Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District's proposed budget currently includes a tax levy that slightly exceeds the statutory limit.

We found that the Treasurer maintained appropriate financial records and the Board generally provided adequate oversight of District financial activities. The Treasurer performed monthly bank reconciliations and submitted monthly financial reports to the Board. However, the Treasurer did not submit an annual report of financial activity to the Board and has not filed the required annual financial report with OSC since 2008. Although the Board does not audit the Treasurer's financial records annually, the Board reviews the Treasurer's records monthly. At monthly Board meetings, the Treasurer provides the Board with bank reconciliations, bank statements, canceled check images, a report of cash receipts and disbursements, and a budget report comparing actual expenditures to budget appropriations. Additionally, the Board reviews and approves all claims prior to payment.

In recent years, the District has struggled with fiscal challenges and deteriorating financial condition. We found that the Board adopted budgets that limited tax increases by balancing its budgets with appropriations of fund balance and reserves. As a result, by the end of the 2012-13 fiscal year, the District had approximately $2 million remaining in reserves, and unexpended surplus funds of $461,000. We reviewed budget-to-actual results for fiscal years 2010-11 through 2012-13 and found that District officials adopted realistic budgets and kept expenditures within budgeted appropriations. The Board reviewed budget-to-actual comparison reports throughout the year to monitor the budget and approved budget transfers at the monthly Board meetings. We commend District officials for their continuous efforts in closely monitoring financial operations and evaluating numerous options to close the District's budget gaps. However, the heavy reliance on appropriated fund balance and reserves as financing sources in the annual budgets has resulted in a significant reduction in the District's unexpended surplus funds and reserve balances.

Overall, we found the books and records were reliable and the monthly financial reporting to the Board was adequate. However, there is a lack of formal written guidance for financial transactions. We reviewed 133 deposits, totaling $90,855, and found that the collections were deposited intact and were properly recorded in the accounting program. However, the collections were not always deposited in a timely manner. We also reviewed 178 disbursements, totaling $77,292, to determine if they were for appropriate purposes, adequately documented, properly recorded and reviewed by the Board. The disbursements included 152 checks and 26 electronic fund transfers. We also reviewed the transactions to determine if they were signed by both the President and Treasurer, as required by the by-laws. We found all the disbursements were for legitimate Company purposes, properly recorded, and reviewed and authorized by the Board. However, we found that 117 of the 152 checks, totaling $63,405, only had one signature (either the Treasurer's or the President's) instead of the two required signatures.

The Board did not ensure that competition was sought when procuring goods and services not subject to bidding. Although District officials have adopted a procurement policy that addresses procurement below the bidding thresholds, the policy states that professional services do not lend themselves to competitive procurement procedures. Therefore, District officials did not solicit competition for eight of the nine professional service contracts we reviewed, which totaled $288,276. Furthermore, District officials did not enforce the policy requirement that quotes be solicited for purchases below the competitive bidding thresholds.

The President did not ensure that the Treasurer fulfilled his duties. The Treasurer was allowed to pay bills and make cash withdrawals without evidence of Company approval or without proper supporting documentation. The Treasurer did not perform bank reconciliations and failed to supply the members with necessary financial reports. As a result, Company members cannot be assured that Company cash is adequately safeguarded.

Department employees may not be conducting inspections of all potentially eligible businesses in the County, and when inspections are performed, employees are imposing fines below maximum amounts allowed by Agriculture and Markets Law (AML). Because of this, there could be significant revenue enhancements in the Department. If the number of potentially-eligible businesses to be inspected were increased and the fines imposed were increased to the AML maximum amounts, potential revenue enhancements could have ranged from $550,000 to $2.3 million for 2013, and could range from $591,000 to $2.6 million for 2014. Additional revenues could be collected if the Department were to increase follow-up inspections for businesses that fail to meet minimum requirements. In addition, County officials have not segregated duties for billing, cash collecting and record-keeping. For example, the Director and both inspectors bill customers for fees and fines and also collect payments. Despite his other duties, the Director also records activities in the software application. County officials have not implemented mitigating controls.

The Board needs to improve its oversight of District financial activities. The Board did not ensure that complete accounting records were maintained and monthly and annual financial reports were prepared. In addition, the Board did not follow the statutory requirements with regard to adopting the 2014 budget and computing the tax levy limit. It also has not adopted a code of ethics, procurement policy or an investment policy. Finally, the Board did not conduct a thorough audit of claims before they were paid.

The Board and Library Board have not adopted cash receipts policies requiring internal control procedures to be established and implemented. We identified weaknesses in the cash collection procedures at the Recreation Department, Clerk's office, Highway Department and Library. Management and employees developed cash collection procedures that were not consistent with good internal control practices, resulting in errors recording and reporting cash receipts without management questioning the errors or re-evaluating procedures. We also found that neither the Board nor Library Board audited and approved claims for payment. Instead, the Treasurer and his staff audited all claims against the Village and the Library. Checks were signed electronically using a single signature file containing facsimile signatures of the Mayor and a Village Trustee, with neither the Mayor nor the Trustee retaining custody of the signature file or being present during the affixing of the signatures. This arrangement is not in compliance with the law and allowed claims to be paid without a proper audit.

The Board did not properly monitor and manage the Village's financial condition. As a result, fund balance for all three major funds (general, water and sewer) decreased significantly from 2008-09 to 2011-12 due to operating deficits caused primarily by poor budgeting which resulted in revenue shortfalls and overspent appropriations. For example, the fund balance of the general fund dropped from $927,214 in fiscal year 2008-09 to a deficit of $39,827 at the end of the 2010-11 fiscal year before showing some improvement in the 2011-12 fiscal year. The Board also relied on fund balance and interfund loans to fund recurring operating expenditures. The Board also did not adequately monitor the budget and allowed appropriations to be overexpended for many line items and in total for the general fund budget. General fund appropriations were overexpended by $143,908 in 2011-12, $197,420 in 2010-11 and $313,832 in 2008-09. Although the 2009-10 budget was not overspent in total, several individual line items were overspent. The lack of monitoring also caused expenditures to consistently exceed appropriations in the water and sewer funds. Finally, the Board has not developed comprehensive, multiyear financial and capital plans to improve the budget development process.

The Department recorded collections of $74,685 in DWI fees, $39,797 in administrative fees, $21,312 in ignition interlock fees and $17,672 in restitution and surcharges during the audit period. We found that the Department has instituted proper controls and is collecting revenues due the Department.

We found that the Board and membership generally do not provide adequate oversight of Company financial activities. The Board has not adopted any written policies and procedures for financial operations. The Board has not set standards of conduct for the guidance of the officers and members with respect to disclosure of interests. The Company's financial duties are not adequately segregated and there are no sufficient compensating controls. The Treasurer provides a monthly report at the membership meeting detailing receipts, disbursements, cash balances and the list of bills to be approved that month. Although the written report is available, no one reviews it; instead, the Treasurer reads it aloud. The individual claims are not audited for accuracy or examined for supporting documentation. The President did not provide the legally required written disclosure of his ownership interest in a business used for the Company's website hosting. The Board did not conduct an annual audit of the Treasurer's books at any time. Finally, the Treasurer has not filed the annual foreign fire insurance report for 2012, as required, and does not maintain separate records of expenditures from these moneys.

We found that the records maintained by the Surrogate's Court were generally up-to-date and complete, and we noted no material discrepancies. However, we found that the County Clerk (Clerk) is not maintaining appropriate court and trust fund records. Although the Clerk maintains scanned copies of all court orders filed in his office, he does not make an entry into the court and trust fund register of the moneys ordered to be paid into court. As a result, the Clerk was unable to readily identify assets ordered to be paid into court, and his records could not be used to verify that all court-ordered deposits had been properly received and deposited by the Treasurer. We also found that the Treasurer established adequate procedures, maintained appropriate records and properly reported the condition of court and trust funds to the State Comptroller as prescribed by statute. However, we identified funds which improperly remained in the Treasurer's custody and should have been turned over to the State Comptroller as abandoned property. Finally, we found that the Treasurer had retained a fee in excess of the amount allowed by law when disbursing court funds.

The Board did not effectively manage the Village's financial condition. The Board did not develop sound revenue budget estimates; it also failed to increase water and sewer rates, which drive the revenues in these funds. As a result, water and sewer revenues were overestimated by an average of 25 percent and 21 percent, respectively, which caused fund balance to decrease significantly in both funds from fiscal years 2009-10 through 2011-12. Unplanned operating deficits caused both the water and sewer funds to have a deficit fund balance. Over a four-year period, the deficit fund balance in the water fund grew by a total of $61,274, or 51 percent, while the sewer fund balance declined by a total of $42,974, or 132 percent. Although both funds had an operating surplus in the 2012-13 fiscal year, the funds still ended the year with deficit fund balances of $181,522 in the water fund and $10,424 in the sewer fund. The Village's general fund loaned moneys to these funds to offset the funds' deficit balances. Furthermore, the poor financial condition of the water and sewer funds has negatively impacted the cash flow of the Village's general fund.

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

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The Village's proposed budget includes a tax levy which exceeds the allowable property tax levy limit. Therefore, to comply with the Law, the Board must adopt a local law overriding the tax levy limit before they adopt the proposed budget.

We found that the Clerk did not number claims or prepare abstracts of claims to be approved by the Board for payment by the Supervisor. Only the total amount of claims approved by the Board for payment was included in the Board minutes. We found that the amounts in the minutes did not agree with the total amounts of the approved claims for two of the four months we reviewed. For example, the February 2012 Board minutes indicated that the amount of claims approved for payment was $9,630 more than the claims filed with the Clerk. Conversely, the February 2013 Board minutes indicated that the amount of claims approved for payment was $1,128 less than the claims filed with the Clerk. The Clerk stated that she may have calculated the totals incorrectly before entering the amounts in the minutes.

The unexpended surplus funds in the Village's general fund increased nearly $200,000 (45 percent) over the past five years to almost $640,000 as of May 31, 2013. As a result, the general fund's unexpended surplus funds in 2012-13 reached 182 percent of next year's appropriations. Unexpended surplus funds increased from 2008-09 through 2012-13 despite the Board adopting budgets that indicated that the Board planned to use some of the fund balance to partially fund operations. Village budgets included planned operating deficits in each of these years. However, from 2008-09 through 2012-13 Village operations generated a combined operating surplus totaling more than $187,000, eliminating any need for using appropriated fund balance except in 2011-12.

The Board needs to improve its oversight and management of the District's budget. Over the last four fiscal years, the District's conservative budgeting practices resulted in operating surpluses that totaled approximately $164,000. To reduce fund balance, the Board appropriated unexpended surplus funds each year, for a four-year total of nearly $1.3 million, to help finance the ensuing year's operations. However, because of the District's surpluses, approximately $1 million of the fund balance appropriations over the four years went unused. As a result, the District accumulated unexpended surplus funds equivalent to 11 percent of the ensuing years' budgets, or nearly three times the amount allowed by law. Further, we found that the amount retained in the District's retirement contribution reserve is excessive and the District made retirement payments out of the general fund rather than the reserve fund. The Board also improperly appointed its President, in place of the Treasurer, as the sole signatory on District checks under $5,000, with its Vice President as co-signor for all District checks over $5,000. This Board action allowed one of its members to, in effect, also act as Treasurer for the purpose of disbursing District funds, which is prohibited by Education Law. Finally, the Board has not developed and adopted policies, including a disaster recovery plan and a breach notification policy, to ensure the District's electronic data is adequately safeguarded.

We found that the Board and District officials did not adopt and implement appropriate policies and procedures for the extra-classroom activity fund. As a result, the Board did not receive monthly extra-classroom activity fund records during the audit period. In October 2013, subsequent to the start of our fieldwork, the central treasurer started providing the Board with extra-classroom activity fund records. In addition, the student treasurers lacked sufficient documentation/accounting records for collections totaling $23,676, such as profit and loss statements, up-to-date activity ledgers or inventory control forms. The central treasurer did not provide the student treasurers with duplicate receipts for remittances from the various clubs totaling $23,676. Further, of these funds, there was insufficient documentation supporting $22,491 collected by the student treasurers to determine if the cash and checks collected were remitted timely to the central treasurer.