District officials developed reasonable budgets and managed fund balance responsibly in accordance with statute. Although the District's fund balance has decreased significantly over the past five years, from $8.5 million beginning in 2009 to $4.6 million in 2013, the District is not currently in fiscal stress. The decline resulted from the District's planned operating deficits and planned use of moneys from its tax stabilization reserve.

The court clerk maintained complete, accurate and timely monthly bank reconciliations and cash accountability reports; however, the Justices did not review these reconciliations and reports. This is of particular concern because the court clerk performed all financial transactions and the Justices did not review her work to ensure that it was accurate and complete. Further, the Village did not maintain time records for the court clerk. As such, Village officials do not have assurance that the court clerk worked all of the hours that she was paid for. Due to poor segregation of duties and the lack of oversight, we obtained information to determine if cases were accounted for properly. Other than deposits not being made timely, we found no exceptions to the amounts collected, reported and accounted for by the court clerk.

In recent years the District has struggled with fiscal challenges due to a deteriorating financial condition. We found that the Board adopted budgets that limited costs and tax increases. The Board balanced its budgets with appropriations of unexpended surplus funds and reserves. As a result, by the end of the 2011-12 fiscal year, the District had only $10,000 remaining in reserves, and an unexpended surplus fund balance of $384,362. To meet short-term cash flow needs, the District borrowed $1.1 million at the beginning of the 2012-13 fiscal year. While the Board has taken steps to attempt to address its declining financial position, we found that the Board has not developed a multiyear financial plan to improve the budget development process.

The Sullivan County IDA (SCIDA) has established a Uniform Tax Exempt Policy for both general and specific-purpose projects. The policies are specific and clearly articulate project goals and abatement schedules. The project approval process includes in-depth cost-benefit analyses based on reasonable assumptions. However, there is no effective mechanism in place to identify agency members' financial interests in potential projects during the selection process. SCIDA officials submit a financial disclosure form to the County Clerk of the Legislature, detailing any business interests; however, the County does not unseal and review the financial disclosure forms or provide them to the SCIDA for review. One of the projects in our review was approved for a PILOT agreement even though a SCIDA Board member was the spouse of one of the two partners in the potential project. Lastly, projects are monitored and performance goals are tracked. PILOT amounts are adjusted annually based on performance.

The Board did not ensure that the Clerk-Treasurer properly reported the Village's financial condition. We found errors in almost every aspect of the accounting function from the accounting records to the financial reports and in the reports to the IRS. The Clerk-Treasurer submitted an annual financial report with less cash reported than the actual balance available. Available fund balance was also significantly underreported and several expenditure lines were reported inaccurately. Moreover, the interim reports that the Clerk-Treasurer provided to the Board were incomplete and did not include sufficient information to enable the Board to monitor the Village's financial activities against the adopted budgets. Further, the Board did not audit the Clerk-Treasurer's records at any time.

The Board needs to improve its oversight of key financial activities and ensure that applicable laws and best practices are followed to help ensure that Town resources are adequately safeguarded. The Tax Collector did not deposit and remit tax payments within the timeframes required by law, and the Supervisor did not ensure that the bookkeeper maintained timely and accurate records and bank reconciliations. Further, because the Board did not audit the books and records of the applicable officials, these and other deficiencies were not detected. The Board also did not properly audit claims and failed to use competition when procuring professional services, increasing the risk of wasting taxpayer money.

The Board did not ensure that detailed claims audit procedures were in place to enable it to perform a proper and thorough audit in a timely manner. As a result, claims totaling more than $11,200 were paid more than 90 days after the invoice date, and claims totaling more than $1,400 were paid for a service contract which was expired. Informal procedures were established and implemented in November 2012 which helped to improve the Town's claims auditing process.

The Board consistently adopted budgets that included overestimated expenditures, underestimated revenues, and the appropriation of fund balance to finance operations; but for three of the last six years, these appropriated funds were not available. As of May 31, 2012, the Village's general fund balance was at a deficit of $56,633, after the planned use of $94,653 to finance operations. We project the available surplus funds at the end of the 2012-13 fiscal year to be approximately $25,500. Budgetary variances were caused by the Board's failure to consider historical revenues and expenditures and/or current known needs as they developed the budgets, and the Board did not effectively monitor the actual results against their operating budgets during the year. Surplus fund balance is no longer available for use as a financing source for Village operations. The Board will be faced with decisions of reducing expenditures or identifying revenues or other financing sources.

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. The District's Finance Committee meets regularly to monitor and evaluate the current year's budget and available fund balance and to plan for next years' budgets. District officials developed reasonable budgets and monitored the budgets throughout the year to properly manage the District's financial condition. Since 2010, total State aid received by the District has declined more than $1 million (8 percent decrease) and revenues, other than real property taxes, have also declined approximately $1.3 million (48 percent). To offset these declining revenues, the District increased its real property tax levy, cut expenditures by $500,000, and used more than $400,000 of its available surplus.

We found that the Company has established a system of internal controls with appropriate procedures to ensure that financial activity is properly recorded and that Company moneys are safeguarded, except for controls over the use of credit cards. The Company does not have a formal policy governing the use of credit cards. Company officials do not ensure that invoices for all credit card purchases are retained and attached to the credit card statement. We reviewed all 264 payments totaling $122,007 made by the Company in 2012, including $7,250 for credit card purchases. We found that claims for credit card purchases totaling $1,570, or 22 percent of the 2012 credit card purchases, did not have adequate documentation on file.

The Board has adopted a code of ethics, but it has not adopted an investment policy or a procurement policy. The Board also has not ensured that procedures are in place for financial recording and reporting. As a result, although the Treasurer did submit monthly financial reports to the Board, they were not complete because the Treasurer had not reconciled the cash and bank balances. The Board also does not perform, or contract for, an annual audit of the Treasurer's records. Finally, while the Treasurer maintained cash balances showing increases and decreases for checking and saving accounts, he did not reconcile those cash balances to the monthly bank statement balances. Because of these weaknesses, we selected all 39 check disbursements totaling $29,914 from January 1, 2013, through February 28, 2013, and found that the disbursements appeared to be for proper District purposes.

Village officials have not developed formal information technology (IT) policies for user access, and the Board has not developed a formal disaster recovery plan. We found generic user accounts on the Village's computer system and some users unnecessarily had administrative rights. We also found that the Village Clerk/Treasurer has administrative rights to the Village's financial software. Therefore, she has the ability to add users, modify access rights and data files, and correct errors. Finally, although audit logs are available through the financial software, they are not generated and reviewed by Village officials. As a result of these weaknesses, the Village's IT system and its data are subject to an increased risk of corruption, loss, or misuse.

The Board has not properly developed its annual operating budgets. In three of the last five fiscal years, the District spent more money than it received. Budget inaccuracies contributed to the District using 54 percent of fund balance to fund the ensuing years' appropriations. Additionally, during this same period, the District budgeted to fund its reserves with approximately $115,000 of fund balance in anticipation of future equipment and repair needs. The fund balance has declined from approximately $71,000 in 2008 to $32,000 in 2012. During the budget development process, the Board did not consider historic trends and develop budgets with these trends in mind. In addition, throughout the fiscal year, the Board did not monitor budget performance or adjust the budgets to reflect actual expenditures as they occurred because the Treasurer was not providing reports showing budget performance.

We found that the Committee generally does not provide adequate oversight of Company financial activities.

During our audit period, the District paid claims totaling $24,547,479. District officials have established adequate controls over the claims processing function that ensure claims are audited in a timely manner and are properly supported. The claims auditor generally conducts a thorough and deliberate audit of each claim before the Board authorizes payment. Even though the claims auditor appeared to be properly auditing claims, the purchasing agent did not always formally approve all purchases prior to ordering goods and services. We selected and reviewed 25 claims totaling $145,637 to determine if purchase orders were issued prior to the ordering of the goods and services and if claims were for legitimate District purposes and audited prior to payment. Despite minor deficiencies that were discussed with District officials, the claims we tested did appear to be for a proper District purpose and audited prior to payment. However, purchase orders for six of the 25 claims totaling $33,539 were confirming purchase orders which were prepared after the invoice was received from the vendor.

Village officials need to improve internal controls over the Village's time and attendance procedures and leave accruals. We identified 79 errors in nine employees' accrual records. There were no timesheets or other records of the days or hours worked, such as calendars and logs, for four salaried employees, and timesheets for two part-time employees were not signed by their supervisors. In addition, internal controls over the Court's operations were not appropriately designed or operating effectively to allow for proper accounting and reporting of financial activities. Bank reconciliations were not documented for Justice Harrison's account, and monthly bank reconciliations of Justice Portin's account showed a recurring, unresolved surplus balance of $446 during the audit period. Finally, internal controls over the Treasurer's activities and the Board's oversight of the Treasurer's financial operations also need to be improved. The Treasurer did not properly reconcile all Village bank accounts or update the accounting records in a timely manner. Further, the Board did not ensure that adequate policies, procedures and agreements were established for online banking and did not provide sufficient oversight of electronic funds transactions.

The Board does not audit claims and has not designated a claims auditor to perform this function. Instead, the Executive Director audits the claims, including payments made for the reimbursement of his own travel costs. Our review of claims did not identify significant discrepancies.

The Board did not ensure that the District only paid for actual District expenses, necessarily incurred on official District business and did not establish appropriate policies and procedures to ensure that expenditures were properly supported. This resulted in the payment of $15,041 in questionable travel costs which do not appear to be for the District's benefit. In addition, claims totaling $23,847, some of which were for this questionable travel, were submitted and paid without adequate support. This included $2,813 in reimbursements to a Chief for expenditures that the District had already paid for on the District credit card. Finally, the Board has not established a maximum daily rate for meals and lodging to ensure that travel is cost-effective and reasonable. Had the Board implemented per diem rates established by GSA for meals and lodging and mandated that the most cost-effective and reasonable means of travel be used, they could have saved over $12,000 on the five out-of-state conferences in 2012.

For the 2011-12 fiscal year we compared billings totaling approximately $3.2 million for all five school districts of residence to revenues received and reported and did not identify any discrepancies. We also reviewed the relevant factors included in the calculation for all five final billings to the school districts and did not identify any discrepancies in the School’s calculation.

We determined that internal controls over the Town's purchasing process were properly designed and operating effectively. We found that Town officials obtained appropriate competition when soliciting purchases from 26 vendors who were paid more than $20,000 each and approximately $1.4 million in total. We also reviewed supporting documents to verify that procurements and subsequent payments were properly authorized, accurate and for legitimate purposes and, where applicable, if reimbursed expenses were appropriate and properly supported by paid bills or receipts. All transactions that we examined were for proper Town business purposes, and were supported by contracts, Board resolutions and appropriately itemized invoices.