A Board member had a prohibited interest in the contracts between the Town and his machining company. During our audit period, the Town made seven purchases from the machining company totaling $3,029. In addition, the Clerk performs all cash receipts duties, including billing for water and sewer rents, receiving cash, recording transactions, depositing money and reconciling her bank account, without sufficient oversight. There is no routine review of cash receipts activity by someone independent of the collections process. Furthermore, the Board did not review and approve the list of unpaid water and sewer accounts to be relevied.

Although we did not find any significant errors in how cash receipts and disbursements were recorded and reported, we identified weaknesses. For example, the Board did not require pre-numbered duplicate receipts or cancelled checks to facilitate the review of accounting records and reports. In addition, controls over receipts and disbursements would be strengthened by adding mitigating controls. Finally, a privately contracted payroll vendor has access to the Yates County Industrial Development Agency's bank account to withdraw funds for payroll and processing fees.

The Board's reserve fund policy, dated August 2017, requires “an analysis of projected needs of the reserves in the upcoming fiscal year and a recommendation regarding funding those projected needs.” However, the District did not perform this analysis. As of June 30, 2018, the District had eight reserves, totaling approximately $9.1 million or 24 percent of 2018-19 budgetary appropriations. Subsequently, during our audit fieldwork in 2018-19 the District reduced two of these reserves by a total of $1.7 million. After this reduction, the same eight reserves totaled $7.4 million. Because the Board and District officials did not prepare or provide an annual analysis as the policy requires, they could not demonstrate the need to restrict funds at these levels in four reserves with balances totaling $2.7 million. The remaining four reserves were reasonably funded.

City officials did not develop adequate information technology (IT) policies or procedures. For example, although the City's employee manual requires City-owned computers and email accounts to be used for appropriate business purposes only, officials did not develop adequate written City-wide IT policies or procedures for acceptable computer use. In addition, City officials have not developed comprehensive written procedures for managing system access for the City's 240 user accounts. We found that 70 user accounts have not been used in the last six months, 19 of these accounts were never used and one account was last used to logon to the network more than nine years ago. City officials also have not developed a disaster recovery plan or provided users with IT security awareness training to help ensure they understand IT security measures. Finally, financial application users had excessive permissions.

The Board and District officials could have improved their management of the 2016 capital project (Project). From February 2017 through February 2019, the District paid over $3 million for the Project's professional services. Of that amount, nearly $2.1 million went toward architectural services and $886,000 for construction management services. The District did not comply with its procurement policy for these services. We also found District officials did not always obtain competitive pricing or obtain alternative proposals or quotations for Project purchases. In addition, the Board did not always approve change orders. Finally, monthly financial reporting to the Board did not include all Project costs.

The Tax Collector did not maintain complete, accurate and timely records. In addition, the Board and District officials did not provide sufficient oversight of the tax collection process. While the Board adopted a written policy governing and describing the Collector's duties, the current Collector indicated that she was not aware of it. Furthermore, the District did not have written day-to-day tax collection procedures which could have assisted the Collector with performing her duties. The Treasurer did not perform a timely reconciliation of tax collection activities, resulting in undetected errors totaling approximately $3,900.

The Board failed to implement proper internal controls and the former Clerk-Treasurer did not adequately perform her duties. As a result, during our audit period, the former Clerk-Treasurer received inappropriate payments totaling $8,828. This matter has been referred to the Schoharie County District Attorney's Office. Furthermore, the financial records maintained by the former Clerk-Treasurer were significantly deficient; the CPA issued a disclaimer of opinion and we were unable to determine whether all water, sewer and refuse receipts were deposited. The former Clerk-Treasurer also did not calculate health insurance benefits in accordance with the employee handbook. Finally, the former Mayor was aware of some of these deficiencies, but did not inform the Board.

Our follow-up review was limited to interviews with District personnel and inspection of certain documents related to the issues identified in our report. Based on our limited procedures, it appears that the District has made minimal progress implementing corrective action. Of the nine audit recommendations, two recommendations were implemented, two recommendations were partially implemented and five recommendations were not implemented.

Due to the District's well-designed system of internal controls, we designed our testing to determine whether the District's control procedures were consistently followed. We reviewed 82 claims totaling $560,008 of the $4.5 million (12 percent) claims paid during our audit period. We found that for the claims reviewed, procedures were followed and these claims were adequately documented, for appropriate purposes and properly audited and approved before payment. District officials implemented well-designed internal controls over the claims audit process. There were no recommendations as a result of this audit.

Because the Board did not adopt realistic budgets, the sewer fund incurred operating deficits and a decline in its overall financial health. The Board overestimated revenues by $379,000 in fiscal years 2014-15 through 2018-19, resulting in net operating deficits in the sewer fund totaling $144,000. The Board also did not annually review contractual revenues, resulting in potential unrealized revenue totaling approximately $295,000. Finally, the Board did not document a basis for, or adequately monitor, shared service costs, resulting in possible sewer fund inequities. However, with rate increases in effect and the adoption of more realistic revenue estimates in 2018-19 and 2019-20, there has been marked improvement.

We conducted an audit of the Town of Carroll (Town) to assess the maintenance of the Supervisor's records and reports and the Justice Court operations of the Town. As a result of our audit, we issued a report in March 2014, identifying certain conditions and opportunities for Town management's review and consideration. To further our policy of providing assistance to local governments, we revisited the Town in October 2019 to review progress in implementing our recommendations. Our follow-up review was limited to interviews with Town personnel and inspection of certain documents related to the issues identified in our report. We limited our review to the Supervisor's records and reports section of our audit. Based on our limited procedures, it appears that the Town has made some progress implementing corrective action. Of the four audit recommendations, three recommendations were partially implemented and one recommendation was not implemented.

District officials did not develop procedures for managing, limiting and monitoring user accounts and securing personal, private and sensitive information (PPSI). We reviewed all of the District's 395 non-student accounts and found 14 accounts (4 percent) had not been used in at least one year and were not associated with current employees. In addition, 65 accounts (16 percent) were generic accounts and had not been used in at least one year. However, District officials generally maintained proper asset inventory records and provided IT security awareness training for District employees.

The Board could improve its budgeting and management of fund balance and reserves. The Board adopted unrealistic budget estimates, which resulted in operating surpluses, unused appropriated fund balances and increasing fund balances in the general and highway funds. In addition, the Board did not adopt a multiyear financial and capital plan or detailed reserve plan that included the need and optimal funding level for each reserve. We also found that Town department procedures for cash receipts were deficient because officials lacked adequate documentation for cash receipts collected by certain departments, recorded receipts using deficient software programs and did not always deposit receipts timely, or thoroughly reconcile them.

The Supervisor neither maintained, nor required the bookkeeper to maintain, complete, accurate and up-to-date accounting records and reports. The bookkeeper recorded all check disbursements made from the major operating funds in a timely manner but did not record revenues or electronic disbursements in the Town's accounting software for fiscal year 2018 until September 2018. In addition, the bookkeeper has not recorded revenues received or electronic disbursements made after September 2018 through the end of our audit period in the Town's accounting software. Although the bookkeeper reconciled the Town's six checking accounts to manual check register balances monthly, he did not reconcile the other eight bank accounts due to their low activity. The Board also has not received a monthly Supervisor's report since February 2018. Furthermore, the two monthly reports that were presented to the Board during our audit period (January 2018 and February 2018) did not accurately reflect the Town's financial position then. Finally, the annual update documents (AUDs), which are the annual financial reports, have not been filed for the fiscal years ending December 31, 2017 and 2018.

Collections were not always adequately supported to allow officials to determine whether funds were deposited. We also found that 462 collections paid by checks totaling $84,076 were not deposited in a timely manner. In addition, 12 credit card payments totaling $6,855 were not approved by the Board as required by the bylaws. Finally, the Board did not ensure that the Treasurer's records were annually reviewed, as required by the bylaws, or obtain the statutorily required annual audit.

Officials did not properly manage the District's network and local user accounts to safeguard data from potential abuse and loss. We reviewed all 323 nonstudent network accounts and 10 local user accounts on eight computers assigned to eight District employees to determine whether the accounts were active, assigned to current District employees and had proper user permissions. We found that District officials did not adequately manage user accounts and their user permissions. For example, former employees and an unknown person had active accounts, and administrative permissions were granted to individuals who did not need these rights. In two instances, officials did not know why the users had excessive permissions. In addition, the Board did not establish a disaster recovery plan and officials did not provide IT security awareness training to employees.

The Superintendent purchases, safeguards and disposes of highway assets with minimal Board oversight. The Superintendent maintained an inventory list for some Department assets. However, he did not maintain an inventory for small equipment, implements and tools and did not annually submit an inventory report to the Board, as required. Furthermore, although officials discussed selling equipment at Board meetings, the Superintendent did not always report to the Board when equipment was sold and the Board did not formally approve all asset sales. In addition, officials need to improve procurement procedures. For example, during our audit period, the Town overpaid for fuel by $5,600 because they did not verify that they were paying the State contract price for fuel. Finally, a Board member had a prohibited conflict of interest totaling $4,400.

The Board did not update the procurement policy annually. The Board also did not seek competition for professional services totaling approximately $1.6 million or competitively bid purchase and public works contracts totaling approximately $6.1 million during the audit period. In addition, the Board did not have written agreements with nine professional service providers paid a total of $968,545 during the audit period. Furthermore, claims were audited and approved without proper documentation. Finally, the Director for Technology circumvented the procurement policy and ordered various items online totaling $71,226 during the audit period, including $4,596 for shipping costs.

The Board adopted adequate policies and guidelines for project approval. In addition, payments in lieu of taxes (PILOTs) for four projects and 26 revolving loan payments were accurate and received on time. However, the Board and the Administrator did not properly monitor tax abatement and loan projects. The Board did not require the Administrator to compare reported job creation and retention figures with project goals or track sales tax abatements to ensure that the exemptions taken were within allowable limits.

Town officials did not effectively manage the financial condition of the water and sewer districts. We found officials did not budget accurately nor raise sufficient revenues to fund water and sewer operations, which resulted in five districts incurring unplanned operating deficits annually. In addition, five of the seven water and sewer districts had deficit fund balances ranging from $13,620 to $113,900 as of December 31, 2018. These deficit fund balances ranged from 14 to 217 percent of 2019 budget appropriations. Finally, officials relied on interfund advances to finance operations in the five districts during the past three years. The Board did not approve these advances, which totaled more than $312,000 at the end of 2018.