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.

The Board needs to improve its budgeting and monitoring of the Town's financial operations and take timely action to improve the Town's declining financial condition. The Town's main operating funds are the general town-wide (TW), general part-town (PT), highway TW and highway PT funds. The total fund balance for these four funds combined has declined $144,719 from a deficit of $57,560 at the end of 2014 to a deficit of $202,369 at the end of 2018. The Board also has not adopted multiyear financial and capital plans. Finally, a Board member, who is the sole owner of an insurance brokerage firm had a prohibited interest in Town contracts totaling approximately $782,100. The Town purchased various insurance policies, such as group health, dental, prescription, life and supplementary insurance, for Town employees and officers through the Board member's brokerage firm.

We identified instances where the Board and District officials could have been more transparent when presenting the project's scope to the public. While project total costs of $16.49 million did not exceed the $16.5 million in propositions approved by voters, officials had an opportunity to complete the proposed project for less than the approved amount. However, officials chose to complete additional work and expand the project's scope rather than spending less. Further, officials did not provide the voters with sufficient detail to enable them to be fully informed regarding the project scope. In addition, we found seven change orders totaling approximately $362,000 that exceeded the statutory bidding threshold of $35,000 for public works contracts that were not competitively bid.

Central treasurers failed to ensure that student treasurers and faculty advisors were informed of the requirement to maintain accounting records for their clubs. In addition, the District's external auditors indicated that student activity records were not adequate to permit the application of auditing procedures in the last four audits (2014-15 through 2017-18). However, District officials still failed to effectively communicate the procedures that outlined the student treasurers' and advisors' recordkeeping responsibilities. As a result, student treasurers and advisors failed to maintain pre-numbered tickets and receipts, statement of profit and loss forms, and annual record of funds received and paid out. In addition, checks were not countersigned and payments were not properly approved. Furthermore, middle school bank reconciliations were performed incorrectly, resulting in inaccurate cash balances being reported to clubs and to the Board.

The Board and Village officials did not ensure disbursements were for proper purposes and supported. We found the former Clerk-Treasurer issued herself five checks totaling $5,100 that she was not entitled to. In addition, employees received payment for medical reimbursements totaling nearly $5,700 that lacked adequate supporting documentation. Four employees, including the former Clerk-Treasurer, submitted duplicate claims for reimbursement totaling over $900 for claims previously paid. Subsequent to our audit, the former Clerk-Treasurer pleaded guilty to petit larceny, a misdemeanor, and agreed to pay full restitution plus $500 to cover the Village's insurance deductible with a one year conditional discharge.

The Supervisor did not maintain complete and accurate accounting records and reports, issue receipts or submit an annual accounting to the Board for its subsequent audit of the Supervisor's records. Instead, the Supervisor indicated that she relies on the certified public accounting firm (Firm) to handle the day-to-day accounting activities and she provides minimal oversight of the Firm because she does not have an accounting background and had not attended any training related to her duties as Supervisor. As of the beginning of the agreement with the Firm in 2018, the Town's computerized financial records, which include budgetary, revenue, expenditure and payroll records, are maintained by the Firm and housed within the Firm's financial software system. The Supervisor does not have access to this software. The Supervisor instead maintains a binder which holds her documents by month, including payroll records as prepared by the Firm and support for revenues she receives, such as check images and stubs. In addition, the Supervisor was not aware of the statutory 10-day requirement for deposits and does not issue receipts, but instead generally takes pictures on her phone of money she receives at the Town, which is typically in check payments, and emails these images to the Firm. She subsequently makes deposits about twice a month.

We evaluated the financial condition of the Town's four operating funds' for the 2016 through 2018 fiscal years. We found the town-wide (TW) general fund and the TW highway fund had deficit unrestricted fund balances whereas the part-town (PT) general fund and the PT highway fund had excessive unrestricted fund balances. The Board also did not develop and adopt comprehensive written multiyear financial and capital plans and a written fund balance and reserve fund policies to help guide the budget development process. Finally, outstanding interfund cash advances from 2016 have not been repaid as required.

The Board did not audit claims before approving payments. Of 166 claim vouchers reviewed, totaling $783,400, the Supervisor paid $124,000 in claims (16 percent) that were either not presented to the Board or improperly paid prior to Board approval. We also found that 11 claims totaling $10,500 lacked adequate supporting documentation and seven claims for $4,100 were paid twice. Finally, the Board did not ensure that procurements of commodities, goods and services totaling $172,000 complied with bidding requirements and/or the Town's procurement policy.

Village officials do not periodically read all customer meters to ensure customers are accurately billed. In addition, the Clerk-Treasurer used an inconsistent methodology for estimating water bills. We also found that estimated and customer-submitted water usages used by Village officials to bill customers did not always appear to be accurate. Finally, 85 percent of the water produced, or 74.9 million gallons, is considered non-revenue (lost) water.

Our Office recently completed a review of the District's general fund budgets because the preliminary results of its annual external audit revealed an unplanned deficit had occurred during the 2018-19 fiscal year. Due to several inaccurate estimates, the District is on track to incur a 2019-20 budgetary deficit of approximately $31.6 million, even accounting for the numerous cost-savings and avoidance measures, including personnel layoffs, recently implemented by the Superintendent and Board of Education (Board). In addition, the District has no available unrestricted fund balance to mitigate this budgetary deficit. The District reported a deficit unrestricted general fund balance of $8.9 million at June 30, 2019. Therefore, if current District operating trends continue, we project the District will have a fiscal year-end deficit of approximately $40.5 million. Further, absent additional severe budget cuts, short-term borrowings or outside intervention, the District will not have sufficient resources to meet its financial obligations by the end of the fiscal year ending June 30, 2020.