District officials did not adequately oversee the cash disbursement process. In our audit sample of disbursements, 30 claims (11 percent) totaling $73,865 were not approved by the department head and 15 claims (5 percent) totaling $69,670 were not approved by the claims auditor. In addition, officials did not establish procedures over payroll to segregate duties or implement adequate compensating controls. Although our testing did not reveal any discrepancies with payroll processing, we found that the senior account clerk's leave accrual records contained errors, and her sick leave balances exceeded the contractual maximum by 111 days.

District officials obtained parental consent to submit Medicaid claims for reimbursement of services provided to 36 eligible students during 2017-18 and 29 eligible students during 2018-19. We reviewed records for 10 eligible students for services provided in 2017-18 and 2018-19 and found claims were not submitted and reimbursed for all eligible services provided. Claims were not submitted and reimbursed for 273 of 1,613 (17 percent) eligible services totaling $16,910 that were recorded as being provided in the special education system (system). As a result, the District did not realize revenue totaling $8,455. The failure to submit claims and receive reimbursements for eligible services occurred because officials did not establish adequate procedures to ensure that all claim reimbursement documentation requirements were met and did not reconcile Medicaid eligible services provided to the claims submitted and reimbursed. After the District took over this process from the vendor, the Director implemented adequate procedures to ensure all claim reimbursement documentation was properly recorded by providers. However, the Director did not reconcile the Medicaid eligible services provided to the claims submitted and reimbursed to ensure that claims were submitted and paid for all eligible services provided.

School officials did not establish effective procedures that ensured credit card claims were properly supported and credit cards used appropriately. The School authorized the Operations Director, Executive Director, the two Business Managers and the Academic Director to use school credit cards. School officials made credit card purchases totaling $496,970 during the audit period. We reviewed 641 credit card transactions totaling $216,882, of which 119 transactions totaling $36,329 (17 percent) were approved for payment without receipts to support the charge. Another 39 transactions totaling $25,342 (12 percent) had receipts that were not itemized. The Board also approved 27 meal purchases, totaling $5,790, for payment without adequate supporting documentation.

Financial activity for the community education program was not recorded in the general fund as required, but instead was accounted for in the special aid fund. The accountant established sub-funds within the special aid fund to record the community education and literacy program's financial activities separately. In addition, both revenues and expenditures were incorrectly accounted for within these two sub-funds. For example, certain literacy program revenue was improperly recorded as community education revenue. In addition, fringe benefit costs were disproportionately charged to the community education program expenditure account instead of the literacy program, totaling $728,000. Finally, officials did not always properly record literacy program revenue in the correct fiscal year.

The Board overestimated appropriations by a total of $2.3 million from 2015-16 through 2017-18 and annually appropriated an average of $495,000 of fund balance that was not used to finance operations. As of June 30, 2018, surplus fund balance totaled $1.7 million and was 12 percent of 2018-19 appropriations, exceeding the statutory limit by approximately $1.2 million or 8 percentage points. Annually appropriating fund balance that is not needed to finance operations is, in effect, a reservation of fund balance not provided for by statute and a circumvention of the statutory limit imposed on the surplus fund balance level. When unused appropriated fund balance is added back, surplus fund balance exceeded the limit each year by 10 to 11 percentage points. Finally, the Board has not adopted a comprehensive written fund balance policy.

The Treasurer did not maintain separate records on leave accruals earned and used for administrative employees or the amount of sick leave accrued and to be carried over to the next fiscal year. We found that three employees used more vacation leave, totaling 32 hours at a cost of $1,223, than they were allocated for the year. In addition, all employees earned and used compensatory time; however, compensatory time is not covered in the handbook or in the Board meeting minutes. Finally, the amounts paid by four surviving spouses for their 2018 health insurance premiums were inaccurate. Two of them had balances outstanding totaling $1,084 because they did not pay the amount billed, and the Treasurer did not catch the errors because she did not reconcile their payments to the billings. Two surviving spouses had overpaid the amount due for the year by $553. However, the Village did not reimburse them for the overpayment nor apply it to the following year.

District officials did not establish a written policy or procedures to ensure that all overtime hours worked were preapproved, adequately recorded and incurred only when necessary. Existing controls over the payroll overtime process did not require preapproval. District officials did not preapprove and adequately monitor overtime for custodial employees. As a result, the District paid overtime to 10 custodial employees totaling $35,017 or 43 percent of total overtime paid to these employees, primarily for non-emergencies. However, with appropriate scheduling some of these overtime payments could have been avoided or reduced. Furthermore, the District also paid $29,135 in overtime to employees who substituted for other employees absent on their scheduled workdays. More than 40 percent of these absences were preapproved and with appropriate scheduling these overtime payments could have been avoided or reduced.

District officials properly established the capital project budget for the eight school buildings and transportation facility improvement project. Officials also monitored and accounted for the capital project, and ensured that work completed was within the scope of the project. We reviewed the project budget and all 136 project claims totaling approximately $4.9 million and all 56 project change orders totaling $315,366 for the audit period and found that District officials properly established, monitored and accounted for the capital project. There were no recommendations as a result of this audit.

The Board does not audit claims prior to approving them for payment. Board members told us that they occasionally review some of the claims but were not aware that they were required to review each claim prior to approving them for payment. As a result, the Treasurer made duplicate payments to 11 vendors totaling more than $17,000, including approximately $3,200 that District officials did not find prior to our audit. In addition, District officials did not competitively bid a public works contract totaling more than $115,000 and did not obtain quotes for 16 of 21 purchases totaling $56,036. In addition, from June 2014 through October 2016, the Board was regularly updated on the project's progress by the construction manager. However, after October 2016, there were no minutes provided. Therefore, it is unclear whether the construction manager continued to regularly update the Board during 2017, when much of the construction was underway. Finally, the construction manager may have improperly charged the District $14,245 for administrative fees and sales tax.

Town officials have not developed adequate IT policies or adopted a written disaster recovery plan. We also found that officials did not monitor Internet usage for computer use policy compliance. Town computers were used for personal activities. Officials did not review the inventory of IT hardware and do not maintain an inventory of software or data. Finally, Town employees were not provided with IT security awareness training.

We reviewed 91 claims totaling $1.3 million (7 percent) paid during the audit period and found they were generally supported by adequate documentation and for proper purposes. However, 45 claims totaling $471,138 were paid before the claims auditor’s approval and the claims auditor did not audit 10 scholarship payments totaling $4,750.

District officials did not include the proper formula for the Public Excess Cost Aid (PECA) set-aside amount in the billing template they provided to charter schools. Instead, they used an outdated PECA formula to determine the set-aside for tuition billing rather than the PECA set-aside formula found in the 2017-18 and 2018-19 State Education Department State aid handbooks. We reviewed all 18 final reconciliations for 2017-18, totaling $118.3 million, and all 19 invoices for the fifth billing in 2018-19, totaling $127.8 million, to determine whether charter school tuition billing for PECA set-aside was accurate. At the time of our testing, the District initially overpaid in both school years. For the 18 invoices in 2017-18, the District paid $5.6 million in PECA set-aside; however, we calculated that the District should have paid $4.6 million, an overpayment of $1 million (18 percent). For the 19 invoices in 2018-19, the District paid $7.1 million in PECA set-aside; however, we calculated that the District should have paid $5.4 million, an overpayment of $1.7 million (24 percent). After discussing it with us, District officials took corrective action to avoid a potential $1.7 million overpayment in 2018-19. In addition, the Board and District officials did not adopt written policies or procedures for charter school tuition billing.

Village officials accurately billed users for water and sewer charges. Officials also deposited water and sewer collections intact and in a timely manner and enforced unpaid bills and correctly assigned interest and penalties. Overall, the Board and officials established effective controls over the billing, collection and enforcement of water and sewer charges.

We found District officials did not establish or implement any formal purchasing procedures for goods and services not required to be competitively bid. Additionally, because the Board did not annually review the policy as required, it did not ensure compliance with the policy. We reviewed 60 purchases made during our audit period totaling $182,014 to determine whether District officials sought competition for purchases that were over $1,000 but below bidding thresholds. We found 32 purchases (53 percent) totaling $115,089 were made without evidence that officials sought competition to obtain the lowest price. For the other 28 purchases reviewed, we determined District officials sought competition for five of the purchases totaling $15,861,10 purchases totaling $31,001 were made from vendors that were sole source providers and 13 purchases totaling $20,063 consisted of various items with costs below the $1,000 threshold that we applied for determining whether the District sought competition.

District officials need to improve their claims audit process to ensure that the claims auditor properly audits and approves all claims before payment. The claims auditor told us that sometimes he audits and approves the claims before the checks and warrants are generated and later compares the approved claims with the check stubs and warrants. In other instances, the claims auditor told us that he approves the claim at the same time he reviews and approves the warrant – after the claims have been paid. After completing his review, the claims auditor signs each individual claim along with the corresponding warrant, certifying the claims to be paid despite some payments having already been disbursed before his review. Although the District has a policy that requires the claims auditor to report the results of the claims audit to the Board, the claims auditor was unaware of the policy and did not provide any reports to the Board.

From 2015-2017, District officials transferred excess funds derived from overestimating appropriations to the reserve funds, leaving the District with virtually no unrestricted fund balance. Because the District had no unrestricted fund balance, it appeared that the tax levy needed to be increased. For the four years reviewed, the District's unrestricted fund balance ranged from $0 to $263, or about 0 percent of the ensuing year's budgeted appropriations. As a result, the District's real property tax levy has increased yearly, by a total $64,000 from 2015 to 2018 (4.3 percent or an annual average of 1.4 percent). We also found that reserves were not adequately established and funded. In addition, District officials did not always seek quotations for purchases under the bidding threshold.

The District lacked adequate procedures to ensure Medicaid claims were submitted and reimbursed for all eligible services provided. We found that for a total of 1,280 of 1,783 (72 percent) eligible services totaling $25,004 that were recorded as being provided in the special education system, claims were either not submitted for reimbursement or claims were submitted and rejected for various reasons. District officials did not review and resubmit the rejected claims. As a result, the District did not realize revenue totaling $12,502 (50 percent of the eligible services provided). The failure to submit claims and receive reimbursements for eligible services occurred because officials did not establish adequate procedures to ensure that all claim reimbursement documentation requirements were met.

Effective September 2016, the Board authorized revisions to its standard project application and adopted new policies for evaluating projects and recapturing financial assistance to address the 2015 IDA reform legislation. We reviewed all seven projects approved by the Board after the 2015 IDA reform legislation became effective. We found that all these projects had a standard application, a uniform project agreement including provisions for suspension, discontinuance and recapture of financial assistance, which were consistent with this legislation. However, we found that the Board did not ensure that adequate cost-benefit analyses for proposed projects were developed before project approval and annual project status reports were submitted in a timely manner. Finally, the Board did not ensure that annual assessments of progress toward achieving project goals were performed.

To supplement money received from foreign fire insurance proceeds and donations, the Company holds an annual chicken barbecue. The Bylaws do not address fundraising activities and there are no policies and procedures in place to ensure fundraising money is safeguarded. There was no report prepared of expenditures, revenues and starting cash, and the records that did exist were not adequate. In addition, Company officials told us the Treasurer has their approval to pay disbursements when he receives them, but we found no authorization of this in the Bylaws or Company meeting minutes. Finally, the Directors have not prepared and filed the Company's 2017 and 2018 Form 990 with the Internal Revenue Service or the annual report of foreign fire insurance tax proceeds, expenditures and the remaining balance with the State Comptroller's Office. The Treasurer told us he thought the Horseheads Fire District's Board of Commissioners was filing the reports.

Key duties over water and sewer operations such as billing, collecting, entry of payments and adjustments were inadequately segregated and lacked effective oversight procedures. Village officials did not implement adequate compensating controls to reduce the risk involved in concentrating key water and sewer district financial responsibilities with the account clerk. We also reviewed 51 water and sewer adjustments made in 15 customer accounts totaling $26.71 million to determine whether the adjustments were approved, supported and appropriate. We found that 43 adjustments totaling $26.7 million had no documented approval and two adjustments totaling $11,890 lacked adequate supporting documentation to show they were appropriate. In addition, water and sewer receivable control accounts were not reconciled to unpaid customer account balances. Finally, the Board did not review the water and sewer re-levy list and the list of unpaid customer accounts. The Clerk-Treasurer worked with the financial software vendor to obtain a complete list of unpaid water and sewer customer accounts from the system as of May 8, 2018, the day before the re-levy list was generated. We adjusted the May 8 unpaid list for account balances the Clerk Treasurer told us would not have been included in the re-levy, and we calculated an unpaid list equaling $148,440. The adjusted unpaid list was $26,835 more than the re-levy list, which indicates the Village may not have re-levied all applicable unpaid charges.