The Town's general town wide fund balance has decreased by approximately $2.4 million over the past five years, due primarily to the Board relying on fund balance as a financing source for operations. The Board did not adopt a policy or ensure that procedures were in place to govern the level of fund balance to be maintained. Furthermore, the Board's estimates of unexpended surplus fund balance to be appropriated in the budgets exceeded the amounts actually available; as a result, the Board did not adopt structurally balanced budgets.

The Board did not prepare reasonable budget estimates. The Board received an extra $1.7 million in unbudgeted revenues from 2008 to 2012. Of this amount, $1.3 million is related to flood revenues. The Board budgeted $6.2 million in expenditures over the same time period and actually spent $6.8 million, resulting in excess spending of $630,000. The Supervisor does not segregate flood-related expenditures in the accounting records, so it could not be determined how much of this difference was attributable to the flood. As a result, the combined unassigned fund balance for all funds had risen to more than $577,000 by the end of 2012, which was 45 percent of the ensuing year's budget. Because flood-related expenditures are not segregated in the accounting records or the adopted budgets, there is not a base-line level for routine expenditures, which makes it difficult to adopt proper budgets in the subsequent year.

The Village is in better financial condition than it was during our previous audit; this is partially attributed to the budgets adopted by the Board. These budgets featured increased tax levies and resulted in operating surpluses and increases in the overall level of unexpended surplus funds. In addition, the Board has recently implemented cost saving ideas including improving the insulation of the highway department garage in January 2013 and changing the date of elections. However, the Board could make improvements in budget preparation and in monitoring and controlling the budget throughout the year to prevent deterioration of the Village's financial condition.

Our audit identified deficiencies in providing adequate oversight of Justice Court operations including depositing, recording, reconciling, and reporting. The Justices did not sufficiently segregate the Clerk's duties or establish adequate procedures for reviewing her work. The Justices also failed to reconcile their bail records to the Clerk's accounting records, or review the information the Clerk entered into the Court's database system. Additionally, they did not ensure that all money received was deposited and recorded in a timely manner, or that monthly reports were submitted to the Justice Court Fund within the time allowed. Further, because the Board failed to conduct annual audits of the Court's financial records, no one can be certain that all Court money was accurately reported and accounted for.

The Board needs to improve controls over cash disbursements to ensure that cash is properly safeguarded. Board members and the Treasurer do not audit each claim prior to the bookkeeper preparing the disbursements and no one reviews the processed payroll reports prior to disbursement or regularly reviews prepared bank reconciliations. In addition, the administrative secretary is allowed to apply the Board President's signature with a stamp to payroll disbursements. Further, the Board has allowed the bookkeeper − who is a vendor − direct access to District bank accounts to withdraw funds for claims that have not been reviewed by the Board members and Treasurer. District officials also have not adequately restricted online banking access rights to ensure the security of funds and the Director, administrative secretary, Treasurer, and bookkeeper share the same user name and password for the online banking function.

District staff did not always follow the competitive bidding guidelines as required by GML, or the District's purchasing policy, for purchases required to be bid, or those that were required to be purchased by obtaining verbal or written quotes. District personnel also did not comply with the District's purchasing policy by seeking competition when procuring the services of professional service providers. In addition, the Board did not follow its own purchasing policy by approving vendors for use outside of the competitive process. Finally, the Board does not always enter into written agreements with professional service providers.

Based on the results of our review, we found that revenue and expenditure projections in the proposed budget are reasonable. However, the Town is currently reporting accounts payable in the Hospital fund that are related to the hospital which closed in 2005. While the Hospital fund is primarily responsible for the $1.9 million payable, the fund only has approximately $536,000 in current resources available to liquidate the liability. The Town's total current resources are approximately $1.9 million. Thus, the full liquidation of the liability could significantly impact the Town's real property tax levy or the current level of services provided. The Town has been reporting the same liability for several years without any changes. Finally, the Town has adopted a local law to override the tax levy limit in 2014.

The Company's governing body did not adequately safeguard the Company's money. The governing body did not develop and implement internal controls over its cash disbursement and receipt functions and did not ensure the Company's by-laws were implemented. The Treasurer did not maintain reports of the Company's financial activities, report to the governing body, or prepare monthly bank reconciliations. As a result, the President was able to misuse the Company's debit card and apparently misappropriate more than $38,000 of the Company's funds during the period October 2009 to December 2012. In addition, during this period, the President made additional questionable purchases and cash withdrawals totaling more than $7,500.

Based on the results of our review, we found that revenue and expenditure projections in the proposed budget are reasonable. The Town's preliminary budget complies with the property tax levy limit.

The Board did not ensure that disbursements were made in an economic manner and for authorized Library purposes. The Board did not audit any of the 767 non-payroll disbursements totaling $1,157,071 made during our audit period. The Board also did not approve 100 of these disbursements totaling $96,586, three of which were to Library employees. Thirteen of the disbursement did not have adequate documentation to determine if they were for legitimate Library purposes. We selected an additional nine Board-approved non-payroll check payments totaling $2,379 made to Library employees and found that three of these payments lacked either adequate documentation to show they were legitimate Library expenditures or were paid for a higher amount than what was actually owed. While none of the three instances resulted in material errors, our findings show that errors can go undetected and leave a potential for material error. In addition, two vendors had initiated a combined total of 137 electronic fund transfers totaling $494,817 out of the Library's general checking account during our audit period, which is not permitted by Law. Lastly, four disbursements totaling $89,000 were for a public works contract that was not competitively bid as required by the Law.

The Company by-laws did not clearly establish the responsibilities of the Board and membership. As a result, the Board and membership did not provide adequate oversight of Company financial activities. The Board did not adequately segregate the Treasurer's duties. The Treasurer submitted monthly and annual financial reports to the Board; however, reports were not accurate because the Treasurer did not reconcile the bank statements or include all disbursements. The Board also did not oversee fundraising activities, did not review all claims, and did not receive reconciled bank statements. Therefore, it did not ensure that all receipts and disbursements were properly recorded and reported. Furthermore, the President did not require the annual independent audit of the Treasurer's records, as required by the by-laws. In addition, the Company does not have a code of ethics as required by statute, and the Board is not certain of the Company's status as a not-for-profit organization as recognized by the Internal Revenue Service.

The Board and District officials believed they were effectively managing the District's fund balance. However, the adopted budgets continually included overestimated expenditures. The cumulative effect of these variances generated over $2.4 million in operating surpluses for the fiscal years ending in 2008 to 2012. To reduce the year-end fund balances to under the 4 percent limit, District officials had to transfer moneys to the District's reserves, which now total $4 million. Some of these reserve balances are questionable as to the amounts required for their stated purposes.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The Town's tentative budget complies with the tax levy limit.

Village officials generally complied with General Municipal Law and sought competition for purchases and public works contracts subject to its competitive bidding requirements. However, the Board-adopted procurement policy did not specify the number of quotes or request for proposals (RFPs) to be obtained for purchases that were not subject to competitive bidding. As a result, Village personnel did not always seek competition for such purchases and paid approximately $84,000 to 13 vendors without obtaining the required quotes or RFPs. In addition, the Board adopted a comprehensive policy covering various aspects of the Village's IT system security, but it did not implement procedures ensuring that controls were instituted. For example, Village officials did not ensure that copies of back-up data were stored in a secure off-site location and the Board has not developed a disaster recovery plan. The Village also received various IT services from consultants without service level agreements.

We commend the Board for establishing adequate internal controls over the cash receipt process to ensure that all cash collections are properly recorded and accurately accounted for. Those controls included policies and procedures that provided guidance to Library staff involved in the cash collection process for cash register operations, performing daily cash counts, preparing deposit slips, and safeguarding cash. Board procedures also adequately segregated duties within the cash collection process to ensure that no individual controls all phases of a transaction. Specifically the duties of receiving, recording, maintaining custody, and depositing collections were segregated. Except for a few minor discrepancies which we discussed with Library officials, the cash receipts we reviewed were all properly recorded and deposited in a timely manner.

At the beginning of each fiscal year, the account clerk initiates an automated process to carry over each employee's accrued leave balances based on the information in the District's financial software. During this process, accrued leave balances are sometimes misclassified, requiring the account clerk to manually adjust the records. We selected 10 of the 236 District employees with the highest accumulated unused leave balances to determine if the employees' unused accrued leave balances were carried forward and appropriately reclassified in accordance with the applicable collective bargaining agreement. Except for minor discrepancies, the District properly accounted for employee leave accruals and made payments in accordance with collective bargaining agreements and employment contracts.

From the 2008-09 to 2012-13 fiscal years, District officials consistently over-estimated expenditures by a total of $5.5 million. These budgeting practices generated approximately $2.2 million in operating surpluses, which caused unexpended surplus funds to exceed statutory limits in each of the past five years. As of June 30, 2013, unexpended surplus funds exceeded statutory limits by $949,184. Although District officials appropriated on average $413,000 in each of the last five fiscal years to reduce the tax levy, the Board over-estimated expenditures by an average of $1.1 million annually, thus negating any benefit the appropriation of fund balance would have in reducing fund balance or the property tax levy. District officials also used some of the annual operating surpluses to fund six reserves that, as of June 30, 2013, totaled $2.1 million. Four of the six reserves appear to be over-funded.

We found no evidence that the Board had fulfilled its fiduciary responsibility to the School by ensuring that it fully evaluated the choice of its site selection for the elementary school or middle school.

The Board did not ensure that all contracts for goods and services were properly awarded. The School's Business Office was unable to provide procurement procedure documentation and inconsistencies were found in the purchasing practices/competitive bid process outlined in the School's charter agreement and the procurement policy. Both policy documents were silent on other key provisions such as when written contracts are required or whether professional services should be procured in a different manner. Furthermore, the documents did not clarify whether thresholds were for individual or aggregate purchases and if quotes should be written or verbal. In addition, even though the School is in its third year of operation with a Principal and a fully functioning Business Office, School officials continue to rely on certain service providers to obtain bids or quotes and select vendors for goods and services such as janitorial services, school uniforms and kitchen supplies.

District officials did not obtain quotes for goods and services purchased from three of 13 vendors, totaling $42,421. These three vendors were engaged to provide maintenance for the District’s vehicles, upgrade the security system, and service the air-conditioning and heating system.