We found that the Library's Business Manager ensured that individuals reported and paid on the payrolls were bona fide employees and, as such, were paid at their approved salaries and wages, and they received only the benefits to which they were entitled. However, we determined that there was inadequate supervision and oversight of the payroll process. During the audit process, we informed Library officials about our concerns regarding segregation of duties in the payroll process. The Business Manager and the Director took action to mitigate this weakness.

The Board does not provide adequate oversight of Company financial activities because the Treasurer does not provide the Board with monthly or annual reports. Additionally, the Treasurer does not prepare a monthly bank reconciliation to be presented to the Board. Further, the Board did not elect two members to audit the Treasurer's records as required by the by-laws and did not audit bills or approve payments prior to checks being issued. While Board resolutions authorized significant purchases and disbursements, the Board did not subsequently review the bills before payment. Additionally, not all Company funds were accounted for or in the custody of the Treasurer as required by the by-laws; instead, the Grounds Superintendent collected fees and made disbursements related to the rental and maintenance of a Company facility.

We found that the Clerk-Treasurer properly billed, collected and deposited water and sewer rents. However, she did not maintain timely, complete and accurate records. In addition, we found significant control deficiencies. We reviewed eight credit adjustments totaling $516 from individual customer accounts and found that none of these adjustments were properly authorized by the Board and only two had been sufficiently documented as to the rationale for the adjustments. Additionally, we reviewed all 34 deposits from the June 3, 2013 through August 30, 2013 collections totaling $12,059 and found that all the receipts were posted as collected on the date the deposits were prepared, rather than when the payments were actually received. The Clerk-Treasurer uses a combination of manual records, spreadsheets with control and subsidiary accounts and a billing software application to record water and sewer financial activity. This “accounting system” did not ensure that transactions were recorded in a timely manner. We reviewed the Clerk-Treasurer's spreadsheets and found that they were not up-to-date to reflect the Village's current financial position. We also found that any individual in the Clerk-Treasurer's office could handle all aspects of a financial transaction.

For the 2011-12 and 2012-13 fiscal years, we compared billings totaling approximately $7.4 million for all three school districts of residence to revenues received and reported and did not identify any discrepancies. We also selected a random sample of 25 students to determine if billings to the school districts of residence were accurate and supported. We found that the School did not maintain adequate supporting documentation regarding students' residency. We found that seven students' files did not contain a proof of residency. In addition, three of the students had moved and their files had a different verified address than the School used when it billed the Rochester City School District.

The Board did not establish or implement adequate internal controls to properly oversee the District's financial operations. As a result, the District incurred operating surpluses and retained unexpended surplus funds totaling more than $270,000 or 169 percent of the budgeted appropriations for 2013. The Board has not adopted an investment policy as required by law, has not developed a capital plan and has not updated the procurement policy since December 1998. Furthermore, District officials could not provide us with a Board-adopted code of ethics during our audit, only a code of ethics template. Additionally, the Board did not adequately segregate the Treasurer's duties or implement compensating controls such as performing an annual audit of her records and reports for 2011 and 2012 to provide some assurance that she was performing her duties in a satisfactory manner. Further, the Treasurer failed to prepare and submit the 2012 AUD and did not file the 2011 AUD in a timely manner. Finally, our review of all the cash disbursements paid in 2012 disclosed that 10 disbursements totaling more than $31,000 did not include sufficient supporting documentation and 12 disbursements totaling approximately $8,700 were not approved by the Board.

The Board and Town officials have not developed long-term financial plans, policies, or procedures to govern budgeting practices and the level of unexpended surplus funds to maintain. The Board has adopted budgets that were not based on sound and realistic estimates of revenues and expenditures, and the Town has accumulated a significant amount of unexpended surplus funds. Also, the Board did not provide sufficient oversight over financial operations or establish and monitor policies and procedures to help ensure that the Supervisor properly accounted for all financial activity and adequately segregated financial duties. Additionally, the Supervisor maintained more bank accounts than were necessary and did not properly account for all town activity and cash balances, in sufficient detail, or in the correct funds. Finally, the Supervisor assigned incompatible duties to the payroll clerk and did not provide sufficient oversight as a compensating control. We also found that the Town did not develop adequate policies and procedures over the use of credit cards. The Town also didn't monitor compliance with its code of ethics policy and entered into contracts that resulted in a Board member having a prohibited interest pursuant to article 18 of the General Municipal Law. Additionally, the Town did not implement policies or procedures to help properly classify individuals as independent contractors or employees, and made payments totaling $175,000 to four individuals as independent contractors, who likely should have been treated and compensated as employees.

Village officials do not consistently require the use of purchase orders when approving purchases, and use purchase orders which were reviewed and approved after the invoice was received. We reviewed 60 claims totaling $194,937 and found that 42 claims totaling $168,141 were made without the use of a purchase order and the other 18 claims included confirming purchase orders prepared after the goods or services had already been purchased or received. Additionally, Village personnel did not always obtain and document verbal or written quotes before purchasing goods and services as required by the Village's procurement policy. We reviewed 16 claims that required verbal or written quotes; 14 claims totaling $22,588 did not have any documentation to indicate the required quotes were solicited. Further, the Board does not review claims for payment; instead, one Trustee is appointed as Commissioner of Claims. Our review of 60 claims totaling $194,937 found that none of the claims contained all the necessary documentation or authorizations, such as purchase order requisitions, itemized invoices and receiving reports, to facilitate an effective audit. All 60 claims appeared to be for proper and necessary Village purposes. Finally, Village officials have not established sufficient internal controls over key components of the Village's information technology system, including the safeguarding of computerized financial data against unauthorized access or potential loss, data backup, monitoring of remote-access users and server room security.

Over the last three fiscal years, the District's budgeting practices generated more than $5 million in budget surpluses. To reduce fund balance and stay within the year-end statutory limit for unrestricted funds, District officials transferred moneys to the District's reserves and repeatedly appropriated fund balance to reduce the tax levy. However, because of the District's surpluses, the combined $3.2 million in fund balance appropriations over the three years went unused. These practices gave the appearance that the District's unrestricted fund balance was essentially within the legal limit, whereas in fact it exceeded that limit each year. We also found that the amounts retained in three of the District's four reserves, totaling approximately $5 million, were excessive and were not used. These ongoing budgeting practices resulted in taxpayers paying more than necessary to sustain District operations. Further, in the 2011-12 fiscal year, over $48,000 in excess funds was improperly transferred from the employee benefits accrued liability reserve to the retirement contribution reserve without the State Comptroller's certification as required by State legislation. Therefore, the District was not in compliance with the law in making this transfer.

We found that the City did not properly award all contracts and has not annually reviewed the procurement policy, as required by General Municipal Law (GML). We found that 17 vendors' contracts totaling approximately $1 million were not executed by the Council President as required by the Charter, but rather by the City Manager. We also found no indication in the Council minutes that these contracts were approved by the Council. In addition, City officials did not regularly seek competition or indicate the selection basis, such as using requests for proposals (RFPs), when procuring professional services. We found that the City awarded contracts to four out of seven professional service providers without evidence of any cost benefit analysis, or having applied and evaluated the procurement policy factors. Generally, the City selected these vendors as a result of their past history of providing services to the City. Payments to these four vendors totaled $260,987 during our audit period.

Overtime costs were primarily attributed to insufficient staffing, particularly, an insufficient number of part-time officers. Had the Sheriff's Office had sufficient full-time and part-time staff, more than $87,000 in overtime costs could have been avoided. Additionally, we identified instances where control weaknesses allowed two administrative employees to receive over $56,000 in overtime pay without pre-approval and proper supporting documentation. We also found numerous weaknesses in controls over payroll processing and the maintenance of time and attendance records within the Sheriff's Office. We identified eight instances, totaling approximately $1,500, where seven officers were paid or compensated for time they did not work. These errors and overpayments occurred because the Sheriff and his administrative staff did not provide sufficient oversight to mitigate the risk of erroneous or inappropriate transactions. During 2012, the County purchased over 2,100 prescription medications totaling about $198,000 for inmates from a local pharmacy without the benefit of competition or obtaining price quotes. We reviewed 983 of the medications purchased, totaling approximately $83,000, and found that the County could have purchased the same medications on State bid and realized savings of more than $32,000 (almost 40 percent).

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. For example, the Board did not review the Treasurer's monthly bank reconciliations; however, the Treasurer presented the year-end bank reconciliation and bank statement to the Board to compare the bank records to the District records. In addition, the Treasurer has not filed the required annual financial report with our office for the last three years. Due to these deficiencies, we reviewed all 115 disbursements, totaling $126,427, to verify that they were authorized, supported, proper District charges, accurately recorded, and that the items were shipped to the District; we found no discrepancies.

District officials have taken appropriate action to manage the District's financial condition. District officials recognized the need to be proactive in budget development and expenditure controls. District officials and Central Business Office representatives meet regularly to monitor and evaluate the current year's budget and available fund balance, and to plan for future years' budgets. This planning includes an ongoing evaluation of the District's spending trends and projected future fund balance.

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.