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.

We reviewed the various resolutions, minutes of Board meetings and bond statements to ensure the Board took appropriate actions to authorize the issuance of the water and sewer revenue bonds. Furthermore, we examined the chief financial officer's (CFO) financial records to ensure the debt proceeds were properly allocated and expended from the various capital projects. We found the issuance of debt proceeds were properly authorized by the Board and the proceeds and related expenditures were appropriately accounted for by the CFO.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. District officials have also taken some corrective action by preparing a projection of year-end fund balance for the food service fund while also improving the overall solvency of the fund. Finally, the District's proposed budget complies with the property tax levy limit because it includes a tax levy increase within the statutory limit.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget for the general, electric, library and parking funds are reasonable. However, the water and sewer funds' tentative budgets are not balanced, and include a deficit of more than $273,000 and $264,000, respectively, or almost 10 percent in each fund. Village officials told us they recognized the deficit, and planned to raise water and sewer rates to make up the difference. We recommend the Board address these deficits in order to avoid adopting budgets that include appropriations without sufficient financing sources. We had a similar finding in last year's budget and the Board did adjust the rate structure and reduced some expenditures; as a result of the actions taken by the Board, the funds are projected to not incur a deficit for the current fiscal year. In addition, the Village's tentative budget does not comply with the property tax levy limit.

We found that District officials established adequate internal controls over payroll. District officials implemented specific procedures to ensure that individuals reported and paid on the payrolls were paid at their approved salaries and wages, and that they received only the benefits to which they were entitled.