We found that the Board was not sufficiently aware of its many legal and administrative requirements and responsibilities as Trustees of a School District Public Library, and therefore, did not provide adequate oversight of Library operations. In fact, for various aspects of operations, Library officials seemed to believe that, and operate as if, the Library was a not-for-profit (NFP) corporation, instead of a public entity. For example, the Library did not file the required annual financial report with the Office of the State Comptroller, and may have incurred unnecessary costs to have an outside accountant annually prepare and file IRS Form 990, which is generally not required for governmental entities. While such confusion may have contributed to some of the deficiencies we identified related to legal compliance, the Board also failed to establish and enforce basic internal controls over Library operations, which would be essential for any entity to operate effectively. Although the Board had adopted an investment policy pursuant to statutory requirements, it did not follow or enforce the policy. Instead, it allowed Library moneys (totaling nearly $1.2 million as of June 30, 2013) to be improperly deposited in types of investments which are not allowed by law, putting Library resources at a greater risk for loss. In addition, the Board had not developed written policies and procedures covering most other aspects of financial operations and had not adopted a code of ethics. The lack of detailed policy and procedural guidance for staff, with very few internal controls in place, left much at the discretion and control of the former Director (who had run the Library for nearly 30 years).

The Board did not adopt comprehensive written policies and procedures to provide proper guidance and internal controls over leave accruals. There was minimal oversight of the employee leave accrual records maintained by the payroll clerk. The payroll clerk receives records containing employees' absences, which she uses to deduct the amount of leave time taken from each employee's leave accrual balances. However, we found that the cafeteria manager, head custodian and committee on special education secretary submit records of their leave time used to the payroll clerk without any independent approval. In addition, other than the payroll clerk providing the leave accrual balances to the employees on an annual basis, there are no periodic reviews performed by a District official to ensure the accuracy of the leave records maintained by the payroll clerk.

We reviewed budget-to-actual general fund results for the 2011 through 2013 fiscal years and found that City officials had adopted realistic budgets. The City Manager reviewed budget-to-actual comparison reports throughout the year and kept expenditures within budgeted appropriations. However, heavy reliance on appropriated fund balance as a financing source in the 2011 and 2012 fiscal years resulted in a significant reduction in the City's general fund balance and unassigned fund balance. Beginning in the 2013 fiscal year, City officials took steps to replace fund balance. Based on the City's 2013 revenue increases and cost-saving measures adopted in 2013, it appears that City officials are properly managing the City's financial condition. City officials should continue to implement cost-saving measures and reduce the City's dependence on using unassigned fund balance as a source of financing operations.

Over the past five years, District officials consistently overestimated expenditures by a total of more than $8 million, resulting in operating surpluses totaling $6.3 million. To reduce fund balance and stay within the year-end statutory limit for unexpended surplus funds, District officials transferred money to District reserves and consistently appropriated unexpended surplus funds to reduce the tax levy. However, because of the District's operating surpluses, almost $3 million of fund balance appropriated over the five-year period was not used. These practices gave the appearance that the District's fund balance was within the legal limit when in effect it exceeded the limit each year. We also found that the District routinely funded its retirement contribution reserve with operating surpluses at year end, instead of funding the reserve through the annual budget process, which would have been more transparent to taxpayers.

The Board and District officials overestimated expenditures by a total of $21.3 million and underestimated revenues by a total of $2.3 million during the last four completed fiscal years. Although District officials appropriated fund balance in each year to reduce the tax levy, most of these funds were not needed because of the poor budget estimates. Consequently the District generated a total operating surplus of approximately $9 million, which was used to increase the District's reserve funds. We found that the District has approximately $2 million in excess reserve fund moneys.

The District reported year-end unexpended surplus fund balance at levels that essentially complied with the 4 percent limit for fiscal years 2009-10 through 2012-13. This was accomplished by appropriating fund balance. The Board's appropriation of fund balance aggregated to more than $11 million over the past four years, which should have resulted in planned operating deficits. However, because the District significantly overestimated expenditures in its adopted budgets, it experienced large operating surpluses in two of the four years and needed less than $270,000 of the appropriated fund balance. For that period, total actual revenues exceeded expenditures by more than $4.7 million. Had District officials used more realistic budget estimates they could have avoided the accumulation of excess fund balance.

The Town's procurement process was generally effective for obtaining goods and public works contracts subject to the policy's bidding thresholds. In most instances the Town purchased equipment and commodities through State or County contracts or by competitively bidding. However, we found one instance where Town officials did not follow these procedures and paid $2,200 more than necessary for road sand from a local vendor. Additionally, Town officials did not always ensure that written documentation was maintained for the quotes obtained for purchases that were not required to be competitively bid. Finally, officials did not develop and follow formal procedures for obtaining professional services and did not have written contracts in place with all professional service providers. For example, Town officials paid an engineering firm approximately $117,000 without the benefit and protection of a contractual agreement. As a result, the best value for goods and services may not have been obtained, resulting in unnecessary costs to Town taxpayers.

The Board has not developed policies or procedures which clarify how comp time will be appropriately administered. Officials use informal, undocumented procedures that are not consistently applied. For example, there is no established deadline when a request to earn comp time form should be submitted for approval. As a result, request forms are not always submitted timely and the supervisor approving the form may not be able to verify the time that was presumably worked. In addition, policies should provide clarification to contract provisions, such as, specifying the circumstances when comp time can be earned, the maximum number of hours that can be accumulated and any restrictions on the use of accumulated comp time. We found that some District employees have been accruing comp time during normal work hours. Therefore, some employees were compensated twice for the same hours which could potentially cost the District $82,000.

We found that the Clerk remitted tax collections to the Town and the County up to two months late and returned duplicate payments eight months after the payment was made. The Clerk did not routinely indicate the form or date of payment on tax stubs/receipts and made deposits on average nine days late. We also found that the Clerk did not properly receive, deposit timely, or remit and report Clerk cash receipts. Further, the Clerk did not deposit receipts for town hall rentals totaling $325 intact and refunded hall deposits in cash. Therefore, there is a risk that that all collections were not recorded and deposited. In addition, the Board has not performed an annual audit of the Clerk's records.

District officials need to improve internal controls over time and attendance procedures and leave accruals for non-instructional employees. We identified discrepancies in 27 of 33 non-instructional employee accrual records maintained by the District. Available records were not sufficient or adequate to verify the leave accrual balances of another five employees. Time and attendance records are not submitted by all employees and are not completed with consistency to capture start/end times and hours worked. Because of these deficiencies, District officials do not have assurance that non-instructional employees are being paid for time actually worked and earning leave accruals to which they are entitled. In addition, District officials have not developed a comprehensive acceptable use policy or procedures to ensure the security of the District's IT system. We found improper assignment of administrative privileges and excessive access rights in the District's financial system. Finally, although audit logs are available through the financial software, they are not generated and reviewed by District officials.

The Treasurer's office did not identify the balances in selected trust and agency funds to ensure the timely disbursement of moneys owed. The Treasurer could not determine the source or purpose of moneys held in several trust and agency funds totaling more than $75,000 as of October 31, 2013. Several factors resulted in these various trust and agency accounts accruing unidentified balances, including the loss of staff knowledgeable about the origins of past balances, destruction of physical records and deletion of data due to software upgrades. Much of the unidentified balances in the accounts existed before all current staff members had been hired or transferred into the Treasurer's office and other County departments. Accounting records dated prior to 2007 were destroyed in accordance with the County's records retention policy. Also, the County changed the computerized accounting system in 2006, which resulted in the loss of all previous electronic records.

District officials consistently overestimated budget appropriations for fiscal years 2008-09 through 2012-13 by more than $6.7 million, which resulted in combined operating surpluses totaling $1.3 million. Therefore, the majority of the $5.8 million in Board-appropriated fund balance was not used to fund District operations. As a result, the District's unexpended surplus funds exceeded the 4 percent statutory limit in each of these years. Additionally, the District's last five independent audit reports cited the District for having unexpended surplus funds in excess of the statutory limit. District officials also could not demonstrate a planned need for approximately $4.4 million held in reserve funds. Finally, District officials could not explain why over $250,000 of District money was held in an agency fund rather than the general fund, which could be used to benefit District taxpayers. By routinely following these practices, District officials withheld significant funds from productive use and compromised the transparency of District finances to taxpayers.

The Board and District officials did not adopt and establish appropriate policies and procedures for the activity fund and did not provide adequate oversight. Consequently, we found 30 cash receipts totaling $27,224 had no supporting documentation and 11 disbursements totaling $6,417 lacked adequate documentation to allow District officials to determine if they were made for appropriate student activities. The District's failure to establish adequate internal controls over activity funds increases the chance that District moneys could be lost or misused.

The District currently holds seven individual life insurance policies with face values totaling $400,000 for its four administrators. As of December 31, 2013, these policies had a cash surrender value of $23,559. Because GML only authorizes group term life insurance for employees of a water district, the District is not authorized to offer whole life insurance policies for its employees and administrators. Also, because these policies have a cash surrender feature, this may constitute an unauthorized investment of District funds.

The District's procedures over cash disbursements have not been appropriately designed to safeguard District assets. A majority of the Board does not audit claims prior to the Treasurer releasing payment. Also, the Board has authorized the District Secretary (Secretary) to sign checks using the Treasurer's signature stamp, and the Secretary is using the stamp without being supervised by the Treasurer. As a result of these weaknesses, District officials do not have adequate assurance that all cash disbursements are for valid District expenditures.

The Board did not establish adequate internal controls to ensure all moneys were properly recorded and deposited. Specifically, cash collection duties in the Department were not properly segregated. One employee had almost complete control of the cash receipt function, without adequate oversight. In addition, receipts were not issued for all collections. Collections recorded in the records did not agree with the amounts deposited in the bank and deposit slips did not include sufficient detail to verify that all moneys collected were deposited. As a result, there is an increased risk of the misappropriation of the moneys collected by the Department.

Internal controls over claims processing were adequate to ensure claims were for appropriate purposes, adequately supported and properly audited and approved. The Clerk-Treasurer assembled claim packages, prepared abstracts and presented claims and abstracts to the Board for audit and approval. We reviewed 40 claims totaling $22,980 and found they were for appropriate Village purposes, were supported by itemized invoices and pre-numbered vouchers, and were included on the abstracts presented to the Board. Additionally, the Board members audited each claim and documented their audit and approval by signing the claims. Furthermore, the Board's audit and approval of claims for payment was documented in the Board minutes.

The Board and District officials did not always develop reasonable budgets or use unrestricted funds to benefit District taxpayers. Over the last three years, the District appropriated $941,081 more in unrestricted funds than needed because the District also generated approximately $3.7 million in operating surpluses prior to making a $4.4 million unbudgeted transfer to the capital fund in 2012-13. This negated any benefit the appropriation of fund balance would have in reducing fund balance or the property tax levy. The operating surpluses were mainly caused by District officials consistently overestimating expenditures by a total of $3.8 million from the 2010-11 to 2012-13 fiscal years.

While the procedures in place for the processing of occupancy taxes paid to the County were sufficient, the Legislature's enforcement of collections could be improved with additional oversight efforts. Further, the establishment of clear goals will also enhance the County's oversight of the use of money paid to promote tourism in the County. The County has difficulty registering smaller seasonal establishments that should pay occupancy taxes and verifying that those establishments and traditional establishments are paying the correct amounts based on their receipts and the exemptions that apply. Exemptions average $360,000 per year. Moreover, the County paid the Corporation over $629,000 in 2012 to promote tourism. Although the Corporation spends money on activities including producing an annual tourism guide and maintaining a website to promote the County and assist tourists, the contract with the Corporation lacks goals, guidelines and benchmarks to measure the results of the different activities.

The Board did not adopt a policy or develop procedures to address the level of unexpended surplus funds. Additionally, the Board has not developed accurate budget estimates or formal, comprehensive multiyear financial and capital plans. Because of the poor budget estimates, unexpended surplus funds that were appropriated as funding sources were not used. As a result, the Town's general and highway unexpended surplus funds have increased to excessive levels. In addition, we found that the Town could have saved approximately $3,900 (or 5 percent) of vehicle fuel cost. Of the total savings, approximately $1,100 (or 29 percent) was for diesel purchases and approximately $2,800 (or 71 percent) was for gasoline purchases, due to the Superintendent using conventional fuel in the Town pickup truck. The Town paid 63 cents more per gallon for conventional fuel than the State contract price for ethanol blended gasoline. The Superintendent stated that he prefers conventional fuel to enhance fuel mileage which he estimates at approximately 25 percent greater than ethanol blended gasoline. We calculated the 4 percent reduction in miles per gallon of ethanol blended fuel to cost approximately $600, still resulting in a savings of $2,200.