District officials did not verify that all non-original equipment manufacturer (OEM) school bus options were consistent with State contract pricing for the 16 school buses they purchased in 2012-13 and 2013-14. District officials did not obtain the State contract list price books, apply the appropriate contract discounts or compare the resultant prices with the invoice prices. As a result, they overpaid by $12,080 for two non-OEM options (rust proofing and heaters) installed on 12 of the buses. In addition, the Board did not properly plan for the use of reserve funds. As of June 30, 2013, the District had seven reserve funds with balances totaling $5 million. We analyzed these reserves for reasonableness and adherence to statutory requirements, and found the balances of five of the reserves appeared to be reasonable. However, the balances of two reserves (the unemployment insurance and tax reduction reserves) with balances totaling approximately $2.2 million appeared higher than necessary to fund costs that may be legally paid from these reserves.

The Board did not develop policies and procedures for budget preparation and monitoring and, as a result, repeatedly adopted budgets with inaccurate estimates for revenues, expenditures and appropriated fund balance. In the town-wide (TW) general fund, the overestimation of expenditures and underestimation of revenues created a positive budget variance of nearly $568,000 over five years. At the 2012 fiscal year end, the unrestricted fund balance amounted to 48 percent of the Town's general-fund expenditures for that year. Similarly, the 2012 year-end unrestricted fund balance in the town-outside-village (TOV) general fund amounted to 68 percent of the year's expenditures; and in the TOV highway fund, to 34 percent. These excess funds are considerably more than reasonably necessary for a financial cushion. Additionally, the Board did not appropriately allocate the Deputy Highway Superintendent's compensation, placing an inequitable burden on TW taxpayers. We also found that the Board did not establish sufficient controls over payroll records and leave time. Employees did not keep daily time records of regular and overtime hours worked or leave time used, and did not formally request leave time usage. Thus, payroll reports did not include leave time usage and inaccurately reported all paid hours as hours worked. In addition, the Highway Superintendent's sick leave accumulation surpassed the maximum by 64 days with leave time credited for 2013.

The Board did not adopt reasonable budgets and adequately manage the District's financial condition. The Board continually overestimated appropriations for the last three years causing the District to exceed the 4 percent statutory limit each year with the District's unassigned fund balance reaching $1,334,486 as of June 30, 2015, or 10.7 percent of the ensuing year's appropriations. Although the Board appropriated fund balance each year, the adopted budgets actually produced operating surpluses. As a result, none of the appropriated fund balance was used. When the unused appropriated fund balance was added back, the recalculated unassigned fund balance reached $2,034,486 or 16.4 percent of the ensuing year's appropriations. In addition, the District maintained a total of $565,000 in three reserve funds but had no plan for their use. The tax certiorari reserve is overfunded by as much as $145,000 (96 percent). Lastly, officials did not adopt a multiyear financial or capital plan.

The Board has not established policies and procedures to ensure adequate internal controls over the cash receipt process for taxes. Library personnel do not maintain a record of taxes received by fiscal year and they have no process in place to ensure the Library received the full amount of real property taxes levied for the Library each year. We determined that for the last four completed fiscal years the amounts transmitted to the Library by the District were $3,500 in 2010-11, $880 in 2011-12 and $46,500 (or 4.26 percent) in 2012-13 less than the voter approved tax levies. We discovered that the District has been reducing the amount of money paid to the Library when there are refunds in property assessments due to tax certiorari judgments. However, there is no authority for a school district to charge back any portion of a tax certiorari refund to a school district public library. The Board has also not established adequate internal controls for over-the-counter receipts. The Library does not have procedures in place to record all receipts at the time of collection and there are no procedures to ensure individual accountability.

The District's controls over extra-classroom activity funds were not operating effectively. The Board did not ensure that District officials implemented and enforced its policy governing the operations of the activity funds. Consequently, we found that 30 cash receipts totaling $19,322 had no supporting documentation and four student treasurers did not maintain ledgers during the 2012-13 fiscal year. The District's failure to maintain activity funds in accordance with the Board's policy increases the chance that extra-classroom activity moneys could be lost or misused. These deficiencies continued to exist even though our previous audit identified similar internal control weaknesses over the District's extra-classroom activity funds.

The Board did not implement adequate controls over the Department's financial activities, develop adequate policies and procedures, or adopt a code of ethics. The by-laws do not include any detailed financial procedures that would adequately segregate the duties of day-to-day financial operations. As a result, the Treasurer and Lottery Account Clerk perform all their financial duties with little oversight. We also found that as of November 2013 the Treasurer had not recorded the monthly lottery transactions since February 2013. Further, although all Department checks require two signatures, there is no evidence that the Board was consistently auditing the prior month's receipts, disbursements, account balances, bank statements and other records as required by the by-laws. There was also no evidence that the Board consistently reported the results of the audits in June and December to the Department members.

The Board adopted budgets that were not financed by sufficient recurring revenues. Instead, to keep the real property tax levy relatively level, the Board used fund balance to finance the Town's increasing expenditures. As a result, there were consistent operating deficits because expenditures exceeded revenues and fund balance was consumed, to the point of depleting fund balance. The 2013 budget included the use of fund balance totaling $70,734 in the town-wide highway fund and $84,766 in the part-town highway fund, while $50,123 and $57,490, respectively, was available. Overall, the available fund balance in all four of the major operating funds has declined between 40 and 99 percent from fiscal years 2009 through 2013. When preparing the 2014 budget, Town officials appropriated more than $104,000 in total fund balance in three of the Town's operating funds, but the part-town general fund and the town-wide highway fund did not have sufficient fund balance available to meet the appropriated amounts. As such, these two funds' deficits will increase. Further, the Board did not develop a multiyear financial plan. Had such a plan been in place, the Board would have been better able to monitor the use of fund balance before it was depleted.

District officials underestimated revenues and overestimated expenditures in the Board-adopted budgets for fiscal years 2008-09 through 2012-13, resulting in combined operating surpluses totaling more than $25 million. Although the Board appropriated unexpended surplus funds each year (exceeding a combined $13.2 million over the five-year period) to help finance the next years' operations, the District actually used less than $5.3 million to fund operations. The District accumulated unexpended surplus funds exceeded the statutory limit over the last three years, while at the same time, increased the real property tax levy by more than $6.6 million, a 9 percent increase.

The Supervisor did not ensure that the bookkeeper accurately maintained the Town's accounting records. As a result, the Town's accounting records were incomplete and inaccurate. In addition, the Supervisor did not adequately review the bookkeeper's monthly bank reconciliations. Consequently, the Supervisor was unaware of the discrepancies that we identified in the accounting records. The Supervisor also did not provide the Board with all the financial information it needs to monitor the Town's financial operations, and the Board did not conduct a proper audit of the Town's records. In addition, the Justices did not provide adequate oversight of their Court operations or the work performed by the Court clerks. The Justices also did not perform monthly accountabilities, and the Court clerks did not deposit all cash receipts collected intact. Further, we found that the Court clerks did not remit all cash receipts to appropriate parties in a timely manner, did not always issue receipts for moneys collected for bail and did not report all tickets issued and fines and fees collected to the Justice Court Fund. Also, Town officials did not perform an adequate audit of the Justices' records.

We found that the Board provides adequate oversight of District financial activities. The Board has adopted policies addressing ethics, procurement, travel and credit card use. The Treasurer provides the Board with monthly financial reports including cash balance and budget status reports. The Treasurer submitted the 2012 required annual financial report of the District's financial condition to the Office of the State Comptroller in a timely manner. The Board has contracted for an annual independent audit of District financial operations each year, as required. The Secretary completes claim forms and prepares voucher packages and submits them to the Board for audit and approval. The Board's process for auditing claims prior to payment includes reviewing all supporting documentation, including quotes obtained in accordance with the District's purchasing policy. Once audited and approved for payment by the Board, the claim packages are submitted to the Treasurer for payment. Except for minor issues that were discussed with District officials, the transactions were properly authorized and recorded in the accounting records and appeared to be for District purposes.

From fiscal years 2010-11 through 2012-13, the District's unrestricted unappropriated fund balance has exceeded the 4 percent statutory limit. However, the District's fund balance has declined as a result of planned operating deficits and appropriating fund balance to finance the planned deficits. Specifically, the amount of unrestricted unappropriated fund balance as a percent of the ensuing year's budgeted appropriations declined from 9.7 percent in fiscal year 2010-11 to 5.4 percent in fiscal year 2012-13. The Board has budgeted to further reduce unrestricted unappropriated fund balance by using it to fund a planned operating deficit in the fiscal year 2013-14 budget. With this appropriation of fund balance, the District's unrestricted unappropriated fund balance is projected to be 4.8 percent of the ensuing year's appropriations, which is still above the 4 percent statutory limit. While we encourage the District to bring its fund balance within the statutory limit, District officials now need to be mindful of the amount of fund balance they will appropriate going forward. Further, the Board has not adopted a multiyear financial plan to allow it to effectively manage its future finances. Such a plan would have helped the Board to monitor and plan for the use of fund balance.

Based on our examination, it appears that the Clerk-Treasurer misappropriated approximately $115,891 of Village funds, made questionable purchases totaling $1,405 and received questionable expenditure reimbursements totaling $319. In total, we question the propriety of $117,615 in Village transactions that were initiated by the Clerk-Treasurer. The Clerk-Treasurer was able to misappropriate funds because the Board had not established an adequate system of internal controls over the Village's cash assets and financial records. The Clerk-Treasurer was responsible for receiving funds and making bank deposits, preparing and signing Village checks, processing payrolls, maintaining the Village's accounting records, and receiving unopened monthly bank statements and canceled check images. She performed these functions with virtually no Board oversight. This created an environment where the Clerk-Treasurer was able to write checks to herself or to others for payment of her personal expenses without Board authorization and divert receipts instead of depositing them into Village accounts. This occurred over a four-year period without detection by the Mayor or the Board.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. Although the City has made progress in improving its financial condition, it did not completely implement recommendations contained in our March 2013 budget review report letter. We recommend City officials investigate the difference between the streets maintenance budget summary schedules and supporting schedules and adjust the budget to agree with the corrected debt schedule and to include court security personal service costs. Lastly, we recommend that the potential water and sewer rate increases be authorized by the Common Council prior to the adoption of the budget. The City's proposed budget complies with the property tax levy limit set by statute.

The Department has not adopted any written policies and procedures for financial operations other than the by-laws, which were not adequate or consistently followed. In addition, the Board did not provide adequate oversight of the Treasurer, who was responsible for all financial duties. As a result, the Treasurer did not present to the Board financial records, detailed monthly or annual reports for cash receipts and disbursements, bank statements or reconciliations of the Department's bank accounts. We reviewed all 915 check disbursements made from January 2012 through May 2013, totaling $363,124. We found that numerous vendor payments reviewed had deficiencies. For example, 66 payments totaling $23,459 were paid before purchase order approval. Additionally, 68 disbursements totaling $35,088 were made without the President's signature on the check as required in the by-laws, and 40 checks totaling $38,159 contained only one signature.

We found weaknesses in the College's internal controls over IT assets. College officials do not maintain a complete and comprehensive software inventory list that contains all software that the College currently owns and has installed on its computers. In addition, the College does not regularly monitor or review its computers to ensure that all software installed is approved and legally obtained. Further, the College could not provide supporting documentation for five software programs installed on College computers. We found that one of 36 computers reviewed contained gaming and instant messaging software.

At December 31, 2012, the general fund balance was 12 percent of the $409 million budgeted for 2013. Although the Legislature adopts realistic budgets, they appropriate general fund balance every year to subsidize the airport and bus transportation enterprise funds. As a result, $3.5 million in operating surplus in 2012 resulted in fund balance increasing by $2 million with $1.5 million used to subsidize the enterprise funds. While the County's budgeting practices have improved its financial condition, the continued subsidizing of the enterprise funds will impact these efforts. An additional $5.7 million of appropriated fund balance was budgeted in 2013 and proposed in the 2014 budget to subsidize both funds.

We found that the Board generally provides adequate oversight of District financial activities, but should make certain improvements. Although the Board audits and approves claims for payment at its monthly meetings, the Treasurer processes and pays certain claims prior to the Board's audit which are not statutorily authorized for payment in advance of audit. In addition, the Board did not use the prescribed budget format, and adopted budgets did not include the required comparisons to prior years, the detail for non-property tax revenue estimates, or estimated fund balance. Furthermore, the monthly reports provided by the Treasurer include only year-to-date information and do not provide detail for the current month's activities, which makes it more difficult for the Board to monitor operations on a monthly basis.

We found that the Clerk deposited all moneys collected and remitted these moneys to the Supervisor, County and other agencies appropriately. In addition, moneys collected were reported in an accurate and timely manner. However, the Clerk, as the Tax Collector, did not deposit or remit real property taxes received in a timely manner. We also found that the Board is not providing adequate oversight of the Clerk's operations and has not conducted the required annual audit of the books and records of the Clerk/Tax Collector. Because of these weaknesses, the risk is increased that Town moneys could be lost or misappropriated.

The Board did not comply with its own policy for firehouse hall rentals, and it did not review and/or approve, monitor or control the firehouse hall rental process. As a result, one Commissioner (Commissioner A) controlled all aspects of hall rentals, including taking and recording reservations for hall rentals, collecting rental fees and depositing moneys in the District's bank account. Because the Board did not properly oversee transactions related to the firehouse hall rental process, Commissioner A was able to rent the hall to various individuals and organizations and collect but not deposit any of the approximately $43,800 rental moneys generated by these events. The District's policies for credit card use, meals and refreshments, and cell phone usage were weak. Not only did the Board fail to provide oversight in these areas, individual Board members themselves abused these District resources. For example, of the $44,245 of credit card purchases that we identified as being questionable, $33,063 were made by one Board Commissioner (Commissioner A). Finally, the District's capital asset policy does not provide adequate guidance regarding appropriate inventory recordkeeping and vehicle and equipment usage and disposal. The District has more sport utility vehicles (SUVs) than appear to be necessary for appropriate District operations, seven of which were either not being used or were assigned to employees who did not need District-owned vehicles to fulfill their job responsibilities.

The Supervisor did not maintain complete and accurate accounting records and reports for all Town funds or ensure that bank reconciliations were properly performed. This resulted in accounting errors and the failure to file annual financial reports with OSC in a timely manner. Further, the Board did not annually audit, or have an independent public accountant audit, the Supervisor's records.