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.

Over the last five years, the District's tax levy only had an average change of 1.09 percent. However, District officials' conservative budgeting practices generated $15.8 million in net operating surpluses. As a result of these operating surpluses, the accumulated fund balance exceeded the statutory maximum of 4 percent of the ensuing year's budget. To reduce the fund balance and stay within the 4 percent limit, District officials transferred moneys to the District's reserves and have continuously increased the amount of fund balance appropriated which has gone unused for the last four years. As a result, the District's general fund's fund balance increased to $48,661,075 as of June 30, 2012. In addition, the District did not solicit proposals for approximately $2.7 million in professional services for a capital improvement project (CIP), as required by the District's policy. Finally, we found that the expenditures for architectural services were not properly supported.

Based on the results of our review, we found that the significant revenue and expenditure projections in the preliminary budget are reasonable. The District's proposed budget complies with the property tax levy limit.

We identified significant revenue and expenditure projections in the adopted budget that are not reasonable and could result in an increase in the County's accumulated deficit. Specifically, the 2013 budget lacks provisions for decreasing the general fund deficits. In addition, the County could potentially face a shortfall in revenue if the County does not receive the projected amount of sales tax revenue. If the Town of Orangetown does not reimburse the County for tax certiorari moneys during the 2013 fiscal year, the County will have an additional revenue shortfall of $2 million. If property is not sold, the County will experience a revenue shortfall of $2.4 million in 2013. It is unlikely that the $550,000 contingency appropriation will be sufficient to cover the annual average $2 million of uncollected taxes. The 2013 budget appropriation of $158 million for personal services appears to be insufficient. The County budgeted salaries as if no employees were taking the early retirement incentive that will be offered in 2013 and then accounted for a savings of $4.3 million in a separate budget account as a negative expenditure amount.

The Board did not meet the fundamental expectations of their financial oversight responsibilities. The Supervisor paid claims without Board audit. Moreover, key financial duties were performed by the Supervisor's bookkeeper, and the Justice's clerk without sufficient oversight from the Supervisor and Justice, respectively. The Clerk also performed all aspects of collecting and recording taxes and fees paid to her office. All of these duties were performed during 2011 without the Board performing their required annual audit.

County officials developed budgets containing unrealistic estimates, and maintained substantial fund balances that were not substantiated by formal and transparent plans for their use. The Board's adopted budgets for the past five years (2007 to 2011) included overestimated expenditures by approximately $28 million and underestimated revenues by $8.8 million, and generated operating surpluses totaling $21 million. The County also maintained reserves totaling $10 million as of December 31, 2011, with no plans in place for the use of these balances.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District's proposed budget complies with the property tax levy limit.

The Town does not have complete, accurate, and up-to-date accounting records, nor have monthly bank reconciliations been performed during our entire audit period. The Supervisor has not filed the required AUD with OSC for the past three years. As a result, the Board could not properly monitor and manage Town operations.

We audited certain moneys collected by four of the seven departments within the City responsible for collecting and/or depositing City moneys; the Finance Office, Public Transportation Office, Water Department, and the City Clerk's Office. Except for minor discrepancies, which we discussed with City officials, we determined that cash receipts collected by the Finance and City Clerk's Offices were adequately accounted for. However, unless City officials improve their recordkeeping practices, the risk will remain increased that all moneys due to the City will not be received, recorded and deposited properly.

The Board and Town officials did not adequately monitor the Town's financial operations and take timely action to maintain the Town's financial stability. The fund balances in the Town's major operating funds fluctuated significantly over the last four years primarily because the Board over-appropriated fund balance in the budget and allowed the budget to be overspent. In addition, duties relating to the Town's financial operations are not adequately segregated. The Supervisor is responsible for preparing and disbursing checks, preparing monthly bank reconciliations, recording cash disbursement entries into the accounting records, and preparing monthly reports to the Board, without the Board providing for an independent review and verification of her work. The Board also has not instituted controls to compensate for this lack of segregation of duties, such as reviewing bank statements, cancelled checks, and reconciliations.