For the last three completed fiscal years, the Board adopted budgets that inappropriately allocated $223,080 including State retirement contributions and medical insurance costs to the highway town-outside-village fund, and sales and use tax revenues totaling $88,605 to the general town-wide fund. This caused an inequity in favor of the taxpayers that reside in the Village of Westfield at the expense of those taxpayers that reside outside the Village. Town officials have properly allocated sales and use taxes in the 2013 and 2014 budgets.

The Committee and Board have not established effective internal controls over the Department's revenue collections. As a result, there are no written policies and procedures covering revenue collections and a lack of segregation of incompatible duties. Billings for inspection fees and fines totaling $4,490 were not recorded and uncollected fees and fines totaling over $600 have not been collected and/or included in the Department's aged receivable report. Formal bank reconciliations are not performed and Committee members do not review monthly reports provided by the Director for accuracy or completeness. These deficiencies create an environment where errors and/or irregularities can occur without being detected. Finally, the Department does not charge inspection fees up to the maximum amounts permitted by Regulation. If the Department had charged the allowable inspection fees and penalties, it could nearly have generated sufficient revenue to more closely match its operating costs.

The Board needs to improve controls over District financial activities. The Board did not establish adequate controls to ensure that financial activity is properly recorded and reported and that District moneys are safeguarded. Although the Board has adopted procurement and code of ethics policies, it did not adopt an investment or credit card use policy. The Treasurer also provides the Board with a monthly listing of claims, which it reviews and approves at the monthly Board meetings after reviewing the individual claims. However, the listing of claims does not include check sequence. Therefore, the Board is not assured that it is reviewing and approving all claims prior to payment. District officials informed us that the former Chairman reviewed monthly bank statements. However, because he was also authorized to sign the checks, this was not an adequate control to ensure that the checks listed on the bank statement were legitimate District disbursements. We found that the former Chairman signed 20 checks totaling approximately $21,400. Further, the Board approved claims for the payment of credit card charges without adequate support. The Board discovered that a Fire Chief made credit card charges that included personal expenditures at various gas stations totaling $795. In addition, the Treasurer filed the 2010 and 2011 annual financial reports in June 2013 and July 2013, respectively, well after the 60-day deadlines. She has yet to file the 2012 and 2013 reports. While the Board has contracted with an external auditor to perform the required annual audit, the audits were not timely for the last three years.

Financial activities are not always recorded and reported as per the Company’s by-laws.

The Library's employee leave accrual records are not accurate. We found errors in all 10 (five full-time and five part-time) employees' accrual leave balances we reviewed. A total of 209.37 leave accruals hours were overstated and 17.25 hours were understated. These errors are valued at approximately $5,800. The Principal Account Clerk processed all leave accruals with little or no oversight by management and made inconsistent manual adjustments to the timekeeping system and to the leave accrual balances. Although Library officials allowed adjustments to the systems, they never monitored the changes or had leave accrual balances independently verified to ensure accuracy. We also found that the Library officials did not use competitive methods when procuring goods and services from six of 10 vendors we reviewed that were paid a total of $77,111. In addition, Library officials did not enter into written contracts with two of these six vendors who were collectively paid a total of $36,177.

The District's 2014-15 appropriations of $23,108,013 are $3.6 million more than expenditures for the last completed fiscal year, 2012-13. Because the District overestimated appropriations and underestimated State aid by almost $680,000, the proposed tax levy is higher than necessary. Further, the appropriated fund balance of $469,595 is unlikely to be used, and the District will likely have an operating surplus. District officials have used operating surplus to create or increase reserves so that fund balance did not exceed the 4 percent limitation allowed by law. Additionally, the District's projected expenditures for the current 2013-14 fiscal year are not realistic. As of February 18, 2014, the District has spent $8.4 million of its 2013-14 budget appropriations. We estimate that the District will spend another $11.3 million, which is at least $1.1 million short of its projection. The District's tentative budget complies with the property tax levy limit.

We found no material discrepancies with the accounting for moneys received by the Court or the accuracy of bank deposits. However, the Justice did not perform monthly bank reconciliations and accountabilities. We also found that the Justice did not always make deposits, or report and remit moneys to the JCF, in a timely manner. Further, the Board's audit steps for the Court were not recorded in the minutes of its proceedings.

We reviewed budget-to-actual results for fiscal years 2010-11 through 2012-13 and found that District officials adopted budgets with realistic revenue and expenditure estimates. However, District officials have relied heavily on appropriated fund balance as a financing source in the annual budgets, which has reduced the District's unrestricted unappropriated funds. In each of the three fiscal years, the Board has budgeted for planned operating deficits by appropriating fund balance to help finance the budgets. As a result, total unrestricted unappropriated fund balance has declined from $7.2 million in fiscal year 2010-11 to $5.4 million in fiscal year 2012-13, which is a 25 percent decline. The District is considered to be susceptible to fiscal stress due to three years of operating deficits and low unassigned fund balance.

Controls over purchasing are not always operating effectively. We found that Town officials did not solicit quotes for certain purchases, as required by the Town's procurement policy. In addition, one contract was prepaid, purchases prices were not verified to bid prices and certain utilized contracts were not authorized by Board resolution. The Supervisor indicated that the Superintendent was allowed to make purchases using State or county contracts. However, she did not realize the Board needed to authorize the contracts by resolution. As a result of the various deficiencies, the Town may have not always received the best price for goods and services.

The Board did not adopt reasonable budgets. Over the last five fiscal years 2008-09 through 2012-13, the District budgeted to use an average of $495,000 of unexpended surplus funds to fund the ensuing year's expenditures. However, the District did not use these funds as intended because revenues exceeded expenditures by an average of more than $1 million in each of these years. As a result, the District's unexpended surplus funds, totaling $2.7 million as of June 30, 2013, were 7.5 percent of the 2013-14 budgeted appropriations, which exceeded the statutory limit of 4 percent. Further, as of June 30, 2013, the District had accumulated a total of $7 million in its reserve funds. We found that the Employee Benefit Accrued Liability Reserve is overfunded by more than $1.1 million. Also, the District's total balances of $1.75 million in the Retirement Contributions Reserve and $151,000 in its Unemployment Insurance Reserve are enough to cover the associated liabilities for at least three years without any additional funding. Therefore, we question the District's need to maintain these reserves at their current funding levels.

The Board needs to improve its oversight of the Village's financial operations. The Board has not developed policies and procedures for cash receipt and disbursement duties. As a result, the Clerk-Treasurer's duties are not segregated and Village officials do not provide adequate compensating controls, such as ensuring that bank reconciliations are properly performed and reviewed. The Village's most recent bank reconciliation, for example, showed an unreconciled difference of $11,451. In addition, the recreation department does not issue pre-numbered duplicate receipts for all transactions and an aide for the youth department is allowed to take cash receipts home before bringing them to the Clerk-Treasurer for deposit. Also, more than half of the claims we reviewed were either not audited by the entire Board, or lacked the required department head approval, and Village personnel do not review cancelled check images to reduce the risk of inappropriate disbursements.

Although Mount Vernon Industrial Development Agency (MVIDA) officials adopted a Uniform Tax Exempt Policy (UTEP) in October 1996, they did not consistently apply the UTEP provisions. Some Board members were not aware that a UTEP existed. In addition, MVIDA officials did not have specific criteria to document how they arrived at their decisions when approving or denying projects. Furthermore, several of the projects that we reviewed did not include a cost-benefit analysis to show that the Board had justification to award low cost financing or tax exempt status to these projects. Additionally, no application was on file for one project and several executed project documents such as signed leases, amendments and authorizing resolutions for projects, could not be found – making it impossible to ascertain the basis of Board decisions or when the Board actually approved contracts, and what was included in those contracts. MVIDA officials also did not adequately monitor IDA-sponsored projects to ensure that they made reasonable progress toward their employment projections or other goals stated in their applications. Moreover, they did not impose penalties on businesses in cases where projects failed to create or retain jobs as projected. As a result, there is limited assurance that MVIDA projects have met their performance goals and benefited taxpayers.

We reviewed five contracts with payments totaling $12.6 million and found that the Board did not properly award two of these contracts − for public works projects and sidewalk replacement services − that resulted in payments totaling more than $10.6 million to two contractors. The Town also failed to properly monitor the services provided by three of the five contractors. Town officials wasted thousands of dollars when deciding to use more expensive bulldozers when other equally capable options were available at much lower costs. The Town also paid approximately $600,000 more than was necessary for sidewalk replacement. Further, because property owners are required to reimburse the Town for sidewalk replacement, a significant portion of this cost was borne by individual taxpayers. In addition, the Town overpaid two vendors more than $100,000 for solid waste disposal and sidewalk replacement services.

The Board and District officials need to improve controls over the District's IT assets. The Board has not established a computer use policy for employees to define appropriate user behavior or procedures to ensure the security of the District's IT system. The Treasurer has administrative rights to the District's financial software that allow her to control and use all aspects of the financial software application, which creates the opportunity for the manipulation and concealment of transactions. Also, the District's vendor master file is outdated with inactive vendors and duplicate names for the same vendors. In addition, the District has no controls in place over remote access, such as user authorizations, policies or monitoring, and has not enabled the audit trail function for its network operating system. Therefore, the District cannot ensure accountability for unauthorized users, reconstruction of events, intrusion detection, and problem identification. Finally, physical security over the District's server room is inadequate, and the District's computer asset inventory record is incomplete and inaccurate.

The Treasurer has not filed the District's Annual Update Documents (AUDs) with the Office of the State Comptroller, as required, even though the accounting books were up-to-date and the Board received period information detailing actual revenues and expenditures. As of December 10, 2013, the 2011 and 2012 AUDs had not been filed, nearly 18 months and 6 months, respectively, past the deadline with a filing extension. The Treasurer has not filed the AUDs because a certified public accounting (CPA) firm contracted in January 2012 to perform the audit for fiscal year 2011 has not completed its audit and the Treasurer is waiting until the audit is complete to file.

The Board failed to ensure fund balance was maintained within legally established limits and that residents were not taxed more than necessary. Although District officials appropriated on average $630,000 of fund balance in each of the last five fiscal years to reduce the tax levy, the District had operating surpluses in four of the five years reviewed. District officials then used excess fund balance to fund five reserves that, as of June 30, 2013, totaled over $2 million. One of the District's reserve funds had approximately $434,000 or 50 percent more than the amount needed for authorized purposes. Also, three of the District's reserves, with balances totaling approximately $775,000, were not supported by a plan setting forth the amounts to be retained, or when the balances would be used. As such, the District has not demonstrated a valid need for about 60 percent of the amounts set aside in these reserve funds.

The Board has not adopted budgets that reflect the Library's operating needs. The Board has consistently underestimated revenues and overestimated expenditures over the past three years, which resulted in operating surpluses totaling nearly $1.6 million. This has also contributed to the accumulation of an unexpended surplus fund balance equivalent to an entire year's budget. For the same period, the Library also increased the real property tax levy by nearly $71,000. The Board also needs to improve controls over cash receipts to help ensure that they are recorded and deposited in a timely and accurate way so that Library assets were safeguarded. The Library does not have formal policies or procedures to ensure accountability for the cash receipts process. As a result, Library staff members do not always ensure that the cash counted agrees with the register tapes each night. In addition, although all 28 deposits made from February 2013 through July 2013, totaling $18,052, were made intact and recorded accurately, they were made between 10 and 66 days after the cash was collected, increasing the risk of loss or misuse of cash.

Based on the results of our review, except for certain matters, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The proposed budget does not include a tax overlay or provisions for infrastructure needs. There are budget gaps in the water and sewer funds which are planned to be funded by rate increases that have not yet been adopted. The amount of sewer rents revenue in the proposed budget has been increased without any supporting justification. The proposed budget complies with the tax levy limit.

Based on the results of our review, in general, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District's proposed budget complies with the property tax levy limit.

The Board and District officials did not develop reasonable budgets. Revenue estimates were generally close to the actual revenues received. However, over the last five fiscal years, the District's general fund spent $21.7 million less than planned. As a result of these budgetary surpluses, the District did not use any of the appropriated fund balance planned to finance operations (an average of $3.5 million for each of the last five years). Instead, between 2008 and 2013, the District's total fund balance for the general fund increased $4.8 million while the real property tax levy also increased by about $4.8 million.