The Board and District officials did not adopt and establish appropriate policies and procedures for the activity fund and did not provide adequate oversight. Consequently, we found 30 cash receipts totaling $27,224 had no supporting documentation and 11 disbursements totaling $6,417 lacked adequate documentation to allow District officials to determine if they were made for appropriate student activities. The District's failure to establish adequate internal controls over activity funds increases the chance that District moneys could be lost or misused.

The District currently holds seven individual life insurance policies with face values totaling $400,000 for its four administrators. As of December 31, 2013, these policies had a cash surrender value of $23,559. Because GML only authorizes group term life insurance for employees of a water district, the District is not authorized to offer whole life insurance policies for its employees and administrators. Also, because these policies have a cash surrender feature, this may constitute an unauthorized investment of District funds.

The District's procedures over cash disbursements have not been appropriately designed to safeguard District assets. A majority of the Board does not audit claims prior to the Treasurer releasing payment. Also, the Board has authorized the District Secretary (Secretary) to sign checks using the Treasurer's signature stamp, and the Secretary is using the stamp without being supervised by the Treasurer. As a result of these weaknesses, District officials do not have adequate assurance that all cash disbursements are for valid District expenditures.

The Board did not establish adequate internal controls to ensure all moneys were properly recorded and deposited. Specifically, cash collection duties in the Department were not properly segregated. One employee had almost complete control of the cash receipt function, without adequate oversight. In addition, receipts were not issued for all collections. Collections recorded in the records did not agree with the amounts deposited in the bank and deposit slips did not include sufficient detail to verify that all moneys collected were deposited. As a result, there is an increased risk of the misappropriation of the moneys collected by the Department.

Internal controls over claims processing were adequate to ensure claims were for appropriate purposes, adequately supported and properly audited and approved. The Clerk-Treasurer assembled claim packages, prepared abstracts and presented claims and abstracts to the Board for audit and approval. We reviewed 40 claims totaling $22,980 and found they were for appropriate Village purposes, were supported by itemized invoices and pre-numbered vouchers, and were included on the abstracts presented to the Board. Additionally, the Board members audited each claim and documented their audit and approval by signing the claims. Furthermore, the Board's audit and approval of claims for payment was documented in the Board minutes.

The Board and District officials did not always develop reasonable budgets or use unrestricted funds to benefit District taxpayers. Over the last three years, the District appropriated $941,081 more in unrestricted funds than needed because the District also generated approximately $3.7 million in operating surpluses prior to making a $4.4 million unbudgeted transfer to the capital fund in 2012-13. This negated any benefit the appropriation of fund balance would have in reducing fund balance or the property tax levy. The operating surpluses were mainly caused by District officials consistently overestimating expenditures by a total of $3.8 million from the 2010-11 to 2012-13 fiscal years.

While the procedures in place for the processing of occupancy taxes paid to the County were sufficient, the Legislature's enforcement of collections could be improved with additional oversight efforts. Further, the establishment of clear goals will also enhance the County's oversight of the use of money paid to promote tourism in the County. The County has difficulty registering smaller seasonal establishments that should pay occupancy taxes and verifying that those establishments and traditional establishments are paying the correct amounts based on their receipts and the exemptions that apply. Exemptions average $360,000 per year. Moreover, the County paid the Corporation over $629,000 in 2012 to promote tourism. Although the Corporation spends money on activities including producing an annual tourism guide and maintaining a website to promote the County and assist tourists, the contract with the Corporation lacks goals, guidelines and benchmarks to measure the results of the different activities.

The Board did not adopt a policy or develop procedures to address the level of unexpended surplus funds. Additionally, the Board has not developed accurate budget estimates or formal, comprehensive multiyear financial and capital plans. Because of the poor budget estimates, unexpended surplus funds that were appropriated as funding sources were not used. As a result, the Town's general and highway unexpended surplus funds have increased to excessive levels. In addition, we found that the Town could have saved approximately $3,900 (or 5 percent) of vehicle fuel cost. Of the total savings, approximately $1,100 (or 29 percent) was for diesel purchases and approximately $2,800 (or 71 percent) was for gasoline purchases, due to the Superintendent using conventional fuel in the Town pickup truck. The Town paid 63 cents more per gallon for conventional fuel than the State contract price for ethanol blended gasoline. The Superintendent stated that he prefers conventional fuel to enhance fuel mileage which he estimates at approximately 25 percent greater than ethanol blended gasoline. We calculated the 4 percent reduction in miles per gallon of ethanol blended fuel to cost approximately $600, still resulting in a savings of $2,200.

The Board adopted unreasonable budgets which included overestimated appropriations. The budgets for fiscal years 2011-12 and 2012-13 called for using a total of about $3.1 million in reserves and surplus funds to finance operations; however, only $539,496 (17 percent) of these funds were used. In addition, the Board moved approximately $3 million out of the general fund's unexpended surplus and into reserves to prevent the District from exceeding the 4 percent statutory limit. District officials also financed expenditures with operating revenues that could have been funded by reserves. We recalculated the District's unexpended surplus fund balance by adding back the amounts improperly allocated to reserves and found it was between 18 percent and 19 percent of the ensuing year's budgeted appropriations for the 2010-11, 2011-12 and 2012-13 fiscal years. This is an amount that is nearly five times greater than the maximum allowed by statute. Furthermore, unexpended surplus funds were as much as 44 percent of the ensuing year's tax levy. By not using unexpended surplus funds and reserves to finance operations, District officials missed opportunities to minimize property taxes. Finally, the District's long-term plan was not adequate because it did not include appropriate provisions for the use of unexpended surplus funds and reserves, and it included revenue and appropriation estimates that were unrealistic.

Our prior audit, dated April 2008, identified certain internal control weaknesses regarding cafeteria cash receipts. However, District officials have not addressed all of the weaknesses identified. District officials still have not adopted written policies and procedures governing cafeteria cash receipts. As a result, the District still uses only one cash drawer and there is no documentation indicating who is using the point of sale (POS) system and when, or the documentation indicates the same employee, even though two employees use the system on a regular basis. Although individual passwords are required to access the system, they are not routinely changed. Further, District officials do not have documentation to show the cashiers' various access levels to the POS system. Although the Treasurer now issues a receipt to the cashier when counting cafeteria cash and compares it to the deposit amount recorded on the daily cafeteria sales report, she does not question the difference between the deposit amount and sales amount. Further, cashiers can make adjustments to the sales reports that are not approved by the cafeteria manager before they bring receipts to the Treasurer for deposit. In addition, the Treasurer does not routinely receive and review certain reports such as the cash receipt adjustments that are auto-generated by the POS system and emailed to the cafeteria manager, student account report and a composition of cash receipts report, to facilitate the reconciliation and verification of the accuracy of cafeteria cash receipts and bank deposits.

We found that the Department has established an adequate system of internal control over the collection and disbursement of restitution. However, we found that County officials were not pursuing all possible revenue sources within the Department. If the County imposed certain allowable fees for probation supervision and drug screening, the probation department could generate an additional $25,000 annually.

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.

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.

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.

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.