The Board does not audit and approve claims before they are paid from the administrative checking account (ACA). Furthermore, the Board authorized the Library Director and an administrative assistant to manage this account, sign checks and pay vendors before submitting claims to the Board for audit and approval. The Treasurer does not have access to or custody of the funds maintained in the ACA. Without a proper audit and approval of Library claims by the Board prior to payment, the Board cannot be assured that all payments are for legitimate Library purposes or that taxpayer dollars are being disbursed in the most prudent and economical manner. In addition, the Board appointed an independent contractor as the Treasurer, who did not take an oath of office and is being paid through a claim voucher rather than through the payroll system. Because the Treasurer is responsible for the care and custody of Library funds, the Board cannot delegate these functions to an independent contractor. Finally, the Board did not require the solicitation of competition at reasonable intervals when procuring professional services.

The Board needs to improve its policies and procedures over payroll to ensure that Town officials maintain adequate time records, accurately calculate gross pay and verify and monitor leave use. The Supervisor's secretary performed virtually all payroll functions without sufficient compensating controls in place. While the Supervisor reviewed and certified final payrolls, his reviews were inadequate. As a result, employees received compensation at pay rates that were not Board-approved, six employees did not receive the correct gross pay in 2012 and eight employees did not receive the correct gross pay in 2013. These employees received combined overpayments totaling $3,890 and combined underpayments totaling $154. Finally, employees' leave accrual records were not accurately maintained. As a result, we found errors in the leave accrual records for all Town employees totaling 442 hours, valued at $8,198.

The Board does not have written policies, procedures or Board resolutions to govern electronic transfers. As a result, the Treasurer and a payroll clerk processed electronic transfers without adequate segregation of duties or documentation of transactions. None of the 98 electronic transfers in our sample, totaling $42.9 million, had evidence that at least two people were involved in transaction processing, and the payroll clerk was allowed to process 10 transfers totaling $3.9 million without the Treasurer's or any other official's approval. Further, nearly half of the transactions in our sample did not have a written confirmation from the bank as required by law. The District also did not retain any supporting documentation for 44 transfers totaling $12.0 million.

During the period June 1, 2012 through November 30, 2013, the Village paid 3,144 claims totaling $4,407,665. We reviewed a sample of 25 claims totaling $59,446, and related abstracts and Board minutes to determine if the claims had been properly audited and approved by the Board for payment. None of the abstracts that we reviewed included the Clerk's signature or a statement indicating that the Board had audited the claims. In addition, there is nothing to show which abstracts were approved by the Board because all Board minutes reviewed included the vague statement “Approve payment of attached bills and allow Treasurer to make necessary transfers.” Board minutes do not include sufficient information such as abstract numbers, abstract dates or the numbers and dollar amounts of claims to document which claims are authorized for payment. Furthermore, five of the claims that we reviewed were not listed on any abstract. Our review of the 25 claims totaling $59,446 also found that each claim was deficient for one or more reasons. Finally, seven of the claims reviewed were paid without a written contract or agreement between the service provider and the Village.

We reviewed the District's accounting records for the 2012 and 2013 fiscal years to ensure completeness and accuracy. We found that the Treasurer did not properly record and report the District's financial activity. The Treasurer recorded all transfers between bank accounts as revenues and expenditures in the accounting system. In addition, the Treasurer incorrectly recorded the real property taxes for 2012 and 2013 as an opening balance in the check register instead of as a revenue. In prior years, the District hired a consultant to assist the Treasurer with completing and submitting the AUD to OSC. However, the consultant was not available to assist the Treasurer with filing the 2012 AUD. As a result, the AUD was not filed until September 30, 2013, or 152 days late.

The Company's bylaws were not followed because of a lack of member interest to fill positions on the Board of Directors and various committees. We found that the President did not sign vouchers or appoint members to an audit committee. Also, the Company did not file an annual report of foreign fire insurance with OSC or Form 990 with the IRS because there was no Board of Directors and the Treasurer was unaware of these filing requirements. In addition, the Treasurer's accounts were not audited and the Treasurer did not prepare bank reconciliations. Lastly, the Secretary did not issue receipts for cash collected or remit all cash received to the Treasurer intact. Because of these weaknesses, we reviewed all bank statement activity for the period January 1, 2012 through December 18, 2013. We found the Treasurer did not properly record and report all the Company's financial transactions because she lacked sufficient training. We also reviewed 236 disbursements totaling $104,498 listed on the bank statements during this same period. All of the disbursements reviewed appeared to be for appropriate Company purposes; however, 159 disbursements were not in accordance with the bylaws.

We found that District officials established adequate internal controls over leave accruals. District officials implemented specific controls to ensure employee leave accruals were earned in accordance with the employee's employment contract and/or CBA. We also found District officials established controls to ensure the accrual and use of leave time were recorded accurately.

The District has accumulated in excess of $2.4 million that should be used to benefit taxpayers by paying off debt, financing one-time expenditures, funding necessary reserves and/or reducing property taxes, in accordance with applicable statutory requirements. District officials did not ensure that budgets were realistic or maintain reserves in accordance with statutory requirements. District officials routinely overestimated appropriations. For example, for the five years ending June 30, 2013, District officials have overestimated appropriations by a total of $6.3 million. These budgeting practices generated $1.36 million in operating surpluses, which caused the unexpended surplus fund balance to exceed statutory limitations for the past five years. Furthermore, the District has accumulated a total of $2.5 million in its reserve funds. We found that the Employee Benefit Accrued Liability Reserve is overfunded by 81 percent or $984,000. Also, the $727,000 balance in the Retirement Contribution Reserve is sufficient to cover the associated liabilities for at least three years and the $80,000 balance of the Insurance Reserve has no associated liabilities. Therefore, we question the District's need to maintain these reserves at their current funding levels. District staff also did not always obtain verbal or written quotes prior to procuring goods and services in accordance with purchasing policies and guidelines. We reviewed purchases of 21 types of goods and services totaling $114,629 and found that 12 goods or services, totaling $66,804, were obtained without any type of competition. For example, during 2012-13, District staff purchased paper towels totaling $8,262 and tires totaling $5,193 without obtaining three written quotes from vendors as required.

District officials have generally taken appropriate action to manage the District's financial condition. Although the District generated operating surpluses and increased fund balance by $1.4 million from fiscal years 2008-09 through 2010-11, for fiscal years 2011-12 and 2012-13, the Board adopted more reasonable budgets which resulted in actual planned operating deficits and reduced fund balance by almost $2 million. The Board also used excess reserve funds to pay off debt. In addition, the District has entered into inter-municipal agreements, as well as District-specific initiatives, that have resulted in cost savings. Finally, although the Board and District officials have developed some long-term financial planning, a multiyear long-term plan that addresses revenues and expenditures, as well as the use of fund balance and reserves, would greatly benefit the District.

The City did not resolve 955 violations issued during the audit period or about 83 percent of the total violations issued. As a result, the City did not receive a minimum of about $86,000 in violation fees the Building Department could have collected had all these violations been resolved. The City currently has about 4,900 violation cases unresolved since 2004, with minimum fines due totaling $440,000. Collecting the fees from resolved violations could significantly increase revenues, well exceeding the $15,000 in violation fees collected during our audit period. Additionally, the Law Department did not pursue collection for all unpaid Court-imposed building violation fines. We identified cases with unpaid fines totaling $12,000. These fines remained unpaid from seven to 20 months because the Law Department did not request Court judgments required to enforce collection. We also found that the Law Department does not review the status of settled cases, enforce Court-ordered judgments and pursue fine collection. As a result, the City is not collecting all the fines to which it is entitled.

The Board needs to improve its policies and procedures over payroll to ensure that Town officials maintain adequate time records, accurately calculate overtime pay and monitor leave accrual use. As a result of the deficiencies we identified, Town officials overpaid 13 employees by more than $3,500 in overtime pay even though the Town personnel policy states that leave time should not be included in the calculation of overtime. For example, 10 highway employees each received 16 hours of paid holiday leave for Thanksgiving and the following day, which was also included as time worked. These employees received inappropriate overtime pay for 151 work hours that should have been paid at their regular pay rate resulting in an overpayment totaling $1,390. Lastly, prior to their retirement, two former highway employees were allowed to use 1,240 sick leave hours valued at more than $24,000, including 136 hours of paid sick leave to which they were not entitled.

The budget includes nonrecurring revenue of $28 million, authorized by Chapter 55 of the Laws of 2014, which will not be available in future years and will create a funding gap. The City continues to rely on fund balance for recurring expenditures. Revenue estimates for sales tax may be optimistic. The budget includes $5.3 million in revenue generated by red light cameras; the legislation authorizing this revenue is set to expire on December 1, 2014. The City continues to rely on debt to pay for tax certiorari settlements, incurring debt and interest costs. The appropriation for firefighter overtime may not be adequate.

Despite the budgetary processes used by Village officials, the Board has not adopted structurally balanced budgets with reasonable estimates for revenues and appropriations for the general, water and sewer funds. Specifically, Village officials repeatedly underestimated revenues and overestimated appropriations in these three funds' budgets for the 2010-11 through 2012-13 fiscal years. General fund revenues were underestimated by a total of approximately $743,000 (10 percent) and appropriations were overestimated by a total of approximately $1.24 million (13 percent) over the last three fiscal years. The Board also planned for general fund operating deficits in each of the three years reviewed and appropriated a total of approximately $1.81 million to fund the ensuing year's operations. Due to unrealistic budget estimates, the general fund only used about $46,000 (2.5 percent) of total appropriated fund balance during this time. As a result, year-end fund balance has remained relatively stable in the three years reviewed. The water fund has consistently maintained unrestricted fund balance amounts in excess of 300 percent of annual expenditures. The water fund's unrestricted fund balance has increased by approximately $358,000 (41 percent) from fiscal years 2010-11 through 2012-13. Finally, even though the sewer fund appropriated fund balance each fiscal year to partially finance the subsequent year's operations, the total unrestricted fund balance has increased by approximately $166,000 (124 percent) from fiscal years 2010-11 through 2012-13. For all three funds, the Board has continued unrealistic budgeting practices with the current budget for fiscal year 2013-14 and the recently adopted budget for fiscal year 2014-15. As such, it is likely that each fund will have results of operations consistent with those in previous years.

The Board needs to improve its oversight of the Department's financial activities to ensure that sufficient controls are in place to safeguard Department assets. Although the Treasurer verbally updates the Board on bank balances at the monthly meetings, he does not provide written monthly or annual financial reports. While the Treasurer does prepare monthly bank reconciliations, the Board does not review them or periodically review the bank statements and canceled check images which could help identify an improper disbursement. Furthermore, there was no documented order signed by the Secretary and President listing the bills approved by the Department members for any payment made during our audit period. The Board also failed to ensure that all disbursement checks contained two signatures as required by its bylaws. Finally, the Board did not appoint an Auditing Committee of three members to examine the Department's finances each year.

District officials have underestimated revenues and overestimated expenditures for the budgets for the 2009-10 through the 2012-13 fiscal years. As a result, the District had operating surpluses totaling almost $1.6 million during this four-year period. Although the Board appropriated unexpended surplus funds each year to help fund the subsequent years' operations, the District did not actually use any fund balance. Furthermore, the District has accumulated unexpended surplus funds of up to two times the amount allowed by statute. District officials used some of the annual operating surpluses to fund six reserves that, as of June 30, 2013, totaled $1.7 million. However, two of the reserves, with balances totaling over $1 million, had excessive balances and no formal plan for funding or using the reserves. As a result, the financial transparency to the taxpayers was diminished and real property tax levies have been greater than necessary to fund operations.

We found that the Treasurer maintained appropriate financial records, performed monthly bank reconciliations, and submitted monthly financial reports to the Board. However, the Board did not oversee fundraising activities, properly authorize disbursements or review the Treasurer's reconciled bank statements. Although the Board retained the services of an independent public accountant to perform an annual audit of the Treasurer's records, this does not relieve the Board of its ongoing oversight responsibilities. As a result of inadequate Board oversight, there is an increased risk that errors and irregularities may not be prevented or detected in a timely manner.

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.