makes all deposits, and is the sole signatory on District bank accounts, often disbursing cash without prior approval.

Due to deficiencies in the Town's handling of cash receipts, combined with inaccurate records, insufficient interim reports and a lack of proper fiscal monitoring, the Board was not aware that $23,532 in collections was missing. We found that a total of $18,586 in park and recreation fees, $4,146 in code enforcement fees and $800 in Town Hall rental fees was not deposited and cannot be accounted for. Additionally, the bookkeeper allowed cash receipts to remain on hand for weeks or months before deposit, including five undeposited checks totaling nearly $338,000. The bookkeeper also altered copies of 19 park-fee receipts to show a total amount of nearly $10,709 lower than what the park manager actually remitted. Furthermore, the Town does not have complete, accurate and up-to-date accounting records. The Supervisor did not perform proper monthly bank reconciliations during our entire audit period; we identified a discrepancy of $14,364 between the bank statement and accounting records for one of the Town's 11 bank accounts. The Supervisor also filed the required annual update document with the State Comptroller's Office months after the due date for both the 2011 and 2012 fiscal years and did not provide the Board with sufficient interim financial reporting.

The proposed budget includes revenue of $9,184,475 for refuse and garbage charges, a 17 percent increase over the 2013-14 budget. City officials plan to raise the additional revenue with a fee increase that has not yet been approved by the City Council. Overtime salaries are budgeted at $2.2 million, despite such costs averaging over $2.9 million for the last five completed fiscal years. In addition, an appropriation of $300,000 for contingencies in included in the proposed budget; however, the City's charter does not authorize such an appropriation. The proposed budget for the water and sewer funds includes increased revenues to be raised from an increase in water rates that has not yet been approved by the City Council. The City's proposed budget complies with the property tax levy limit set by statute.

We found that GCIDA was effective in its efforts to promote, develop, and assist in economic development projects in Genesee County. However, we identified some opportunities for GDIDA to improve its controls and accountability. While the GCIDA Board has adopted a Uniform Tax Exemption Policy (UTEP), it has not formalized some of the critical procedures and policies that are used as criteria in the project evaluation processes. GCIDA officials did not consistently apply the guidelines and/or criteria when evaluating application, such as input factors for the computation of cost benefit analysis ratios. Finally, GCIDA does not verify the numbers given by businesses/firms when applying for financial assistance or annual reported data that is used to evaluate project performance. Without assurance that reported job numbers represent actual jobs created and/or retained, the Board cannot be sure that the community is receiving the expected benefits.

The Board did not adequately safeguard the Department's money. The Board did not develop and implement internal controls over its cash disbursement and receipt functions, ensure its bylaws were followed or perform annual audits of the Treasurer's financial records. Additionally, the Board also did not ensure that the District's adopted code of ethics also applied to Department members. As a result, the former Treasurer misappropriated approximately $17,500 of Department funds from February 2011 through August 2013. Additionally, during this period, the former Treasurer made questionable disbursements totaling more than $560. Furthermore, the former Treasurer did not maintain records of the Department's financial activities or prepare and present accurate and timely monthly reports or any annual reports to the Board. Because of the misappropriation, Department cash, which totaled approximately $9,300 as of January 1, 2010, was reduced to $135 when we began our audit.