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.

We found that the School's purchasing policy does not provide appropriate guidance as to when written or verbal price quotes should be obtained and when items must be competitively bid. The policy also does not address threshold amounts under which approval can be made by management, versus large purchases that would require Board approval. Additionally, we found that although the policy requires the use of purchase orders, School officials are not routinely using them to initiate the acquisition of goods and/or services. We also found that School officials often did not properly document verbal or written price quotations when making purchase decisions. For example, School officials spent $11,346 on computers but did not have adequate documentation to demonstrate that the lowest price was obtained. We also reviewed 12 disbursements associated with three capital projects that totaled approximately $1.3 million. We found that one of the three project contracts was not properly approved by the Board and there is no evidence that change orders totaling approximately $63,000 were approved by the Board.

Internal controls over the Court's operations were not operating effectively to allow for proper accounting and reporting of activities. Justice Bartlett failed to account for all moneys received, resulting in a $2,295 shortage in the Justice's account. The Justice did not prepare monthly bank or accountability reconciliations, issue appropriate receipts for all money received, deposit money intact or in a timely manner, file accurate and timely financial reports, maintain an accurate listing of bail, properly report ticket dispositions to the DMV or close his bank account as required when he resigned.

District officials consistently over-estimated expenditures over the past five years, which resulted in operating surpluses totaling $7.1 million. Although the Board appropriated unexpended surplus funds each year (exceeding $14 million over a five-year period) to help finance the ensuing year's operations, District officials actually used less than $1 million for District operations. As a result, the District's unexpended surplus funds routinely exceeded the amount allowed by statute and District taxpayers paid more than necessary to sustain District operations.

The 2014 proposed budget contains significant financial risks that the City Council should consider when adopting the 2014 budget. The City continues to finance operating expenditures with debt when it should be funding such expenditures with operating revenues. The practice of supporting operating expenditures with unrealistic revenue estimates and one-shot revenues is not prudent. The City projects operating surpluses for the 2013 fiscal year for the general fund and the water fund. However, due to overstated revenue estimates, the golf and recreation fund is projecting a $93,308 operating deficit. The unassigned fund balances in these three funds are still expected to remain as deficits. The 2014 budget included estimated revenue of over $1 million from the sale of property that may not happen timely or as planned.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The 2014 budget includes estimated revenues of $1.5 million in the general fund from the sale of Town property. Revenue from the sale of property is non-recurring (one-shot) revenue that will be received in one year, but will not necessarily recur in the following year. The Town's tentative budget complies with the tax levy limit.

Based on our limited procedures, it appears that the District has made substantial progress in addressing our recommendations. Of the 13 audit recommendations, seven recommendations were implemented, three recommendations were partially implemented and three recommendations were not implemented.

The District was identified as being susceptible to fiscal stress due to a general fund operating deficit during the 2010-11 fiscal year. Our audit determined the District is not currently in fiscal stress. District officials developed reasonable budgets and managed fund balance responsibly in accordance with statute. With the exception of the 2010-11fiscal year when the District incurred a planned operating deficit, fund balance has steadily grown during the period reviewed. During the 2011-12 fiscal year the District produced an operating surplus of approximately $2.8 million. The operating surplus was achieved through a decrease in salary and employee benefit costs due to staff reductions and lower energy costs. Additional cost savings were realized in pupil transportation costs due to declining enrollment and the combination of bus routes during the 2011-12 fiscal year.

Justice Tripp did not meet his required responsibilities when he resigned his position. Records were incomplete and, as a result, we could not determine if the amount he remitted to the Village was sufficient to meet Court liabilities.

We found that the Town Comptroller has not properly accounted for and reported reserve funds and other restricted moneys. The Town Comptroller does not record reserve activity in the financial system, instead she accounts for certain reserves separately and in some cases does not maintain any record of the reserves. This resulted in more than $2 million, which should have been used for debt service, remaining idle since 2004. In addition, we found that the Town Comptroller has not properly recorded and reported interfund activity. In addition, the Town has not established an effective fleet management program. The Town does not have any written policies or procedures to determine if the acquisition of new or replacement vehicles is cost effective. The Town does not maintain - in any consistent manner - repair, maintenance, usage, or fuel records for its fleet. Overall, we found that the Town's Engineering Department had the most comprehensive system for tracking vehicle maintenance and repair costs. We were unable to determine if cost savings could be realized due to the lack of certain information in the Town's records.

We tested purchases made in 2012 from five vendors totaling $100,943 for compliance with the Town's procurement policy. The Town purchased $10,362 of unleaded gasoline and $33,068 of diesel fuel from a local vendor. These commodities were not competitively bid as required by the policy. We compared the price that the Town paid with the State contract price and noted that the Town could have saved approximately $1,167 in 2012 had the fuel been purchased from the State contract vendor. In addition, the Town purchased a tractor in April 2012 for $38,200 without publicly soliciting bids as required. Tires of various sizes were purchased from a local vendor six times during 2012, totaling $9,140. The Highway Superintendent only obtained quotes from vendors for one of the six purchases, costing $424, which was from the vendor who quoted the lowest price. In 2012, the Highway Superintendent purchased air, oil and hydraulic filters totaling $2,213 but did not obtain any quotes as required. We compared the costs of the filters purchased to the costs from other vendors in the area and noted that the Town paid reasonable prices for these items.

The Legislature adopted budgets for the general fund that were not structurally balanced; instead the Legislature routinely relied on appropriating significant amounts of fund balance and reserves to finance operations. In addition, the County's enterprise infirmary fund was not self-sufficient, and therefore required subsidies from the general fund through both interfund transfers and advances. The Legislature also had not adopted a policy establishing a reasonable level of unexpended surplus funds to maintain and had not developed and adopted comprehensive, multiyear financial and capital plans. As a result, the general fund realized annual operating deficits, a declining fund balance, and a declining cash balance over the last four fiscal years (2009 to 2012). In fact, the general fund's cash balance was so depleted over the last four fiscal years that the County could not transfer cash to the county road, road machinery, and enterprise infirmary funds for the entire amounts that were included in the general fund budgets for interfund transfers to these funds. In addition, we found that the County's financial condition declined further during 2013 to a position that the County did not have sufficient cash to pay its bills and other obligations when due, resulting in the County issuing short-term debt in the form of a tax anticipation note for $4 million on May 31, 2013. The County's financial condition will likely decline further during 2013 because the general fund budget is not structurally balanced.

The Board's adopted budgets were based on accounting records with discrepancies because the Clerk-Treasurer did not maintain the Village's accounting records in an accurate manner. As a result, in two of the last five fiscal years, Village officials appropriated more fund balance than was available in the general fund. In addition, the Board arrived at a tax levy it deemed necessary, but the Village rarely receives that total amount, making it necessary to use more fund balance than planned to offset that shortfall. However, the Board did not consider the affect of the unlikely collection of the full levy on its adopted budgets. Also, the Board has not developed long-term funding plans to address the Village's deteriorating financial position and capital assets.

The Board did not adopt realistic and structurally balanced budgets and instead consistently relied on appropriating fund balance, a non-recurring revenue, to finance recurring expenditures. Further, in two of the last three years, the County incurred operating deficits. As a result, the financial condition of the general fund has diminished in recent years. As of December 31, 2012, the County reported a total fund balance of $11.4 million in the general fund, a decline of 41 percent from the January 1, 2010 total fund balance of $19.2 million. We also found that the County's cash on hand declined from twice its average monthly expenditures in 2010 to about $324,000 less than the average monthly expenditures in 2012, and the County's contingency appropriation is not adequate for current financial conditions. The County's declining financial condition is the result of poor budgeting and financial management practices and the Board's failure to develop and use long-term financial plans.