The Mayor and the Board did not conduct a thorough and deliberate audit of the claims presented for payment and therefore, did not ensure that disbursements were for proper Village purposes. The Board also did not adequately segregate duties of the Clerk-Treasurer or implement sufficient compensating controls. Finally, the Board did not conduct an audit of the Clerk-Treasurer's records for the 2011 fiscal year. As a result, Village funds were at risk of misuse.

The Board and the Mayor did not meet their fiscal oversight responsibilities. For example, they did not realize that they were required to annually audit the Clerk-Treasurer's records and reports, and therefore, did not audit any of the Clerk-Treasurer's receipt or disbursement records. In addition, they have allowed the Clerk-Treasurer and Deputy to perform all of the financial functions including billing, collecting, recording and depositing cash receipts, and printing and signing checks, without anyone verifying the accuracy and completeness of the work they perform. As a result, no one can be sure that all money received is deposited in a Village bank account and that all disbursements are for proper Village purposes.

The Board did not require the Supervisor to meet the fundamental financial responsibilities of his office. The 2012 accounting records were in disarray and the 2011 accounting records could not be produced for our review. No one can be sure that all moneys received were actually recorded and deposited, and that all moneys disbursed were for proper town purposes. Cash was not reconciled, and had large unsupported adjustments in an attempt to force the accounting records to agree to the bank balance. Furthermore, monthly and the last two annual reports were not consistently provided by the Supervisor to the Board, and the annual reports filed with OSC are over one year late. In addition, the Town's unaccounted-for water of 39 percent was substantially more than the Environmental Protection Agency (EPA) industry standard, costing the Town approximately $19,000 each year. In addition, water bills were calculated inaccurately.

We found no material issues in the accuracy and timing of deposits and the recording and accounting for the Court’s moneys. However, we found that the Justices did not perform monthly bank reconciliations and accountabilities and the Board did not provide effective oversight of Court operations through an effective annual audit.

The Board did not segregate the Clerk-Treasurer's duties or provide additional oversight as a compensating control, and did not properly plan or monitor the Village's finances. The Board did not institute compensating controls and did not audit the Clerk-Treasurer's records as required. Although our tests of financial transactions found no significant discrepancies, these control weaknesses place the Village at an increased risk of errors and irregularities. We also found that the Board did not develop a long-term financial plan or adequately monitor the Village's water fund. As a result, the water fund's year-end fund balance increased from $76,272 to $194,688 from fiscal years 2007-08 to 2011-12, and is now equal to 168 percent of annual expenditures. Village officials have not addressed the intended use of these excess funds and have not reviewed water rates to assess their reasonableness.

During the last two fiscal years the Town's financial condition has improved. This improvement has been primarily the result of hiring a bookkeeper who has enhanced the development and monitoring of the annual budgets adopted by the Board by helping the Board overcome a lack of established budgetary guidance. In previous years, the Board adopted budgets which included inaccurate revenue and expenditure estimates and appropriated fund balance that was not available. We found that the Board has not adopted formal policies, and the Supervisor has not developed detailed procedures, for ensuring that financial duties are adequately segregated or that sufficient review and oversight procedures are in place. The Board also did not perform an audit of the water department and did not maintain adequate documentation of its audit of the records and reports of the Supervisor, Town Clerk, or Town Justice. Furthermore, the Board has not established policies and procedures related to acceptable use, online banking, breach notification, or disaster recovery. Additionally, there is no system in place for monitoring IT activity or changes in the system, maintaining a computer inventory, or sanitizing computer equipment before disposal.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. Village officials appropriately monitored the revenues and expenditures in the water fund to ensure the continued improvement of the water fund's financial condition as was recommended in the budget review report issued in April 2012. The Village's proposed budget complies with the property tax levy limit.

Based on our review, individual significant revenue and expenditure projections in the tentative budget appear reasonable. However, this tentative budget, as well as those from the last five years, is likely to produce an operating surplus. As a result, fund balance appropriated as a financing source is unlikely to be used and the District's fund balance will continue to increase. The District's tentative budget complies with the property tax levy limit.

Based on our review, individual significant revenue and expenditure projections in the proposed budget appear reasonable. The District's proposed budget complies with the property tax levy limit.

County and Department officials had not established an adequate system of internal controls over the Department's financial operations. As a result, cash receipts were not properly accounted for, secured, and deposited in a timely manner. The Department's failure to establish policies and procedures regarding driving while intoxicated (DWI) administrative fees has resulted in an inequitable assessment of fees to probationers and a lack of enforcement of inactive probationers' delinquent accounts. For example, we found that 89 inactive probationers owe at least $9,710, but as much as $58,260, to the County for unpaid DWI administrative fees. Finally, the Director's decision to not utilize the financial module of the computer program that the Department purchased in 2006 resulted in the Department utilizing computer systems that could not generate adequate monthly reports and allowed for financial transactions to be modified and deleted without audit trails.

All four bar committee members had unmonitored access to the safe where the cash from bar operations was stored. The Board did not require bar committee members to have a second member present while conducting cash counts or adding or removing cash from the safe. Bar committee members routinely paid for bar-related purchases with undeposited cash generated from bar sales. We compared bar cash register tape totals to daily cash reports and bank deposits. From January 1, 2010 to January 22, 2013, bar cash register tape totals exceeded corresponding bank deposits by $41,359. After deducting $14,708 of purchases made with cash from bar sales and $2,897 in bar cash on hand as of January 24, 2013, $23,754 in cash remained unaccounted-for. On August 21, 2012, we discussed the deficiencies that occurred with Company officials. According to Company officials, the bar committee chairman produced $10,505 in cash at the Company meeting held that evening. Company officials told us that over the last several years, the bar committee chairman was able to divert cash from the cash register in the bar without their knowledge.

Although the Department established a money-handling policy in April of 2012 providing guidance and internal controls over cash receipts and disbursements, cash receipts and disbursements were not processed in accordance with the policy. We found the civil clerk performed virtually all financial duties without sufficient oversight or other mitigating controls. We also found that bail and civil office cash receipts were not properly accounted for, secured, and deposited in a timely manner, resulting in a $6,184 overdraft in the civil office bank account in August of 2012. In addition, the civil clerk affixes the Sheriff's signature to Department checks without his direct oversight or review. We also found that bank reconciliations were not prepared properly or timely, resulting in $2,050 in bail payments not being transferred into the civil office bank account in over three months from the date of receipt and an unidentified balance in the civil office bank account of $2,567. Lastly, the Department's computer system allowed for the ability to modify and delete financial transactions, creating the opportunity for the manipulation and concealment of transactions.

We found that the Village Building Inspector did not take an oath of office and, as generally required of a Village officer, does not reside within the Village. In addition, the Village and this individual have entered into a contract, which provides for an annual fee for basic services of $8,000 plus 50 percent of certain permit fees. This type of arrangement is usually indicative of an independent contractor relationship. Requests for payment are submitted monthly by voucher. The Building Inspector receives an Internal Revenue Service Form 1099, and does not receive any fringe benefits. During our audit period, this individual received $84,197, nearly $73,000 of which was based on fees collected for building permits. Because there is no cap on the amount of fees paid to the Building Inspector, the Village cannot know whether the individual's compensation is excessive in any given year. If it is excessive (e.g., more than reasonable compensation paid to inspectors in other comparable villages), then the Village may also have made a poor business decision in basing the compensation on the amount of fees collected.

Internal controls over cash disbursement are appropriately designed and operating effectively with the exception of bank reconciliations, which have not been prepared since May 2012. Because the Town's deposits total $26 million, the lack of bank reconciliations creates a risk that errors or fraudulent transactions could occur without detection.

Based on the results of our review, in general, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. We compared the District's food service fund 2013-14 budgeted revenues and appropriations to the average of the actual results for the past two years and projected results for this year. The budgeted revenues and appropriations are higher than average actual results by $65,000 and $120,000, respectively. The District's proposed budget complies with the property tax levy limit.

The Board did not adequately design, implement, or monitor internal controls over the Town's financial activities. The Supervisor did not provide effective oversight of the work performed by the bookkeeper to address her incompatible financial duties. Because the bookkeeper can initiate transactions, make accounting entries, and perform bank reconciliations without any supervision, there is a risk that she could initiate and conceal inappropriate transactions that could go undetected and uncorrected. Further, the Board did not conduct an annual audit of the records of officials and employees who receive and disburse cash. In addition, the Supervisor has not adequately segregated the bookkeeper's online banking duties. The Supervisor had not reviewed or supervised the bookkeeper's online banking transactions totaling more than $1.8 million made during the first six months of 2012. In addition, the Town has not established a confirmation process with its bank for online transfers of Town moneys.

The Board did not audit and approve claims after the transactions occurred and prior to the Treasurer paying those claims. The Board did discuss many purchases prior to those purchases being made, thus ensuring that the goods purchased were for District purposes. However, without auditing the claims prior to payment, the Board could not be sure that the amounts paid were aligned with its previously established expectations. In addition, the payroll vendor has access to a District bank account with a significant amount of District cash. Finally, District officials could not account for more than 50 percent of fuel delivered to two of the three District fire stations.

We found that the District established adequate internal controls over Business Office operations. Board policies and written procedures have been developed and adhered to by staff for cash receipts and disbursements, payroll, purchasing, and claims processing. Furthermore, District officials had developed appropriate segregation of duties amongst Business Office staff where possible and also implemented various reviews of the work performed as mitigating controls.

The Board did not ensure that disbursements were made for authorized District purposes. The Board did not adequately segregate duties or implement sufficient compensating controls. The Treasurer performs all aspects of the cash disbursements process including preparing the monthly abstracts; printing, signing, and mailing the checks; and preparing the bank reconciliations. The Treasurer also is responsible for performing online bank transfers. The Treasurer performs all of these duties without sufficient oversight by the Board. While the Board approves all claims that are presented for audit, no one verifies that all checks disbursed were approved by the Board. The Treasurer does not provide check numbers to the Board and no one compares canceled check images to the Board-approved abstracts.

We found significant problems with the accounting for and reporting of capital project activity as well as the use of certain debt proceeds. The Administrator did not maintain capital project records in a manner that readily provides information about actual resources committed and expenditures incurred throughout the course of each project, which often span two or more fiscal years. Rather, the Administrator recorded certain capital project activity in the sewer fund, together with routine sewer operations, which are budgeted for annually by the Board. The commingling of all of these resources and transactions in the sewer fund does not allow for capital activity to be appropriately monitored against project authorizations approved by the Board as well as for compliance with legal requirements related to debt proceeds.