The Dutchess County Industrial Development Agency (DCIDA) Board did not design or implement an adequate system to monitor, evaluate and control benefits and incentives granted to businesses. Ten of the 21 businesses receiving DCIDA benefits have not met their employment goals. Job creation was less than the agreed-upon amount by 1,398 jobs. Six of these 10 companies will receive tax exemption incentives over the life of their contracts, in part, because of their plan to create jobs in Dutchess County. Therefore, taxpayers may not be receiving expected benefits. Also, DCIDA did not properly bill, collect and distribute the PILOT amounts for three of seven projects that required that DCIDA control the PILOT amounts. Additionally, none of the 12 PILOT agreements reviewed had a recapture clause. The annual report submitted by the DCIDA was not accurate or complete. In addition, of the ten projects with PILOT agreements, five totaling $14,351,627 were not reported on the Public Authorities Reporting Information System report. Furthermore, two projects that were reported were not correct. Finally, the employee statistical information was reported incorrectly by 14 of 21 project owners.

We found that, except for minor discrepancies that we discussed with District officials, all customers were accurately billed, penalties were calculated correctly, and late fee waivers and billing adjustments were generally made in accordance with District policies and properly authorized by a designated official.

A significant amount of Town resources are being inappropriately reported and sequestered in the capital projects fund because the Board and Supervisor did not close completed capital projects and transfer the remaining money to the appropriate operating fund. The Supervisor is accounting for $913,000 remaining from a “Host Community Fee” received in 2007 in the capital projects fund. Town officials indicated that they had not established future plans for this cash. Moreover, the Supervisor is also accounting for park operations in the capital projects fund, rather than the general fund. As of September 30, 2013, the capital projects fund held $39,600 in cash from park operations. These cash balances, which total $953,000, should be recorded in the general fund-townwide, where they can be used to reduce real property taxes and finance operations.

In recent years the District has struggled with fiscal challenges due to a deteriorating financial condition. District officials have adopted realistic budgets and its spending did not exceed the budget. However, they relied heavily on appropriations of fund balance in the budgets from 2010-11 through 2011-12. As a result, by the end of 2011-12, the District's unexpended surplus funds had declined to a deficit of $1,157,820. By the end of 2012-13, the District was able to increase the unexpended surplus funds to $1,127,047 (.8 percent of the ensuing year's appropriations). Although this is an improvement from the prior year, the District has very little cushion for managing unforeseen events. To meet short-term cash flow needs, the District borrowed at least $10 million each year, incurring about $150,000 for interest costs in the 2012-13 fiscal year. While the Board has attempted to address the District's declining financial position, it has not developed a multiyear operational plan to provide a framework for future budgets and facilitate management of financial operations.

The Board had not adopted comprehensive written policies and procedures providing guidance and internal controls over departmental cash receipts. Consequently, we found that $42,031 in cash receipts had inadequate supporting documentation of the collections and $11,429 in cash receipts were not remitted to the Business Office and deposited into District accounts in a timely manner. In addition, we found that open swim program cash receipts were not properly accounted for, were substituted by the open swim program coordinator with personal checks and were not all remitted to the Business Office for deposit. In addition, internal controls over the District's information technology (IT) system were not appropriately designed or operating effectively. We found that users were granted access to functions of the financial software applications that they did not need to fulfill their day-to-day job responsibilities. In addition, although the District's technology controls policy designates the Superintendent with the responsibility of assigning access rights (administrative rights) to the financial application, we found that the School Business Executive has been granted administrative rights to the financial application. Furthermore, audit logs were not generated and reviewed by someone independent of the Business Office's operations.

The District reported $195,355 of unexpended surplus fund balance remaining as of June 30, 2013. Given the size of the District's operations this is a dangerously low level. In addition, approximately $5.3 million in workers' compensation reserve funds were inappropriately used to fund other unrelated general fund operating costs. The District's last multiyear financial plan was prepared in June 2012, which included information on past financial trends and projections for revenues and expenditures. The financial plan also included a history of fund balance, which has substantially dwindled over the past six fiscal years. We also found that District officials did not establish adequate safeguards over mobile devices, and that District employees did not use mobile devices in accordance with the District's acceptable-use policy. For example, on 23 of the District's 40 mobile devices we found indications of personal use. We also found that 25 devices had minimal to no discernible use for District purposes and were used predominantly for personal use, or not at all.

Internal controls in the payroll department were generally operating effectively. We tested payroll payments for all 54 employees, including full-time, part-time, seasonal and temporary employees, to determine whether they were paid Board-approved wages. We found that employees were compensated accurately but that leave accrual records were not properly maintained. We tested the leave time used by all six highway department employees for whom leave records were maintained and found minor discrepancies that we discussed with Town officials. Because the Town did not maintain leave accrual records for other employees, Town officials have no way of determining the accuracy of time for vacation, sick and personal leave accruals.

The Town maintains two above-ground fuel storage tanks at its highway facility; a 1,500-gallon tank for diesel fuel and a 500-gallon tank for gasoline. From January 2012 through October 2013, the Town purchased 24,000 gallons of fuel costing approximately $80,000. The Town does not maintain perpetual inventory records to show the amount of fuel remaining in inventory at any given time, and it does not take periodic physical inventories for reconciliation purposes. We performed an analysis of the Town's fuel purchases and usage records. We determined that approximately 7,100 gallons valued at $23,500 were unaccounted for. We also found apparent errors in the fuel usage records. The Town has not taken measures to provide physical security over fuel. There are no procedures in place to record the distribution of fuel shed keys. Also, because the distributed keys can be duplicated, there is no assurance that an inventory would identify all of the keys that exist. Additionally, once the shed is opened, there is unrestricted access to the fuel tanks.

We found that the Board generally does not provide adequate oversight of the Company's financial activities. There was no evidence that the Board or Company membership adequately reviewed or approved all bills/claims prior to payment. The Treasurer did not provide the Board with monthly or annual reports and was not responsible for receiving and maintaining custody of all Company funds. Furthermore, the Treasurer did not prepare a budget or cash flow document to guide annual operations.

The Board has not established adequate policies and procedures to ensure that the Treasurer prepares monthly bank reconciliations. We found that, while the Board established some controls, they lacked some key components to ensure that financial activity was properly recorded and reported to safeguard District moneys. Specifically, both the former and current Treasurer filed the District's annual update documents (AUDs) late for the past five years and they failed to complete monthly bank reconciliations. We prepared bank reconciliations as of December 31, 2012 and August 31, 2013 and noted no material discrepancies.

Although the former Director properly accounted for some Department funds, she did not properly account for funds associated with the Center's operations. The day before the former Director officially retired, $21,526 of unsecured cash ($19,732) and checks ($1,794) was found in a Department file cabinet. Of this amount, $4,003, was in a sealed envelope and appeared to be ready to be remitted to the Town Comptroller. There was no indication that the remaining $17,523 would be remitted to the Town Comptroller. The former Director opened an unauthorized bank account in 2004 which the Board was not aware of, deposited Center funds in the account and wrote questionable checks from that account for Center activities. In addition, the former Director paid for overnight trips for Center members with her personal credit card and subsequently wrote checks to her husband for reimbursement of the payments, for which the former Director's husband was overpaid approximately $3,743. The former Director and her husband also did not pay $4,657 for the trips which they participated in. The former Director did not issue press-numbered receipts or properly account for moneys received. Payments were made without supporting documentation, and items were purchased that do not appear to have been used for Center activities. These activities occurred because the Board did not provide adequate oversight of the Department's financial activities.

The Board did not develop policies or procedures for budgeting practices and, as a result, repeatedly adopted budgets with unrealistic estimates for revenues, expenditures and appropriated fund balance. These inaccurate budgets caused significant budget variances and resulted in unused appropriated fund balance; fund balances were not actually reduced at the levels represented to taxpayers in the adopted budgets. The Board also has not adopted, reviewed, updated or enforced adequate financial-related policies to ensure Town resources are protected. The financial duties in the Supervisor's Office were not adequately segregated and there were no effective compensating controls. Additionally, the Board has not entered into detailed written agreements with the payroll processor and bank to ensure that the Town's information and resources are adequately safeguarded.

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.