Internal controls over the Court's operations were not appropriately designed or operating effectively to allow for proper accounting and reporting of financial activities. Justices Blain and Olson did not perform bank reconciliations properly or at all, prepare monthly accountabilities, deposit cash receipts in a timely manner, adequately segregate the court clerk's duties and provide proper oversight of the court clerk. Further, the Board's oversight of the Court was inadequate. The court clerk improperly held partial payments, did not issue press-numbered receipts for all payments collected by the Court, and did not enter all moneys received into the Court's accounting system. Because of these weaknesses, Justice Blain had unidentified funds totaling $1,848 in his bank account that could not be traced to any open or closed case files, fines or fees, or bail moneys; and Justice Olson had a cash shortage totaling $852 which had not been detected or corrected.

District officials' appropriation of fund balance in excess of the amount actually available to fund operations resulted in an unassigned fund balance deficit of $1.5 million as of June 30, 2011. District officials addressed this situation by implementing reductions to budgeted expenditures in the 2011-12 fiscal year. The District's latest annual report shows the deficit was eliminated as of June 30, 2012.

Although the STAR program has succeeded in delivering millions of dollars in tax relief, we found that local assessors have granted a significant number of exemptions to individuals or entities not eligible to receive them. Our tests of one class of potentially ineligible exemptions at 46 sampled municipalities showed that 19.6 percent of the exemptions should not have been granted because they were duplicate or improper. We project that the State lost $13 million in the 2010-11 fiscal year - and will lose an additional $73 million through the 2015-16 fiscal year - just for exemptions with this specific risk indicator (i.e., having a mailing address that receives STAR exemptions for multiple parcels). Because the exemptions we examined represent less than 3 percent of the STAR exemptions in effect in 2010, the extent of duplicate or improper exemptions is likely significantly higher, and much more costly to the State. We found that some municipalities have taken proactive steps to reduce homeowner “double-dipping” and other abusive practices. However, municipalities, on their own, do not have the tools they need to avoid granting duplicate exemptions; specifically, clear direction in the Law and the ability to perform effective searches for potential duplicate exemptions.

During the audit period, 32 employees left District service and received separation payments totaling $722,738. Generally, District officials calculated the correct amount for separation payments provided to the employees leaving District service. Except for two minor exceptions, which we discussed with District officials, we found that the District has designed appropriate internal controls over employee separation payments and those controls are operating effectively. We also found that, in 2010, District officials developed a disaster recovery plan; however, the Board has not formally adopted the plan. Also, the plan does not sufficiently address all necessary components and does not contain the level of detail necessary to ensure that the computer system could be restored in a timely manner. We also found that the District has not tested the plan to ensure that it can be implemented in emergency situations and that management and staff understand how it is to be executed. Finally, we found that all employees were not made aware of the plan.

The City's servers are not placed in secure locations. In addition, system users were granted administrative privileges that they did not need to perform their job duties. Further, the Council has not adopted a disaster recovery plan. As a result, there is an increased risk that computerized data could be lost or compromised, or that City operations could be seriously disrupted.

The Board and Supervisor did not adequately segregate duties related to the collection, recording, and depositing of receipts, the preparation and recording of disbursements, and bank reconciliations. In addition, the Supervisor allowed the bookkeeper to affix the Supervisor's signature on disbursement checks using a rubber stamp. We also found that no one compares the approved claim warrants to the checks that cleared the bank, and there was no documentation of an annual Board audit of the Supervisor's records.

Over the 2009-10 through 2011-12 fiscal years, the Board underestimated expenditures by a total of more than $416,000 despite historical indications that expenditures consistently exceeded the budget. These budgeting practices created operating deficits that have contributed to ongoing fund balance deficits in the general fund. During this period, the Village received over $642,000 in non-recurring revenue without which the fund balance deficit would have been even greater. The Board also failed to audit all claims as required by Village Law. For the fiscal year ended May 31, 2011, the Board reviewed and authorized only 12 abstracts with 573 claims out of 146 abstracts with a total of 1,031 claims. In addition, a Board member had a prohibited interest in a contract with the Village. Finally, Village officials have not adopted comprehensive IT policies and procedures regarding standards for computer use, remote access, breach notification, data backup, and disaster recovery.

We reviewed four resident school district bills for three resident school districts whose students comprised an average of 95 percent of the student population during the 2011-12 and 2012-13 fiscal years to determine whether the billing invoices were accurate and supported. We found that the School accurately billed the school districts of residence. We also found that the School maintained adequate supporting documentation for the students reviewed. Furthermore, at the end of the fiscal year, the Finance Manager completes a reconciliation of amounts billed and collected. We reviewed his reconciliation for the 2011-12 school year and the reconciliation appeared reasonable.

The Board did not develop and adopt accurate budgets that were based on realistic estimates of revenues and expenditures. Even though the Board received monthly budget-to-actual reports from the Supervisor, they consistently underestimated revenues and overestimated expenditures. As a result, fund balance that was appropriated as a funding source was not used, taxes were unnecessarily levied, and the Town accumulated $309,369 and $399,024 of unrestricted surplus funds in the general and highway funds, respectively. These amounts are excessive in comparison to the Town's expenditure levels, representing 108 percent and 69 percent of the 2013 budgeted expenditures for the general and highway funds, respectively. In addition, the Board accumulated $117,463 in a reserve fund for highway equipment and $18,606 in an unemployment reserve without documenting any planned use.

The Board authorized substantial improvements to the Village's water system and obtained funding for the project from the Environmental Facilities Corporation without first identifying a plan to pay for the related debt. Although the Board raised water rates five times starting in June 2007, it did not establish a reserve to set aside any of these resources to fund project costs or the debt service payments that are expected to begin in the Village's 2013-14 fiscal year. We also found that the Clerk-Treasurer's records for the water fund were inaccurate, and misrepresented the fund's financial condition. In addition, the Board did not establish policies or procedures for the billing and collection of water charges, and failed to properly segregate the duties of the Clerk-Treasurer or implement compensating controls. Finally, we found that the Clerk-Treasurer did not include all unpaid water bills and fees on the tax roll for the 2011-12 fiscal year.

Town officials did not have written procedures for reconciling the water processed by its water system and purchased from the Village with the water billed to its customers. The Town could not account for 8,376,160 gallons, or about 25 percent of the water processed. We estimated that the Town lost $64,787 in water rent revenue from unbilled water if the lost water was due to malfunctioning meters and/or theft. Conversely, if the water lost was due to leaks, the Town incurred a loss of at least $57,000 to purchase 7.6 million gallons of unaccounted-for water. The Town also has not established written procedures that clearly define the process for issuing permits allowing property owners to connect to the water system. Consequently, property owners did not always apply for tapping permits. We calculated that the Town lost revenues of $30,550 as the result of not issuing tapping permits and collecting tapping fees. Finally, Town officials did not seek competitive rates for electricity supply purchases or periodically review the rate they were paying with rates offered by other electricity suppliers. The Town could have saved as much as $4,035 had it contracted with the same energy supply company (ESCO) as the Village, or $2,548 using the Orange County ESCO.

Since our last audit of the City's financial condition, the general fund's unexpended surplus has significantly increased from $165,723 on December 31, 2006 to $6.2 million on December 31, 2011. As of October 31, 2012, the fiscal year 2012 general fund budget of $37.2 million appears on track with City officials not anticipating an operating deficit. Also, while the financial condition of the water and sewer funds has improved during our audit period, the water fund balance continues to remain in a deficit. As of October 31, 2012, the fiscal year 2012 water budget of $2.97 million and sewer budget of $3.67 million appear generally on track with City officials anticipating a small operating deficit in each fund. During the period reviewed, the Council did not address cash flow problems in the water and sewer funds. Instead, the Council routinely relied on increasing amounts of inter-fund loans from the general fund to finance operations in the water and sewer funds. The combined balance of outstanding inter-fund loans from the general fund to the water and sewer funds has increased from approximately $1.4 million on January 1, 2008 to $1.8 million on December 31, 2011, with no plan for repayment.

Intermunicipal cooperation for the provision of IT services has resulted in cost savings for local governments.

The Board does not provide adequate oversight of the Department’s financial activities.

The Board did not ensure that all claims were audited, were audited prior to payment, and did not properly audit all claims to ensure they included evidence of receipt and price quotes. As a result, 20 claims totaling $32,326 were paid even though evidence of Board approval was not documented in the Board minutes, and five claims totaling $6,258 were inappropriately paid in advance of Board audit. Although we did not identify any instances where goods and services were not received, two claims, totaling $4,099, lacked quotes as required by the Village's procurement policy. In addition, the Board did not audit, or cause to be audited, the Treasurer's records and reports.

The Board has not maintained an adequate level of unassigned fund balance which limits the Village's ability to manage emergencies and other unanticipated occurrences. For example, in two of the last four fiscal years, Village officials appropriated more fund balance than was actually available. For the 2009-10 and 2011-12 fiscal years, the Board appropriated $1,874 and $999, respectively, of fund balance that they did not have. The Board also has not exercised effective oversight of the Clerk-Treasurer. For example, the Clerk-Treasurer has not filed the required annual financial report with OSC on a timely basis. Further, the Board did not audit, or cause to be audited, the records and reports of the Clerk-Treasurer.

We found that the Board did not provide adequate oversight of the District's capital projects and tax certiorari reserve funds. District officials overfunded the High School Roof project and burdened District taxpayers with $1.3 million in unnecessary borrowing. Further, the District paid approximately $579,300 in tax certiorari claims from July 1, 2009 through June 30, 2012 from the general fund instead of using the tax certiorari reserve. We also found that the District's Audit Committee acted outside the scope of its authority and withheld information from the Board. The District also paid four professional service providers (legal, architectural, internal audit, and external audit) $233,894 during the audit period without first soliciting competition. Finally, the Board did not properly segregate the Treasurer's and Deputy Treasurer's duties over cash disbursements.

The Council did not review the fire companies' fundraising events held in 2011 because none of the fire companies provided the City with advance notice of these events, as required by law. These events included chowder sales, food and beer tents at Canal Fest and a variety of raffles, bingo, and other games of chance. We identified fire company fundraisers that operated at a loss and provided free alcohol to participants. In addition, City officials did not maintain records indicating they sought written or verbal quotes, as required by the purchasing policy. We tested 24 claims totaling $41,600 from nine vendors who provided the City with materials and supplies totaling $140,703 in 2011. We found that for all 24 claims tested, department supervisors did not maintain a record of the verbal or written quotes required by the procurement policy and therefore, could not provide evidence that City funds were used in the most efficient and economical manner.

Town officials have not closed out a capital project for a dump closure with a remaining cash balance of $111,373. In addition, Town officials did not receive approval from OSC for establishing capital project reserve funds and exceeded the Board-authorized amount when funding two reserves by a total of $101,445.

The Village is compensating the appointed Building Inspector and elected Village Justice by voucher as if they were independent contractors. However, these are Village official positions and should be paid on the Village's payroll. In addition, the Board did not adopt a comprehensive credit card policy. Although the Village adopted a credit card policy on April 23, 2012, this policy only set the credit card limits and required that receipts be submitted for any purchases; it did not specify who was authorized to use the credit cards, for what purpose the cards could be used, or procedures for monitoring the card usage. The Village had two major credit cards, one issued to the Mayor and one issued to the Administrator. The Mayor regularly used the Village credit card at local restaurants and in most instances there were no credit card receipts to show whether items purchased were appropriate Village charges.