The purpose of our review was to determine whether the County Treasurer’s controls are adequate to ensure that financial activity is properly recorded and reported and that Court moneys are safeguarded for the period January 1, 2011 through January 1, 2014.

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.

District officials improperly made gifts and non-interest bearing loans of public moneys to members of the District's fire department in excess of $26,000. This included the payment of personal expenses. The District retained an independent contractor to perform the duties of Secretary-Treasurer. However, Town Law requires that the positions of District Treasurer and District Secretary are public offices and may not be delegated to an independent contractor. Also, during our 16-month audit period, the District paid the Secretary-Treasurer a total of $118,940, of which $113,340 represents hourly payments. Using the Secretary-Treasurer's $20 hourly rate, this would equate to the Secretary-Treasurer working over 11 hours a day, seven days a week, every week, for 16 months. The Board did not have written policies and procedures over financial operations including investments, cash receipts and deposits. As a result, bank accounts totaling approximately $463,000 were listed as reserve funds even though the Board could not provide evidence that it met the legal requirements to establish reserves for those moneys. In addition, receipts in some cases were held in excess of 200 days before deposit. The Secretary-Treasurer only reconciled one of the District's bank accounts on a monthly basis. Finally, we found that the Board did not obtain the legally required independent annual audit and that the Secretary-Treasurer did not file an annual financial report with the State Comptroller's Office for 2011.

We found that the Executive Committee generally does not provide adequate oversight of Company financial activities because the Treasurer does not provide it with adequate monthly or annual reports. The Treasurer was unable to provide us monthly reports for 10 of the 18 months in our audit period. We reviewed all 226 disbursements totaling $54,054 made during the period April 1, 2012 through September 17, 2013. While these disbursements appeared to be for legitimate Company purposes, 198 disbursements totaling $49,682 were not recorded in the Treasurer's report or Company minutes as having been authorized for payment, including $10,858 for accident and health insurance and $3,639 to a local grocery store/gas station. We also found that the Treasurer did not include $5,533 of receipts in his monthly reports. For example, $4,045 for fundraising and soda sales was deposited on July 26, 2013, but not included in the July monthly report. The Treasurer also does not prepare bank reconciliations.

The Board did not ensure that all disbursements were for proper purposes. The Board did not audit and approve 63 disbursements prior to payment, totaling $149,505. We reviewed 64 disbursements totaling $110,090 that were approved by the Board and found discrepancies with 31 disbursements totaling $24,808. Of this amount, $5,883 was disbursed for items that were not appropriate District expenditures, such as clambake tickets, volunteer incentive gifts, meals and travel expenses for mutual aid. In addition, the payroll vendor has access to a District bank account with a significant amount of District cash. Furthermore, while District officials did establish policies to safeguard the use of certain District vehicles, they did not implement such policies for District-owned computers. The Board also did not properly manage the District's financial condition. We found deficiencies in the manner in which the Board budgeted for operations and capital purposes. Finally, we found that the District had no formal long-term capital plan.

The Board did not establish adequate controls to ensure that financial activity was properly recorded and reported and to safeguard District moneys. Specifically, the Board did not adopt an investment policy or a code of ethics; issue a W-2 form for the Treasurer's wages and take out withholdings from her gross pay; perform a thorough audit of claims before payments were made; obtain an audit of the District's records by an independent public accountant; and verify the applicability of the wording in the contract relating to the calculation of the District's annual fire protection bill.

The Town's internal controls over payroll processing were not properly designed or operating effectively. Although the Town has a collective bargaining agreement (CBA) with the highway department employees, the Town lacks written policies and procedures to provide guidance to Town officials on how to process and distribute payrolls. Furthermore, although the Supervisor stated that he signs a payroll certification page for each payroll; he does not review the payroll records for any errors. As a result, all six highway department employees received a total of 134.25 hours of leave accrual benefits valued at $2,516 they were not entitled to for the six months of payroll we reviewed. Also, four of the six highway department employees did not receive a total of 37.50 hours of compensatory time valued at $700 they were entitled to for the same period.

We found that Village officials did not seek competition when purchasing vehicle fuel as required by GML and the Village's procurement policy. Had the Village used State contract vendors, it could have saved approximately $1,100, or 4 percent on the fuel purchases we reviewed. In addition, the Board authorized the payment of more than $2,300 in gasoline purchases using fuel credit cards without receipts to document these transactions or identify the purchaser. Furthermore, officials did not maintain diesel fuel inventory records. As a result, there are increased risks that fuel will not be obtained at the lowest possible price or that unauthorized fuel use could occur and not be detected.

For the five fiscal years ending June 30, 2013, District officials consistently over-estimated expenditures by a total of $8.3 million. These budgeting practices generated approximately $3.9 million in operating surpluses. Although District officials appropriated $300,000 of fund balance in each of the last five fiscal years to reduce the tax levy, the Board over-estimated expenditures by an average of $1.7 million annually, thus negating any benefit the appropriation of fund balance would have in reducing the property tax levy. District officials also used some of the annual operating surpluses to fund eight general fund reserves and one debt reserve that, as of June 30, 2013, totaled $10.5 million and $1.4 million, respectively. Five of these reserves are over-funded.

Disbursements totaling more than $1.3 million were made prior to Board approval. Had the Board authorized the payment of certain allowable claims pre-audit, more than $1.2 million of these claims would not require prior Board approval. In addition, the Treasurer does not sign all checks to pay claims. Rather, the Board authorized that supplemental warrant checks need only one signature. The Board also did not provide guidance for procuring goods and services not required to be competitively bid. Therefore, all 35 claims totaling $163,960 were acquired either without obtaining competition or the Board approved the purchase without the required documentation of competition attached to the claim. Also, Library staff did not seek competition when selecting four professional service providers who received payments totaling $54,885. Lastly, the Library did not enter into a written agreement with two professional service providers who received payments totaling $33,750.