Over the last four years, District officials consistently overestimated expenditures in the adopted budgets by a total of $5.5 million. As a result, the District had operating surpluses of $2.7 million, which caused the accumulated fund balance to exceed the statutory maximum of 4 percent of each ensuing year's budget. During these four years, District officials appropriated $3.2 million in fund balance that was not needed to fund the budgets, and transferred approximately $1.1 million to the District's reserves with no documented plan or justification for the excessive funding levels, which effectively allowed it to circumvent the statutory limits. District officials have exceeded the 4 percent fund balance limit by an average of approximately $1.1 million in the fiscal years 2009-10 through 2012-13, levied more real property taxes than necessary and retained large amounts of taxpayer dollars without full disclosure of how these funds will be used.

We found that the Board approved transfers of School funds totaling $425,000 to capitalize two wholly-owned private entities which the Board caused to be established for the purpose of enabling the School to engage in what are essentially commercial ventures. We question whether the Board had authority to approve the transfers. Even if the Board had authority to approve the transfers, we were not able to assess the level of risk involved with the School's participation in these ventures because School officials refused to provide us access to either entity's financial records. We also note that the School made payments for services to one of the entities without a written contractual obligation to do so.

The School entered into a three-year compact agreement with the Brighter Choice Foundation (Foundation) in April 2013. During the 2012-13 fiscal year, the School paid the Foundation a fee of $32,218 to become a member of the charter school network and receive services stated in the compact. We reviewed the compact document and did not identify a specific declaration made by the Foundation that clearly defined what activities it will engage in to achieve the stated goals and objectives. Also, the compact did not contain a specific performance measure to determine whether the services had been received by the School to warrant the School's payment of the $32,218. In addition, we asked the Board President to describe the services the School is receiving from the Foundation, but the Board President could not provide specific details regarding such services. Therefore, because School officials are not certain of the services they should be receiving under the compact, they cannot determine if the School is actually receiving the services it has paid for.

The Board did not demonstrate that it used an appropriate process to ensure it obtained a suitable site at a reasonable cost. School officials did not document that the Board performed an appropriate cost analysis of the selected site or alternative sites. Consequently, the School agreed to an arrangement requiring it to pay more than $5.1 million for the acquisition and renovation of its building financed at a 20 percent interest rate. We found that the building was acquired and renovated for approximately $1.4 million, and that a developer fee and interest costs will total more than $3.7 million over the term of the School's 15-year lease. As a result of a recent decision to prepay a portion of the debt, the School was able to save approximately $136,000. In addition, the business office did not maintain accurate and supported leave accrual records for all School employees. The School does not require that all employees submit leave request forms. Those employees required to submit forms did not do so consistently, and the forms did not always include evidence of required approvals.

By incorporating renewable energy technologies and efficient building placement and design, the Town Board has reduced the amount of energy purchased and the greenhouse gas emissions for Town facilities. Since April 2010, the Board has generated 48,584 kilowatt-hours (kWh), of which 22,202 kWh were utilized by the Town, resulting in savings of $2,500, or a 36 percent reduction in energy purchased. The remaining 26,382 kWh (48,584 minus 22,202) were sold back to the energy provider, resulting in additional savings of $3,000. The Board also has reduced carbon dioxide emissions by 76,000 pounds, which is equivalent to annual greenhouse gas emissions from seven passenger vehicles, or carbon dioxide emissions from the electricity use of five homes for one year.

We found that certain billings were not accurate and enrollment was not always adequately supported. In some instances, for students with less than full-time enrollment, School officials incorrectly calculated the FTEs, which resulted in over-billing school districts by more than $10,200. We also reviewed the 2012-13 fiscal year FTE report prepared by School officials and found that the School may be owed approximately $13,500 from one of the school districts. However, due to the incorrect calculations of FTEs identified in our testing, it is unclear whether this amount owed to the School is entirely accurate. We also found that the School's system of collecting and reporting student data could be improved. In addition, of the 22 students' files sampled, the proof of residency on file for five students was either inaccurate or missing.

The School did not consistently comply with the Law and guidance regarding fingerprint-supported criminal background checks. The School has a policy entitled "Fingerprint Process" in their Onboarding Guide, which stated that "All school employees must be fingerprinted before they are authorized to work in a school in New York State." We requested documentation to support that all adults working on site have been properly fingerprinted. Two of the 25 workers tested did not have complete background checks performed prior to working at the School. For one worker, School officials did not obtain clearance specifically for their School. A School official told us that because the worker was previously cleared at another charter school, School officials believed they did not have to obtain clearance. In addition, the former CEO did not have fingerprint records on file with OSPRA at the time of our testing. Fingerprint records were obtained subsequent to our request and we were provided documentation that on June 14, 2013 the former CEO’s fingerprints were filed with OSPRA and cleared.

Neither the Board nor the Department of Public Works Superintendent has taken adequate steps to identify and reduce the amount of water loss within the Town's system. Town officials failed to periodically compare the amount of water produced with the amount billed for, and were not aware of the extent of water loss until we brought it to their attention. We compared water production reports with water billing registers for six consecutive quarters and found that the Town's water loss over that period totaled approximately 63 percent of water produced. Water loss was more than 57 million gallons over the six quarters, or an average of 9.5 million gallons per quarter. The cost to produce this water for the period totaled approximately $176,000.

While the Board meets regularly to deal with a range of issues, its oversight of the School's fiscal affairs could be improved. The Board contracted with National Heritage Academies Inc. (NHA) to be responsible for the administration, operation and performance of the School in accordance with the School's Charter and subject to the oversight and authority of the Board. The agreement transfers all School revenues to NHA, and the revenues are to be expended by NHA in accordance with the approved budget, and as otherwise authorized by the Board. NHA provides the Board with projected budgets, budget amendments and quarterly financial statements for its review. Although the Board reviews and approves budgets and budget amendments, the budgetary information and the quarterly financial statements lack transparency to allow the Board to identify the fee for services paid to NHA and to distinguish indirect from direct costs, and how indirect costs are allocated by NHA to the School. For example, $2.9 million in indirect costs have been allocated to the School by NHA but the Board has not received support for how the costs are allocated. As a result, this limits the Board's ability to adequately monitor NHA and verify indirect costs allocated to the School are accurate and appropriate.

We reviewed four building leases and 12 service contracts entered into by the School to ascertain if it has procurement procedures and policies designed to obtain the best possible goods and services for the best price. We found that the School entered into the leases without any process for determining the fair rental value of the buildings. Similarly, although competitive bidding is not required, we found that the School only sought competition for one of the service contracts we reviewed. These findings are of particular concern because the leases and contracts were entered into with organizations having various types of business or occupational relationships with members of the Board or their family or friends. Under these circumstances, it is questionable whether the leases and contracts were in the best interest of the School. The School paid for use of a building and for certain services without having entered into written agreements. The School also lacked appropriate information technology (IT) policies and procedures. The School did not properly control user access rights to the IT system and did not properly establish a disaster recovery plan. Furthermore, we found that the School lacked accurate IT inventory records.

The Village's internal controls over billing, collecting and enforcing water fees needs to be improved. The Clerk's duties were inadequately segregated, unpaid water bills were not accurately re-levied, water bills were not prepared in accordance with the Village's local law, and the Board did not approve all customer account adjustments the Clerk made in the water accounting system. Further, the Board did not annually audit, or cause to be audited, the Treasurer's records. As a result, there is an increased risk that the Village may not be collecting all the revenue to which it is entitled and the Board's ability to monitor the Village's water operations is diminished.

The Justice did not establish adequate internal controls over the Court's financial operations. Specifically, the Justice did not perform bank reconciliations, prepare monthly accountabilities, deposit cash receipts in a timely manner, properly account for bail money held by the Court or submit the required monthly reports to JCF in a timely manner. Because of these weaknesses, there is an increased risk that errors and irregularities could occur without being detected and corrected, which puts public resources at risk.

Although the District has implemented procedures and controls over the payroll process, there is room for improvement due to the lack of uniformity in procedures. Due to the lack of specific guidance and uniformity for timekeeping procedures, we tested computerized data and records for samples of employees, including substitutes, working for different functional departments and school buildings. Our tests included regular hours, overtime and the use of accrued leave time such as sick leave. For example, we selected six of 64 employees with custodial titles, eight of 83 employees with bus driver titles and five of 55 employees with food service titles. Except for minor deficiencies that we discussed with District officials, we found that the controls over timekeeping were adequate to limit the risks associated with a lack of specific guidance and uniform procedures. However, the District can strengthen the controls over timekeeping by establishing and implementing uniformity of procedures and forms.

The Board did not adopt a policy or develop procedures to govern the level of fund balance to be maintained. Additionally, the Board had not developed accurate budget estimates or a formal, comprehensive multiyear financial and capital plan to adequately address the Town's long-term operational and capital needs. As a result, the water fund has retained excessive amounts of unexpended surplus fund balance. Unexpended surplus funds were consistently more than the actual expenditures in each of the fiscal years 2008 through 2012. In contrast, the highway fund reported deficit unexpended fund balances of approximately $61,000 in 2011 and $10,000 in 2012. Because the Board considered that the tax levies were no longer sustainable without significant budget cuts, it enacted a local law in 2012 to override the 2 percent property tax increase limit under the new tax cap law, thereby allowing the Town's 2013 budget to exceed the tax cap by $25,403, or approximately 5 percent.

We found that Department officials have established adequate internal controls over cash receipts. Department officials established a fiscal management policy in February 2012 providing guidance over the collecting, recording, depositing and safeguarding of cash receipts received in the civil office. We also determined that various control procedures that Department officials had implemented over the cash receipts process in the civil office provided additional oversight. We tested 147 receipts totaling $14,592 from January 1, 2012 through December 31, 2012 and 127 receipts totaling $12,203 from January 1, 2013 through June 30, 2013. We found that appropriate receipts were issued for all the cash receipts reviewed; they were recorded accurately and timely into the computerized system, and were deposited timely and intact.

The Board did not adopt realistic budgets or routinely monitor financial operations. School officials created an expenditure code entitled “building fund” and budgeted $4.8 million for it in the 2010-11 fiscal year, $5.2 million in 2011-12, and $2.6 million in 2012-13 even though School officials had no expectation of any outflow of cash for such expenses. As a result, net income was understated in each of those three years. Additionally, the Board is not monitoring the annual budget and has not established a Budget and Finance Committee as required by School by-laws. The School also paid for Board member expenditures that were not authorized by the School by-laws or policy. Of $31,630 in Board expenditures, $26,444 was not authorized. These expenditures, which included undocumented credit-card charges as well as direct reimbursements, were for food, transportation to attend regular Board meetings, lodging and charges for the Chairman's cell phone. Additionally, the former Chairman was directly reimbursed for an undocumented expenditure, and alcohol was purchased at Board dinners. Finally, the School paid four vendors a total of $521,197 for significant public work and purchase contracts without fair competition, did not seek competitive price quotes when procuring goods and services totaling $16,028, and engaged six professional service providers, paid a total of $478,264, without soliciting competition. Further, the School paid an information technology consultant $118,182 more than the agreement provided, and did not have an applicable agreement for paying $25,713 for security services.

The Board has taken steps to provide oversight of the Library/Museum's financial activities. An accounting firm prepares the accounting records, and the Executive Director provides the Board with financial reports. However, the Board did not adopt a budget for the fiscal years 2011-12 and 2012-13, as required by the by-laws, and did not monitor and comply with the stipulations in the Foundation Agreement regarding the maintenance of Foundation funds. In fact, although the Foundation Agreement stipulates that the Library/Museum can only spend interest earned on Foundation funds, the Library/Museum violated this stipulation by spending $138,458 of principal. While the Board reviewed bills prior to payment, it allowed them to be paid late due to the lack of available cash. We also found weak controls over cash receipts. The Board contracted with an accounting firm to provide accounting services but did not review any bank statements, reconciliations, or canceled checks to ensure payments were only for authorized purposes.

City officials failed to maintain accurate and complete accounting records. We identified significant inaccuracies in balance sheet account balances as well as in revenues and expenditures. The City's fiscal year runs from July 1 through June 30 and the City generally prepares and files its Annual Update Document (AUD) in conjunction with the annual independent audit of the City's financial statements. As of September 17, 2013, the City had not yet closed its accounting records, initiated the independent audit or filed the AUD for the 2011-12 and 2012-13 fiscal year. We reviewed the annual financial reports and audited financial statements prepared by the City's independent auditor for the 2009-10 and 2010-11 fiscal years and found the independent auditor issued qualified opinions on the City's financial statements in both years.

The City's Boat Basin operations are generally operating efficiently. However, the cost allocation of administrative services could be improved. In 2000 and 2001, the City contracted with an outside vendor to analyze and calculate cost allocations for its enterprise funds including the Boat Basin fund. Although the cost allocation was updated in 2001, it has not been updated since that time. The City increased the administrative services costs charged to the Boat Basin each subsequent year until 2009, but City officials could not provide documentation showing their methodology for calculating these annual increases. From 2009 through 2013, the City has charged an annual flat fee of $88,367 for administrative services provided to the Boat Basin. We estimated the amounts the City undercharged the Boat Basin fund, during fiscal years 2009 through 2013, using the last cost allocation methodology in 2001 and the City's actual costs for each of the five years. Based on the 2001 methodology, the Boat Basin has been undercharged approximately $50,000, since 2009.

While the Board adopted the Company's constitution and bylaws, which dictate the manner in which operations are to be conducted, these procedures are insufficient. In addition, the Board is not providing adequate oversight to ensure the procedures in the constitution and bylaws are being followed, and did not establish a code of ethics. Although the Administrative Board authorizes each claim for payment presented to it, through a resolution noted in the minutes, there is no process in place to verify that all claims approved by the Administrative Board are properly paid, or that the Administrative Board is presented with and approves all the claims that are actually paid. Neither the Board nor the Administrative Board reviews monthly bank statements or require the Treasurer to perform bank reconciliations. Also, the Treasurer's report is usually verbally communicated as the Treasurer is not timely with recording financial information. Finally, the Treasurer's books are consistently reviewed by a disinterested third party who reported that everything was in good order; however, this review was not an effective audit as it failed to identify the weaknesses and discrepancies we found in our audit.