We found that the Board has not adopted a policy and Town officials have not developed procedures to govern the level of unexpended surplus funds to be maintained. Additionally, the Board has no policy for developing accurate budget estimates. As a result, the Board has underestimated revenues in its town outside-village funds over the last three years totaling $186,968 in the general fund and $339,662 in the highway fund. The Board also overestimated expenditures in its town outside-village funds for the last three years totaling $49,557 for the general fund and $183,154 for the highway fund. Because the Board did not adopt accurate and realistic budgets and monitor them against actual results of operations the Town has accumulated excessive fund balances in the town outside-village funds, 115 percent in the general fund and 93 percent in the highway fund for the ensuing years' appropriations. In addition, the Town comingled cash for various funds but did not account for cash separately by fund until the year-end financial reports were prepared. Therefore, at the end of 2011 the Board decided to transfer an additional $55,000 from the highway town-wide fund to the capital project fund and the Board appropriated $30,000 of non-existent highway town-wide fund balance in its 2013 budget to help pay for expenditures As a result, as of December 31, 2012, the highway town-wide fund had a total deficit fund balance of $36,491. Finally, there were no policies or procedures for the establishment, use and record keeping requirements for reserve funds and the Town could not provide any documentation to indicate that any of the reserves were properly established pursuant to General Municipal Law.

We found that the Board generally did not provide adequate oversight of District financial activities. The Board did not audit the Treasurer's financial records or provide adequate evidence that claims were audited prior to payment. The Treasurer has not filed the required annual financial report with OSC since 2009. The Treasurer also did not receive or review cancelled checks (or check images) and did not prepare monthly bank reconciliations to determine whether any differences existed between bank records and his check register.

We found that the Board does not provide adequate oversight of District financial activities. Although the Board has adopted procurement, investment and code of ethics policies, it did not ensure there were proper controls over cash disbursements or ensure the Treasurer was performing her duties properly. The Board reviews the claims at biweekly Board meetings. However, because it is not reviewing monthly bank statements or bank reconciliations, the Board cannot verify if it is approving all claims for payment. In addition, it cannot determine whether there are any discrepancies between bank and book cash balances. In addition, the Treasurer has not filed the annual update document with the State Comptroller's Office for the years 2009, 2010, 2011 and 2012.

The District's financial position has deteriorated over the last three years because the Board has not adequately budgeted for expenditures. Specifically, the District's fund balance has declined 74 percent from approximately $120,000 in 2010 to $30,000 in 2012 and available cash decreased from $131,000 to $24,000, which was 4 percent of 2013 appropriations. These declines were largely due to unbudgeted and unforeseen repairs to the District's equipment. The Treasurer submitted budget-to-actual reports to the Board on a quarterly basis. The Board has not developed any long-term financial or capital plans and only receives financial reports that detail the adopted budget and year-to-date revenues and expenditures on a quarterly basis. In addition, the Board has not established written policies and procedures to govern financial operations including; investments, cash receipts, capital planning and information technology.

The Justices did not ensure that Court moneys were accounted for properly. We found numerous errors and irregularities, from adjudicating traffic tickets to recording, collection and deposit and in reporting to the Justice Court Fund (JCF) and the Department of Motor Vehicles (DMV). For example, $1,325 in collections was recorded with no corresponding deposits; 10 cases totaling $2,520 were reported to the DMV as paid, with no related records of receipt or deposit; and we identified a $3,500 shortage in the Court account of Justice Race (retired), of which $2,300 in bail had been forfeited during our scope period but not deposited or remitted to the JCF. Further, over 903 tickets with outstanding fees on record at the DMV were not current in the Court's records and, therefore, represent significant unrealized revenue. The Justices did not prepare monthly accountabilities, which could have identified these discrepancies. Although the Board engaged a CPA firm to annually review certain Court activities, these reviews were on average five months late and the Board did not fully understand the deficiencies reported or take any corrective action until recently.

Over the past five years, District officials have consistently overestimated expenditures totaling $12.5 million. Although the Board appropriated unexpended surplus funds each year (approximately $10.3 million over a five-year period) to help finance the ensuing year's operations, District officials actually used $2.5 million (24 percent) of unexpended surplus funds for District operations. The consistent overestimation of expenditures resulted in the District not using fund balance that was appropriated. This allowed District officials to make it appear that they were in compliance with the 4 percent statutory limit, when in fact, they were not.

The Highway fund incurred a significant operating deficit in 2011 totaling more than $180,000 which resulted in deficit unexpended funds. The operating deficit was caused by substantial storm-related expenditures for which reimbursement was not received from the Federal Emergency Management Agency (FEMA) until 2012. Additional storm-related projects were initiated in 2012 for which no reimbursements from FEMA or the State Emergency Management Office (SEMO) were received. Town officials issued revenue anticipation notes totaling $260,000 to provide the cash necessary to finance these projects. The general fund also made interfund loans, totaling more than $101,000, to the highway fund to finance highway operations as of December 31, 2012, which were not repaid by the end of the year as required by statute. Further, Town officials did not develop detailed repair cost estimates and a plan to finance the 2012 projects prior to initiating them to ensure that adequate resources would be available as expenditures were incurred. In addition, the Supervisor did not ensure that timely and accurate accounting records were maintained. The accounting records were incomplete and included inaccuracies that hindered filing the 2012 annual update document (AUD) with the Office of the State Comptroller.

The Board did not ensure that fuel supplies in the parks department were adequately safeguarded and properly accounted for. In addition, the fuel monitoring system in the highway department is not being used to its fullest capabilities. Employee and vehicle information are not identified within the system and the odometer reading is not a required entry when dispensing fuel. The Town paid approximately $1,870 more than necessary for unleaded fuel purchased by the parks department. We found no evidence of inappropriate fuel use in either department. In addition, the Board has not established a fleet management policy or conducted a needs assessment to determine if the vehicles in the Town's fleet are being utilized effectively. We found that not all vehicles are being fully utilized, and the Town may achieve savings by considering other alternatives, such as reimbursing employees for mileage, or establishing a pool of vehicles to be shared by multiple departments rather than assigning vehicles to individual employees.

We found that the records maintained by the County Clerk and Surrogate's Court were generally up-to-date and complete, and we noted no material discrepancies. 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 four actions totaling $9,663 which were not properly turned over to the State Comptroller as abandoned property. After we brought these actions to her attention, the Treasurer took immediate corrective action.

The Board did not adopt a policy governing the use of Town-provided cell phones. The Board determines on an as-requested basis which individuals are provided a Town cell phone, according to the Town Clerk. The Town does not have established written guidelines or documentation that shows the process or decisions made by the Board when providing individuals with Town cell phones. While the Town provided cell phone service to Town officials and employees for job-related use, it also provided this service to individuals who did not perform any Town functions. Generally, the people allowed to have Town cell service were relatives of Town managers. By participating in the Town's plans, these individuals generally paid only for the cost of an additional line (approximately $10), rather than the full access charges. Although the Town established some controls to be reimbursed for the cost of cell phone services provided to certain individuals, it lacked a policy or contract stating what amount should be reimbursed, when payments are due and what is to be done if someone does not reimburse the Town in a timely manner.

Based on the results of our review, we found that most of the significant revenue and expenditure projections in the tentative budget for the general, sanitation, water and sewer funds are reasonable. The tentative budget did not include a tax overlay or provisions for potential salary increases from contract settlements. In addition, the tentative budget includes revenue that is not achievable. These issues could cause the Village to become fiscally stressed or require them to increase taxes.

We found that the Board generally provides adequate oversight of District financial activities. However, the Board did not annually review and update its adopted procurement policy. Currently, the District's procurement policy requires officials to obtain three written quotes for purchases costing from $5,000 to $10,000, but does not address the process to be followed for purchases between $10,000 and $20,000. The District annually spends approximately $9,000 for natural gas and $13,000 for electricity. We found that the Board was not soliciting proposals for either of these purchases. We reviewed natural gas and electricity bills from September 2012 through September 2013 and compared the rates the District paid with rates charged by a local energy cooperative. We estimate that the District officials could have saved approximately $4,000 on their electricity bills if they had obtained quotes for these purchases.

We found that the Officers generally provide adequate oversight of Company financial activities. The Treasurer prepares monthly reports and the President annually reviews the Treasurer's records. Although Company minutes include motions to “pay all bills,” it is unclear what bills are being approved for payment. In addition, the majority of payments made by the Treasurer were paid with cash from the petty cash fund, leaving no audit trail. Due to these deficiencies, we reviewed all 162 disbursements from the petty cash fund totaling approximately $14,000 from January 1, 2012 through October 8, 2013. Although we found that disbursements generally had receipts, recorded cash payments for 18 disbursements, totaling $574, did not have receipts. However, the Treasurer was able to identify the purpose for each payment as a proper Company purpose.

County officials have not ensured that the Department account clerks' financial duties were adequately segregated. While our testing did not disclose material issues, the clerks' ability to control all cash receipts and disbursement functions increases the risk that Department funds could be misappropriated without detection. Also, although the Department has established policies for disbursing restitution money retained in a victims' trust fund, Department officials have not disbursed these funds in a timely manner in accordance with the policy. As of July 2013, the balance in the victims' trust fund totaled $130,707; this excessive balance precludes many crime victims of unsatisfied restitution orders from receiving the money to which they are entitled. Finally, the Department's software does not produce accurate accounts receivable aging reports, which hinders Department officials' ability to monitor these accounts and take appropriate action.

Town officials do not have written procedures for reconciling the water produced by the Town's water system with the water billed to the Town's customers. Although the Superintendent prepared the Water Withdrawal Report Form to be submitted to the New York State Department of Environmental Conservation on an annual basis, he did not prepare formal reconciliations comparing the amount of water produced to the total amount metered and estimated amounts for authorized unbilled uses. For the audit period, the Town could not account for 53 percent of the water produced. Using the rates paid by the Town customers and the 11.6 million gallons of unaccounted-for water in excess of the standard industry allowance, we estimate that the Town lost $23,327 in revenue if the unaccounted-for water was due to malfunctioning meters. Conversely, if the unaccounted-for water is due to leaks rather than malfunctioning meters, the Town is incurring excess costs for producing water. We estimate that it costs the Town $1.06 to produce 1,000 gallons of water. Therefore, it cost the Town $12,394 to produce the Town's 11.6 million gallons of unaccounted-for water.

For the last five fiscal years ending June 30, 2013, the Board and District officials consistently underestimated revenues by a total of $7.2 million and overestimated expenditures by a total of $4.4 million. These budgeting practices generated approximately $6.7 million in operating surpluses, which caused unexpended surplus funds to significantly exceed the statutory limit each year. Although District officials annually appropriated fund balance to reduce the tax levy, these funds were not needed because the budgeting practices generated operating surpluses. As a result, the District's unexpended surplus funds exceeded the statutory limit of 4 percent of the ensuing year's budget by more than $7 million, or 35 percent, as of June 30, 2013. Furthermore, District officials improperly accounted for certain financial activity which understated unexpended surplus funds by approximately $1 million. Consequently, the District has accumulated more than $8 million in unexpended surplus funds.

The School entered into a three-year compact agreement with a not-for-profit foundation (Foundation) in June 2011. All Board members voted in favor of the compact agreement, except for the Board Chairman, who recused himself from voting because he is also the Foundation's Executive Director. The compact does not describe in detail the services that the Foundation will provide. The fee for the services is 1 percent of total pupil revenue from the prior academic year. The total 2012-13 fiscal year fee due to the Foundation was $14,801. In January 2013, the School revised the compact contract with the Foundation. The revised compact provides further detail about the specific services that the Foundation could provide the School and increases the fee from 1 percent of total pupil revenue for the 2012-13 fiscal year to 1.5 percent for the following year, and 2 percent for the contract's final year. The fee structure, based on a percentage of per pupil revenue, does not appear to be reasonable, as the services being provided do not have any bearing on the number of students at the School or the State Education Department's Charter School Tuition rate. In addition, during the audit period, two Board members were also officers or directors of the Foundation. While both filed financial disclosure forms, neither disclosed their relationship with the Foundation on these forms.

District officials did not adopt policies governing the establishment, use and maintenance of reserve funds and could not demonstrate the reasonableness of reserve balances. As a result, two of the District's reserve funds had balances that totaled $3.19 million in excess of the amounts needed for authorized purposes, and three of the District's reserve funds had balances that totaled $1 million that were not supported by a written plan or other documentation validating the amounts retained. District officials also do not have a comprehensive payroll policy supported by written procedures. As a result, there is no independent review of leave time records. In addition, District officials do not ensure that access rights to the payroll and human resource modules within the computerized accounting system are appropriately limited. Finally, Board President Larry Gauger is employed by an engineering firm that does business with the District. Mr. Gauger formally disclosed his interest in writing and abstained from voting on matters involving the firm. However, it is unclear whether he has directly performed engineering work on District projects. If he was involved with the procurement, preparation or performance of the contract, or if his compensation from the firm was directly affected by the firm's relationship with the District, he would have a prohibited interest in the contract.

The Board did not ensure budget estimates were reasonable. Over the last five years, the District appropriated a total of almost $3.6 million of unexpended surplus funds and budgeted for expenditures from its reserves in its budgets. Although unexpended surplus and reserve funds were included in the budgets as a financing sources, the District did not actually use the surplus funds or all of the budgeted reserve fund amounts as planned in fiscal years 2008-09 to 2009-10 and fiscal years 2011-12 to 2012-13 because District expenditures were significantly less than what had been estimated for those years. In addition, two of the District's reserve fund balances are excessive. Finally, when we consider the total operating surpluses and planned use of fund balance over the last 5 fiscal years, the District raised $2.4 million more in taxes than necessary for operations.

On May 27, 2011, the Board approved a compact contract between the School and a not-for-profit foundation (Foundation) that states that the Foundation will provide the School with access to legal and financial assistance, technical support and advocacy at State and local levels. The fee for these services is 1 percent of per pupil revenue from the prior academic year. On January 31, 2013, the Board approved a revised compact contract with the Foundation that supersedes the prior compact contract. The revised contract increases the fee from 1 percent for the 2012-13 school year, to 1.5 percent for the following year, and 2 percent for the final year of the contract. The increase in the fee percentage over the next two years will place an additional financial burden on the School. The fee structure of a percentage of per pupil revenue does not appear to be reasonable, as the services being provided do not have any bearing the number of students at the School or the State Education Department Charter School Tuition rate. We also found that the School did not budget properly. The School failed to accurately budget a number of expense accounts, including failing to budget some account codes and using unrealistic amounts in others. In addition, the School does not modify its budget during the year. During fiscal years 2011-12 and 2012-13, School officials had budgeted for a $650,362 surplus. However, the actual net income amounted to only $89,497, a shortfall of $560,865.