We reviewed the District's reserve fund balances from fiscal years 2010 through 2012. The District accumulated over $1.2 million in five separate reserve funds as of December 31, 2012. The capital reserve fund accounted for almost 70 percent of the total reserve funds held by the District. According to the Board resolution, the capital reserve was established in 1982 for the purpose of purchasing fire apparatus and equipment with an estimated $100,000 maximum funding level. The capital reserve account had a balance of $889,327 at December 31, 2012. The former Board Chairman told us that the reserve's balance is much greater than the $100,000 maximum established in the resolution because the amount in the resolution was just an estimate. In addition to the budgeted $325,000 for fiscal years 2010 to 2012, the District funded the reserve with $225,000 that was not budgeted. These are significant amounts when compared to the size of the District's budgets. Had the excess funds not been placed in the reserve, the funds could have been appropriated for the next years' budget to lower the tax levy.

From fiscal year 2008-09 through 2011-12, the Board adopted unrealistic budgets that caused large deficits in the moneys available to be appropriated for the ensuing year's budget or for contingency or emergency needs (unexpended surplus funds). The Village has experienced deficits in its unexpended funds in the general, sewer, and water funds from 2008-09 through 2011-12. While the general fund had its most severe deficit in its unexpended funds in 2008-09 totaling $674,575, the sewer fund experienced its most severe deficit in its unexpended funds in 2011-12 totaling $847,486. The water fund has had significant deficits in its unexpended funds in 2008-09 totaling $625,625 and $608,039 in 2011-12. These deficits were caused by unrealistic budget estimates and the Board's insufficient monitoring of financial operations throughout the year.

We found that the Board could improve its oversight of the District's financial activities. Although the Board has adopted a code of ethics and purchasing and investments policies as required, the policies are not regularly reviewed and are outdated. Further, the Board has not adopted other policies or procedures for financial operations such as cash receipts and disbursements, claims processing and information technology. As a result, the Board did not adequately segregate the Treasurer's duties or implement sufficient compensating controls. The Treasurer performs all recordkeeping functions, makes all deposits, and is the sole signatory on District bank accounts, often disbursing cash without prior approval.

Due to deficiencies in the Town's handling of cash receipts, combined with inaccurate records, insufficient interim reports and a lack of proper fiscal monitoring, the Board was not aware that $23,532 in collections was missing. We found that a total of $18,586 in park and recreation fees, $4,146 in code enforcement fees and $800 in Town Hall rental fees was not deposited and cannot be accounted for. Additionally, the bookkeeper allowed cash receipts to remain on hand for weeks or months before deposit, including five undeposited checks totaling nearly $338,000. The bookkeeper also altered copies of 19 park-fee receipts to show a total amount of nearly $10,709 lower than what the park manager actually remitted. Furthermore, the Town does not have complete, accurate and up-to-date accounting records. The Supervisor did not perform proper monthly bank reconciliations during our entire audit period; we identified a discrepancy of $14,364 between the bank statement and accounting records for one of the Town's 11 bank accounts. The Supervisor also filed the required annual update document with the State Comptroller's Office months after the due date for both the 2011 and 2012 fiscal years and did not provide the Board with sufficient interim financial reporting.

The proposed budget includes revenue of $9,184,475 for refuse and garbage charges, a 17 percent increase over the 2013-14 budget. City officials plan to raise the additional revenue with a fee increase that has not yet been approved by the City Council. Overtime salaries are budgeted at $2.2 million, despite such costs averaging over $2.9 million for the last five completed fiscal years. In addition, an appropriation of $300,000 for contingencies in included in the proposed budget; however, the City's charter does not authorize such an appropriation. The proposed budget for the water and sewer funds includes increased revenues to be raised from an increase in water rates that has not yet been approved by the City Council. The City's proposed budget complies with the property tax levy limit set by statute.

We found that GCIDA was effective in its efforts to promote, develop, and assist in economic development projects in Genesee County. However, we identified some opportunities for GDIDA to improve its controls and accountability. While the GCIDA Board has adopted a Uniform Tax Exemption Policy (UTEP), it has not formalized some of the critical procedures and policies that are used as criteria in the project evaluation processes. GCIDA officials did not consistently apply the guidelines and/or criteria when evaluating application, such as input factors for the computation of cost benefit analysis ratios. Finally, GCIDA does not verify the numbers given by businesses/firms when applying for financial assistance or annual reported data that is used to evaluate project performance. Without assurance that reported job numbers represent actual jobs created and/or retained, the Board cannot be sure that the community is receiving the expected benefits.

The Board did not adequately safeguard the Department's money. The Board did not develop and implement internal controls over its cash disbursement and receipt functions, ensure its bylaws were followed or perform annual audits of the Treasurer's financial records. Additionally, the Board also did not ensure that the District's adopted code of ethics also applied to Department members. As a result, the former Treasurer misappropriated approximately $17,500 of Department funds from February 2011 through August 2013. Additionally, during this period, the former Treasurer made questionable disbursements totaling more than $560. Furthermore, the former Treasurer did not maintain records of the Department's financial activities or prepare and present accurate and timely monthly reports or any annual reports to the Board. Because of the misappropriation, Department cash, which totaled approximately $9,300 as of January 1, 2010, was reduced to $135 when we began our audit.

While the County does have certain information technology (IT) user policies, they have not adopted a breach notification policy or a disaster recovery plan. We also found that while the County does have a policy regarding USB removable media, they are not monitoring or enforcing the policy. County IT officials told us that each department has the ability to order office supplies, including USB removable media on account. The IT Department does not have the capability to monitor or prevent unauthorized use of USB removable devices while still being able to allow authorized devices to operate. County IT officials also stated they did not aggressively monitor the use of USB media because it was determined that they are integral for some department's operations.

Town officials did not properly administer all aspects of the Restore NY grant and Community Development Block Grant (CDBG) grant funds awarded to the Town; they were successful in some aspects but failed in others. The Board failed to meet certain critical expectations regarding the application and screening process for awarding grant funds, protecting the Town's financial interests, monitoring the proper use of the moneys they awarded or auditing claims paid from the grant proceeds. However, the Board did properly ensure that Town policies were in compliance with grant agreements and that certain grant recordkeeping requirements and external reviews were met. The Board also received appropriate approvals from State agencies before it approved the demolition of the Dutch Barn. Finally, the Board has not closed out the CDBG grant in accordance with the grant requirements; this failure to close out the grant could jeopardize any future grant applications.

The Town's internal controls over payroll and leave time were not properly designed or operating effectively. The Board did not establish written policies and procedures for authorizing, processing and reporting payroll, including the verification, approval and monitoring of leave time. We also found errors in the leave accrual records for Highway Department employees and inadequate documentation of time worked. As a result, employees were credited with 69 hours of leave accruals, totaling $1,191, that they were not entitled to, and in some instances, employee leave accruals were charged in error. Furthermore, the Board has not established adequate timekeeping procedures for non-highway employees, and there was no supervisory review of time records submitted by employees. These control weaknesses increase the risk of error and the potential abuse of leave time benefits.

County officials adopted budgets and monitored budgets and operations throughout the year, resulting in available surplus funds at the end of 2013 totaling $10.8 million. However, surplus funds are below 5 percent of the 2014 adopted budget, which is required by the County's own policy. In addition, the County's revenues for 2013 included moneys raised by an additional 1 percent sales tax that is subject to reapproval from the New York State Legislature every two years. The New York State Legislature's reapproval for the County to keep its additional 1 percent sales tax ended on November 30, 2013. As a result, the County could not levy additional sales tax after November 30, 2013. County officials explained that the County would experience a revenue shortfall due in part to the loss of approximately $2 million dollars of sales tax revenue for December 2013. Because of the uncertainty regarding the sales tax extension, the County budgeted to use $13.2 million of the County's unexpended surplus funds to balance the 2014 Executive budget. The State Legislature reapproved the County's additional 1 percent sales tax levy in January 2014. We conducted a review of the County's proposed budget for 2014 and found that the significant revenue and expenditure projections in the budget are reasonable. Because the sales tax extension was approved, the County may not have to use all of the fund balance that it appropriated for 2014 and its surplus fund balance at the end of 2014 may be higher than initially expected.

In 2013, the Board attempted to improve the segregation of duties over water billings and collections. Although there was an improvement, duties were not fully segregated and compensating controls were not established. The Board established the position of water clerk to be responsible for billing and collecting water charges. The water clerk's duties were primarily the same as the former bookkeeper's duties except that the water clerk also collected payments. The Board also appointed an account clerk to make bank deposits. In addition, the Board approved the water billing rate and all billing adjustments for both years. Although there was a certain level of Board oversight and certain duties were segregated, these compensating controls were not sufficient because the water clerk was responsible for the billing process, collecting and recording the payments into the accounting records, and could make adjustments to the customers' accounts without prior approval from the Board. Having such responsibilities increases the risk that the water clerk could make adjustments to customer accounts and not record all collections turned over to her.

We found that the Treasurer maintained appropriate financial records, with the exception of bank reconciliations, and disbursements were generally for reasonable Department expenditures. However, the Board does not provide adequate oversight of Department financial activities. Although the Department's bylaws specifically detail the Board's responsibilities and the Treasurer's duties, these guidelines do not adequately segregate the Treasurer's duties. In addition, the Board has not adopted any written policies or procedures addressing cash receipts and disbursements, procurement or claims processing. As a result, the Treasurer makes all deposits, disburses cash without the Board's prior approval and performs all recordkeeping functions. While the Treasurer provided a monthly report to the Board detailing receipts, disbursements and cash balances, proper bank reconciliations have not been prepared. Further, the Board has not required the Treasurer to submit an annual report, conducted an annual audit of the Treasurer's records or adopted an annual budget as required by the bylaws.

The Supervisor relied on the bookkeeper to perform most of the Town's financial duties without providing any oversight. The bookkeeper was solely responsible for receiving and disbursing Town money as well as recording and reporting the Town's financial activity. The bookkeeper prepared reports for the Board by summarizing monthly financial activity without ensuring the reported balances were accurate and complete. Additionally, the Supervisor has not filed the required annual financial report with OSC since 2008. Finally, the Board failed to audit the Supervisor's financial records, as required.

Based on our limited procedures, it appears that the Village has made progress implementing corrective action. Of the four audit recommendations, two recommendations were implemented and two recommendations were partially implemented.

The Justices did not properly account for all court fines, fees and surcharges. We also found that pending cases and payments due were not followed up in a timely manner. In addition, we traced one month of cash receipts to bank deposits and the monthly report to the Justice Court Fund (JCF) for the former Justice and the current Justice. We found that the former Justice generally made deposits intact but not always timely. For example, fines and bail received on January 6, January 9, and January 13, 2012 totaling $3,470 were not deposited until January 17, which is not within the 72 hours required by the regulations. We found that the current Justice generally made timely and intact deposits. For both Justices, the amounts collected, during the two months we reviewed, were reported to JCF correctly. We also found all monthly reports we reviewed were submitted to the JCF in a timely manner.

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.