Overall the Board could have improved its financial management. It did not appropriately budget for certain expenditures and did not properly monitor spending during the year. We found that the highway fund had deficit fund balances during our audit period and incurred operating deficits in two of the past three years (2016 and 2017). The Supervisor and Superintendent told us that road repair expenditures exceeded appropriations in 2017 due to unanticipated road damage caused in part by excessive rainfall and flooding. However, they were unable to provide an explanation for the budget shortfall that occurred in 2016. General fund revenues were overestimated by approximately $72,000 over the three-year period (2016 through 2018) or on average $24,000 (7 percent) each year while appropriations were overestimated by approximately $216,000 or on average $72,000 (21 percent) each year. Finally, the Board did not develop and adopt comprehensive written multiyear financial and capital plans to help guide the budget development process or establish reserve funds to help finance future capital needs.

We identified 42 professional service providers who were paid a total of $24.6 million during the audit period. We selected and reviewed the contracts of 10 professional service providers who were paid approximately $2 million. We found that District officials did not seek competition from three professional service providers who were paid approximately $696,000. The three services provided were legal ($520,863), insurance ($111,294) and engineering ($64,134). Furthermore, we found the officials did not periodically review the services of the three professionals to determine if a request for proposal (RFP) is needed. When District officials do not seek competition, they cannot assure taxpayers that procurements are made in the most prudent and economical manner, without favoritism, extravagance, fraud or corruption.

City officials did not segregate the duties of the clerks inputting payroll or implement compensating controls. For example, each of the clerks have the ability to change, add and delete payroll information. The Treasurer does not independently perform a review or certify payment of wages and salaries for the City's employees. Further, after the payrolls are processed, no one reviews the payroll journal, which contains information including gross pay, net pay and withholding amounts for each employee. In addition, the Council did not adopt policies that address how compensatory (comp) time will be authorized, earned and used. Finally, City officials did not have a process to verify accrual balances prior to approving the use of leave accruals.

As of June 30, 2019, the unemployment insurance reserve and tax certiorari reserve balances of $381,484 and $563,862, respectively, were excessive. In addition, the District's reported fund balances exceeded its statutory limit in all three fiscal years. Although the District's budgets were reasonably accurate and property tax levies remained relatively flat during these years, the positive budget variances were enough to offset the appropriated fund balance, which was approximately 4 percent of the budget each year. After adding back unused appropriated fund balances, the District's recalculated surplus fund balance exceeded the statutory limit each of the last three fiscal years, ranging from 4.7 percentage points to 8.9 percentage points over the limit. Finally, the Board and District officials did not develop multiyear financial plans or establish targeted funding levels for reserves.

We found that signed checks were printed before the claims auditor audited and approved claims. As a result, claims for 213 check disbursements totaling $845,215 were not audited and approved prior to payment. Except for minor instances, we found the claims paid prior to audit were supported by adequate documentation, for appropriate purposes and subsequently audited by the claims auditor. In addition, credit card claims, paid by wire transfers, were not audited and approved prior to payment and 38 of 105 credit card charges totaling $16,664 were not adequately supported. Additionally, the credit card claims continued to be paid prior to audit and approval through our audit period. Although the claims were reviewed subsequent to payment, they continued to lack supporting documentation. The claims auditor stated that he was not aware the District had a credit card. Therefore, he did not know that there were credit card claims to be audited.

The Board has not adopted a comprehensive written fund balance and reserve policy establishing optimal funding levels and plans for reserves. We analyzed the balances of the District's reserve funds as of June 30, 2019. We determined that the District's tax certiorari reserve had a balance of nearly $1.9 million as of June 30, 2019 and was overfunded because there were no outstanding tax certiorari claims supporting the balance. In addition, we compared the 2016-17 through 2018-19 estimated revenues and budgeted appropriations with actual operating results and found that estimated revenues were generally reasonable, but budgeted appropriations were overestimated by an average of 3.8 percent. Due to the unplanned operating surpluses in two of the last three years, appropriated unrestricted fund balance totaling $3.5 million was not used during the 2016-17 through 2018-19 fiscal years – only $217,580 (of the almost $1.5 million in fund balance appropriated for 2016-17) was used. Finally, over the last three completed years, the District reported surplus fund balances of 3.9 to 4 percent of the next year's appropriations, which was within the statutory limit. However, with the unused appropriated fund balance and the overfunded tax certiorari reserve added back, surplus fund balance exceeded the statutory limit by 9.5 percentage points, or about $3.3 million, as of June 30, 2019.

District officials did not review or reconcile electronic payments with cash receipts records to verify that all amounts were collected and remitted to the District. As a result, the District did not initially receive more than $5,500 in fees recorded as collected but not remitted by a vendor in January 2019. In November 2019, the vendor agreed to fully reimburse the District for lost revenue. In addition, the Board did not adopt written enforcement policies for overdue accounts and the Coordinator did not ensure overdue accounts were invoiced in a timely manner. We reviewed an accounts receivable aging report for the before and after school program and identified 75 accounts with outstanding balances totaling almost $28,000 as of August 13, 2019.

District officials did not always comply with the procurement policy by using requests for proposals (RFPs) when procuring professional services. During the audit period, officials paid approximately $3.14 million to 29 professional service providers. District officials did not periodically seek competition for services from five professional service providers who were paid a total of $911,795 during our audit period. The District has not sought competition for legal services in 28 years (since 1992), bond counsel for 24 years (since 1996), architectural services in 20 years (since 2000) or construction management services for 16 years (since 2004). In addition, officials could not tell us how long ago their current financial advisor was first appointed. Because officials did not always use competition to procure professional services, they cannot be sure that professional services are procured in the most prudent and economical manner.

The Board did not provide adequate oversight of the management Company's work or actively direct and monitor financial operations. The Company provided the School's curriculum and performed all aspects of financial transactions for the School with little oversight. The Company failed to sufficiently act as the School's audit liaison and no audit committee acted independently from the Company during our audit period. School officials did not ensure the Company provided all of the services required by its contract. Officials also did not receive documentation that supported the service fees and reimbursements paid to the Company. Finally, the School could have earned up to $28,000 if the Directors had used School provided cash rewards credit cards.

The Board did not properly plan and manage the capital project and clearly inform taxpayers when the estimated cost and scope of the project changed. In addition, the Board was not fully transparent on the anticipated project costs. As a result, original estimates were $9.8 million and increased by more than $3.6 million after competitive bids were received. When inaccurate costs are included in project estimates, there is an increased risk that the Board may issue more debt than necessary to finance the project because funding is available to pay for costs that were not within the original project scope. Finally, Town officials did not ensure an itemized project budget outlining revenues and expenditures was maintained in the accounting records and periodically updated.

Our review of 24 purchases totaling about $128,000 found that District officials did not seek competition by obtaining oral or written quotes for 18 purchases (75 percent) totaling $81,500. District officials did not seek competition for services from five of the six professional service providers reviewed. These providers were paid $457,700 during the audit period. When District officials do not seek competition, they cannot assure taxpayers that procurements are made in the most prudent and economical manner, without favoritism. Further, they may be unaware of other vendors that could offer similar services at a more favorable rate.

The Board and District officials can better manage fund balance and reserves. As of June 30, 2019, surplus fund balance was nearly $2.9 million (14 percent of the 2019-20 budgeted appropriations), exceeding the statutory limit by more than $2 million or 10 percentage points. Although the Board adopted a written reserve fund policy, it did not address optimal funding levels, conditions necessary for use or how and when reserve funds would be replenished. We found that seven reserves totaling $2.9 million as of June 30, 2019 had not been used in the past three fiscal years. The Board and District officials also improperly restricted $2.2 million in two reserves and the agency fund. Finally, the Board has not adopted any written multiyear plans.

Town employees did not comply with and officials did not monitor the computer use policy. Employees accessed websites related to social media, entertainment (including streaming websites), personal shopping, and personal investing and online banking. The consultant stated that while he periodically reviewed usage logs in the past, the server containing the logs failed in early 2019. As a result, Town officials do not have the ability to review web usage logs. We also found that 20 of 66 user accounts were not necessary for Town operations. Finally, Town officials did not develop a breach notification policy, disaster recovery plan or a policy addressing personal, private and sensitive information (PPSI).

Although the District purchased fixed assets totaling $145,398 during our audit period, the District does not have a comprehensive policy or procedures to safeguard fixed assets. In addition, the District's inventory list did not contain identifiable information for each asset including purchase date, purchase price, date placed in service and useful life. As a result, officials were not aware that equipment in their possession could have been sold or traded in to help offset the cost of new equipment purchases totaling $124,880. Finally, 20 pieces of equipment purchased during the audit period totaling over $44,000 were not listed on the District's inventory list.

District officials did not properly account for Niagara Power Coalition revenues. We found that $4.2 million was maintained in the debt service fund although the funds had not been designated to pay debt. Because these funds have not been assigned to pay debt, Coalition revenues should be accounted for in a special revenue fund until revenues are allocated for debt payments. District officials improperly restricted funds totaling $507,000 in a debt reserve. Finally, District officials maintained a capital reserve funded at $506,000 that was not properly approved.

We compared budgeted appropriations and estimated revenues with actual operating results for 2016-17 through 2018-19 and found that, while revenue variances were generally reasonable (overestimated by an annual average less than 3 percent), appropriations were overestimated by an average of $913,000 (6 percent) each year or a total of $2.7 million. However, budget estimates appear to be improving and becoming more in line with actual expenditures. Because the Board overestimated appropriations, it appeared the District needed to appropriate fund balance to close projected budget gaps. The Board annually appropriated at least $225,000 of fund balance in the 2016-17 through 2018-19 budgets that was not needed to finance operations. As of June 30, 2019, surplus fund balance totaled over $1 million and was 6 percent of 2019-20 appropriations, exceeding the statutory limit by approximately $354,000 or 2 percentage points. Finally, the District's written reserve fund policy was not comprehensive and three reserves with balances totaling $1.3 million were generally not being used.

District officials did not seek competition for seven professional service providers who were paid $325,131 during our audit period. The Superintendent told us that he was unaware that District policy required RFPs or written documentation of verbal quotes for professional services, except for audit services. In addition, officials did not obtain written or verbal quotes for the purchase of goods and services from five vendors paid $267,306. Finally, the Board did not review and update the District procurement policy.

District officials did not provide IT security awareness training for individuals who used the District's IT assets. In addition, personal Internet use was found on computers assigned to employees who routinely accessed PPSI. District officials were unaware of this activity because they did not routinely monitor employee Internet use. The Director told us that because he was the only IT contact on staff, he was unable to spend time monitoring employee Internet use. Finally, network and application user accounts were not properly managed.

The Board overestimated appropriations by a total of $3.1 million from 2016-17 through 2018-19 and annually appropriated an average of $500,000 of fund balance that was not used to finance operations. In addition, the District improperly restricted more than $260,000 in its trust and agency fund. As of June 30, 2019, surplus fund balance totaled $708,000 and was 4.5 percent of 2019-20 appropriations, exceeding the statutory limit by approximately $75,000. However, when we added the unused appropriated fund balance amounts and the funds improperly restricted for other post-employment benefits (OPEB) back to surplus fund balance, the District exceeded the limit each year by nearly 5 to 7 percentage points in amounts ranging from $681,000 to $1,036,000.

The Board did not ensure Company claims were audited on a monthly basis as required by its bylaws. In addition, the Board President and two Board members did not publicly disclose, in writing, their deemed interests in contracts totaling $91,106 with the Company. Furthermore, the Treasurer did not file Form 990 with the IRS during our audit period because the Board was unaware of this reporting requirement. Additionally, the Company has not filed 1099-MISC forms to report payments made to the three Board members who provided services as independent contractors related to the new firehouse construction in 2016, 2017 and 2018. Finally, Company officials did not ensure collections totaling $40,084 from fundraising activities were adequately supported.