The Board adopted budgets that conservatively estimated revenues and appropriations over the last three fiscal years, which resulted in unplanned operating surpluses totaling $2.3 million instead of planned deficits. In the last three completed fiscal years, the District generated $2.3 million in unplanned operating surpluses instead of $1.4 million in planned deficits. Over the past three completed fiscal years, the District reported surplus fund balance that ranged from 3.9 percent to 4 percent of the ensuing year's appropriations, which is within the 4 percent limit allowed by New York State Real Property Tax Law. However, when unused appropriated fund balance is added back, surplus fund balance exceeds the statutory limit. In addition, certain reserve balances were excessive or not needed. Of $3.7 million in seven reserves, three reserves totaling $636,665 may be unnecessary because related expenses were paid from operating funds. Finally, District officials did not develop comprehensive written multiyear financial or capital plans.

We have determined that the 2019-20 budget materially complies with the provisions of the Fiscal Agent Act. However, we identified the following issues which impact the City's financial condition in the current and future years. In prior years, we have expressed concern about the City's practice of financing recurring operating expenditures with nonrecurring funding sources. The 2019-20 budget continues this practice of reliance on nonrecurring funding of $50.3 million to finance operating expenditures. In addition, the City has not implemented procedures to reduce police overtime, so it is likely the historical trends will continue, which means the appropriation for overtime is likely underestimated by as much as $3 million. The adopted 2019-20 budget includes $500,000 for payment of tax certiorari claims, which is low compared to the $15.7 million in tax certiorari payments the City made so far in 2018-19. We also found that the water fund may be subsidizing the general fund for services not related to the water fund by as much as $3.7 million. The City will need $71.2 million to service its debt obligations during 2019-20 which represents about 6 percent of the City's annual budget. In addition, the City recently passed special ordinances authorizing the issuance of bonds up to $160.2 million with payments becoming due in 2020-21. As of June 28, 2019 the City has not completed the State Comptroller's Constitutional Tax Limit Form to verify this computation as required and the City has not finalized and submitted the Comptroller's Real Property Tax Cap Form as required.

The Board did not adopt adequate information technology (IT) policies and procedures. While the District has a written acceptable use policy, the Board has not adopted policies and procedures for granting, changing and terminating user access rights to the District's network and financial application. Additionally, District officials have not adopted policies and procedures for breach notification and have not developed a written disaster recovery plan. Although servers and financial data are backed up on a regular basis and backups are stored offsite, personnel have no guidelines to minimize the loss of equipment and data or implement data recovery in the event of a disaster. In addition, District officials told us that employees are not provided or required to attend formal cybersecurity awareness training. District officials also did not disable and/or remove unnecessary user accounts on the network or properly manage personal, private and sensitive information (PPSI) data.

We examined the continuing education department's cash receipts activity and found weaknesses in procedures. We found no significant discrepancies when comparing participant registration forms to cash receipts recorded in the Department's revenue ledger and to bank deposits. However, without duplicate press-numbered, itemized receipts, there is no assurance that all course registration fees paid to the Department were properly accounted for. Further, both the Coordinator and the clerk perform, or have access to perform, all of the same functions in the cash receipts process. As a result, incompatible duties (of receiving and having access to undeposited cash receipts and updating participant registrations and class rosters) were not properly segregated or mitigated by sufficient monitoring and oversight. These exceptions occurred because the Board did not establish a written policy and District officials did not develop detailed procedures to provide guidance for the Department on how to properly account for and handle cash receipts.

Due to the planned shutdown of Indian Point Nuclear Power Plant (Indian Point), District officials are faced with losing approximately $22 million in revenue within five years. If additional funding sources are not found, the revenues needed to balance future budgets will need to be raised through real property taxes. As a result, District officials have updated the multiyear financial plan. This plan is reevaluated each time the District obtains more information regarding Indian Point's closure. The revenues and expenditures are projected through the 2030-31 school year. However, we found that District officials' projections of operating surpluses in 2019-20 through 2028-29 may be unreasonable. These projected surpluses, which will be used to fund the ensuing year's budgeted appropriations, range from $1.5 million (approximately 1.8 percent of the budget) to $4 million (approximately 5 percent of the budget). Although District officials provided a rationale for the figures used, the projected surpluses appear high when compared to the operating results for the last five years. The average operating surplus for the audit period is approximately $1 million, and two of the five years experienced operating deficits. Since the Indian Point closure was announced, the Board has monitored financial condition and reduced expenditures and increased revenues to prepare for the significant loss of revenue.

The Board did not reasonably estimate certain general fund appropriations in the annual budget each year we reviewed. We compared budgeted revenues and appropriations to actual revenues and expenditures for 2013-14 through 2017-18 and found that while revenue estimates were generally reasonable, certain appropriations were overestimated each year. We analyzed the budget-to-actual expenditure reports individual accounts or line items for 2013-14 through 2017-18 and found that the Board and District officials did not reasonably estimate appropriations for three line items, Board of Cooperative Educational Services (BOCES) special education, health insurance, and social security each year by cumulative totals of approximately $6.45 million. We also reviewed the 2018-19 budget and found that, except for BOCES special education, the Board and officials continued these budget practices which resulted in property taxes being higher than needed. By not estimating certain appropriations conservatively, the Board created annual operating surpluses, resulting in the accumulation of significant fund balance. However, the District's tax levy has remained fairly consistent over the last five years, in spite of the consistent surpluses.

Checks were printed before the claims auditor audited and approved the corresponding claims. The Treasurer told us that she also signed and issued checks for certain claims before the regular monthly claims audit to meet payment deadlines. In addition, the Treasurer made non-check disbursements to pay claims before the regular monthly claims audit to meet payment deadlines. Claims for these disbursements were then presented to the claims auditor with other claims during the subsequent monthly cycle. As a result, claims totaling $172,760 for 35 check disbursements and 50 non-check disbursements made during the audit period were not audited and approved before payment.

The Board's budgets were incomplete and inaccurate. Also, appropriations were overestimated and transfers to reserves were not budgeted. Over the five-year period from 2014 through 2018, actual expenditures were approximately 24 percent or $605,479 less than budgeted appropriations. In addition, the Board was unable to provide documentation of four required permissive referendums and legal notices. The Board was unable to provide documentation of permissive referendums and legal notices that were required before expending reserve funds from type reserves. Finally, the Board did not adopt a reserve policy. Because the reserves were established over 10 years ago, Board members were unsure if a policy had been previously adopted and were not aware of the need for one.

District officials did not provide information technology (IT) cybersecurity awareness training for individuals who used District IT assets. In addition, personal Internet use was found on computers assigned to four employees who routinely accessed personal, private and sensitive information (PPSI). Finally, the Board and District officials have not established a disaster recovery plan.

District officials need to improve their claims audit process to ensure that the claims auditor properly audits and approves all claims before payment. The purchasing agent provides the claims and supporting documentation to the Business Administrator for review and approval before sending the claims to an Oneida-Herkimer-Madison Board of Cooperative Education Services' account clerk. The account clerk processes the claims and returns a warrant and the related check payments to the purchasing agent who compares the checks to the claims and warrant before mailing the checks. However, the purchasing agent provides the warrant, claims and check stubs to the claims auditor for review and approval after the checks have already been mailed. We found that the claims auditor did not audit and approve 116 claims we reviewed totaling $1.9 million (19 percent) until after the claims were paid, including five claims for travel reimbursements totaling $1,260 that were not submitted for payment within District policy timeframes. Finally, the claims auditor did not audit and approve 20 electronic payments for credit card charges totaling $11,600 and nine postage claims totaling $11,442.

We reviewed timecards and time vouchers for all 24 employees eligible to accrue leave for our audit period. We compared the allocation of accrued leave based on the collective bargaining agreement (CBA) or handbook to the leave records maintained and employee time records. For compensatory time earned and used, we compared the timecards to the highway secretary's spreadsheet and the payroll journal to determine whether any compensatory time was paid as overtime. We found that Town officials did not maintain accurate leave records or follow the employee handbook and the CBA. Officials also did not design or implement procedures to monitor compliance with their information technology (IT) security policy or provide computer users with security awareness training. Finally, Town officials did not sign a formal contract with the IT service provider identifying the specific services to be provided or the vendor's responsibilities.

The Board did not adopt written policies and procedures for purchasing fuel from gas stations and monitoring fuel held in reserve tanks. In addition, the Superintendent did not properly monitor gas station fuel purchases or reserve tank inventories. Officials also did not adequately safeguard access to fuel. After removing active police and firefighters from the Town's authorized driver list, 267 individuals remained. We compared these names with a list of active employees and found that 148 individuals were not current employees. One individual listed was a consultant for the Town and authorized to purchase fuel for Town-related travel. The remaining 147 individuals should not have been on the list or have active PINs for fuel purchases. Although 75 of these individuals were former employees, the remaining 72 were not. The Highway Superintendent did not adequately review fuel transactions. Finally, Department officials did not maintain fuel logs or perpetual inventory records for the reserve tanks to track fuel delivered, used or remaining in the tanks.

The Board did not audit claims before payment or adopt a resolution authorizing the advance payment of those claims allowed by law. During 2018, the Treasurer paid expenditures totaling $50,812 before the Board's audit and approval. In addition, the Board did not develop multiyear financial and capital plans, including a plan for reserves, to establish long-term objectives for funding long-term needs. District officials budgeted conservatively over the last three completed years (2016, 2017 and 2018) and annually included appropriations for tax stabilization. The tax stabilization appropriation totaled approximately $9,400 in each of these years and the actual amount expended was less than $1,000 each year. As a result, the District's unrestricted fund balance increased by $64,289 since January 1, 2016 to more than $170,000 at the end of 2018, or 224 percent of the next year's appropriations. A more transparent method would be to more accurately estimate overall appropriations when the budget is prepared and include budgetary provisions to fund a capital reserve if established for the new fire station or equipment.

The Board did not provide proper oversight to the bidding process, capital project management or the claims audit process.

The Board and officials did not develop written policies or procedures for how entrance and rental fees should be recorded, deposited and reconciled or provide guidance for Park employees issuing complimentary or discounted tags. Daily tally and gate summary sheets for entrance fees were not accurately completed. As a result, we were unable to determine whether employees properly collected fees for all tags issued. On behalf of the Town, the rental agent enters into rental contracts with patrons for Park facilities and beach ceremonies. Rental fees were not accurately entered in the financial system, as the rental agent does not provide copies of rental contracts to the recreation department office.

A Trustee and his spouse are the owners of a local hardware store, organized as a partnership, from which the Village purchases materials and supplies. During our audit period, the Village made 19 purchases from the hardware store totaling $4,190. Each purchase by the Village of materials or supplies from the hardware store resulted in an “agreement” for the sale of goods at a certain price with the Village and, thus, a “contract” for purposes of article 18 of the General Municipal Law. As an “owner” of the partnership, it appears that the Trustee is deemed to have an interest in each contract by virtue of being a member of the partnership. As a member of the Board, the Trustee also has one or more of the powers and duties that can give rise to a prohibited interest, including the ability to authorize or approve contracts, authorize or approve payments under contracts, audit bills or claims under the contracts, or appoint someone to perform that function. Accordingly, because we found no indication that any of the statutory exceptions applied to these circumstances, it appears that the Trustee had a prohibited interest in the contracts between the Village and the hardware store.

We tested 100 percent of the 172 duplicate receipts totaling $148,143 issued to the Recreation Department by Accounting during the audit period by tracing the receipts to bank deposits and Department records. Our testing showed that Department records do not reconcile to duplicate receipts issued by the Accounting and duplicate receipts do not reconcile to bank statements. In addition, summer camp fees were not always properly recorded in Department records. Finally, while the Director provided 33 of the 36 required reports during the audit period, the reports were narrative in form and did not contain the accurate financial information. The program participant count and associated revenues were not accurate in each of the three years for Summer Camp and Flag Football.

We found that claims were not always audited and approved before payment. We found that 301 claims totaling more than $6.1 million were paid before the claims auditor's audit and approval. For example, 39 checks for claims totaling $944,595 were dated December 5, 2017 but not audited until January 9, 2018. These checks cleared the bank an average of 28 days before the claims were audited and approved. The claims auditor also did not sign the warrants on which 70 checks for claims totaling $988,677 were listed. In addition, three checks totaling $924 cleared the bank, but were not listed on a warrant. We reviewed eight claims totaling $822,658 from the unsigned warrants and found that the claims auditor had initialed and dated the individual claims, but failed to sign the warrant. Without a signed warrant the Treasurer is not authorized to pay the claims, and there is an increased risk that checks can be disbursed for inappropriate purposes and not be detected in a timely manner. Further, the claims auditor did not provide a report to the Board documenting all the deficiencies identified when performing the audit of claims. As a result, the Board does not have sufficient information to address deficiencies in the claims auditing and procurement processes.

The Board adopted budgets that conservatively estimated revenues and appropriations the last three fiscal years, which resulted in unplanned operating surpluses totaling $4,652,365 instead of planned deficits. Due to the unplanned operating surpluses, appropriated fund balance totaling $3,670,000 was not used. Over the past three completed fiscal years, the District reported surplus fund balance that ranged from 3.4 percent to 4 percent of the ensuing year's appropriations, which is within the 4 percent limit allowed by Real Property Tax Law (RPTL). However, when unused appropriated fund balance is added back, surplus fund balance exceeded the statutory limit by as much as seven percentage points. Because the Board did not enforce the 2015 reserve policy, District officials transferred money to reserves from operating surpluses at the end of each fiscal year to stay within the 4 percent limit. As of June 30, 2018, the District reported $11,263,676 in 10 reserves. Our review of the reserves' activities determined the employee benefits accrued liability reserve was overfunded by $3.1 million. In addition, the workers' compensation, unemployment and repair reserves may not be needed because District officials have not used the reserves to fund related expenditures during the past three years. Also, the capital reserves are not being used properly. Finally, District officials did not develop comprehensive written multiyear financial or capital plans.

District officials were unaware of the requirement for the faculty auditor to audit extra-classroom activity (ECA) funds for compliance or certifying the accuracy of records maintained by the central and student treasurers because they thought the annual audit of ECA funds by the external auditors was sufficient. By not using the Regulations of the Commissioner of Education of the New York State Education Department to define the faculty auditor's role, there is no periodic review of the central and student treasurers' accounting records by the faculty auditor. We found 42 (61 percent) of 69 collections totaling $26,639 (55 percent) lacked adequate source documentation which prevented us from determining whether the collections were remitted intact to the central treasurer. However, ECA cash disbursements were supported and were generally for legitimate ECA purposes. Finally, the faculty advisors were unaware of the requirement that student treasurers be involved with preparing the accounting records.