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.

The Town Supervisor did not review and sign 379 checks totaling $375,916 and instead, allowed a County employee to use a stamp to affix his signature to the checks. However, we found that the checks were accurate and for an appropriate Town purpose. In addition, a County employee made 79 bank account transfers using an online banking profile totaling $427,704. Town officials did not monitor check disbursements or bank account transfers. By surrendering on-line banking privileges to a County employee and allowing the same employee to process disbursements exposes the Town to the potential for inappropriate bank transfers and disbursements to be made without being detected. Finally, the Board did not audit or obtain an audit of the Supervisor's records and reports.

District officials circumvented the statutory limit on surplus fund balance by making more than $12 million in unbudgeted year-end transfers to capital projects and reserves, overstating encumbrances by $827,000 and not using $5.3 million in appropriated fund balance as a funding source. We compared appropriations and estimated revenues with actual operating results for 2015-16 through 2017-18 and found that the total budget variance was more than $5 million each year. Revenues were annually underestimated by an average of $2.7 million (2.8 percent). Appropriations were overestimated by an average of $3.1 million (3 percent) each year. Because the Board included unrealistic estimates in its budget, the District generated operating surpluses each year, ranging from $988,000 to $1.8 million. By underestimating revenue and overestimating appropriations, the Board gave taxpayers the impression that it needed to both increase taxes and use appropriated fund balance and reserves to close projected budget gaps. The tax certiorari and unemployment insurance reserves were overfunded by $2.86 million as of June 30, 2018. The Board increased real property taxes by $2.6 million over the last three years despite having sufficient funds to finance the District's increased costs.

District officials provided the administrator and three of four utility vendors direct access to a District multi-fund bank account to disburse payments for services by electronic fund transfers (EFTs) or check. The Treasurer initiated and processed $266,854 in electronic payments to one natural gas vendor through EFTs. However, the third-party administrator (administrator), and three utility vendors, who disbursed $488,545 during the audit period (for dental plan benefits, administrative fees and utilities), had direct access to a District bank account to disburse these funds. In addition, payment of utilities totaling $60,641 and administrative fees totaling $1,144 were made without audit and approval by the claims auditor.

The District reported surplus fund balance at 4 percent in compliance with Real Property Tax Law in 2015-16 through 2017-18. However, this was achieved, in part, by making year-end unbudgeted transfers totaling approximately $2.4 million to reserves to reduce the amount of reported surplus fund balance. Prior to these decisions, year-end surplus fund balance exceeded the allowed fund balance level. In addition, because the District did not use its appropriated fund balance, actual surplus fund balance exceeded the statutory limit. The District further circumvented the statutory limit by maintaining unnecessary or overfunded reserves. We recalculated the District's surplus fund balance, which in total exceeded the statutory fund balance limit by 4 percentage points as of June 30, 2018. In addition, the Board and officials also annually increased school lunch meal prices, despite repeated warnings from its external auditor that the school food service surplus fund balance was excessive. Also, we found that the District had two overfunded general fund reserves with balances totaling more than $1.3 million as of June 30, 2018. Finally, the Board has not adopted a comprehensive written multiyear financial plan to help officials address and plan for the use of fund balance, including reserve funds, and prioritize and plan for future capital needs.

The Board adopted an acceptable use policy that states that computers are to be used for business purposes only. However, officials did not require users to sign the policy, enforce the policy or design and implement procedures to monitor compliance with the policy to determine the amount of employees' personal use. We examined 10 computers to determine whether they were used for nonbusiness purposes and found evidence of personal use on every computer. Although the Board has adopted an acceptable use policy, it did not provide users with IT security awareness training. In addition, the Board has not adopted and implemented a written disaster recovery plan. Finally, we reviewed the computer and server inventory lists maintained by the Town and determined there were a total of 41 computers and servers listed. However, we found that there are 49 computers and servers owned by the Town. We also found that there were incomplete descriptions on the inventory lists.

The District did not consistently comply with Education Law for employee criminal history background checks. Although District officials properly performed fingerprint-supported criminal history background checks on most District employees, some employees were not checked or not checked until after they had begun to work at the District. We tested 157 employees, six of whom had a 12-month gap or longer in District employment, and found that nine employees had not been properly fingerprinted. We tested all nine employees who were not fingerprinted at the time of hire against the State Sex Offender Registry web portal and found no exceptions. We also tested 38 volunteers and verified that all 20 volunteers prior to 2015 were properly Board-approved. We verified that a building principal or the athletic director interviewed and checked the references of 17 of the remaining 18 volunteers. One volunteer coach hired in early 2016 was not interviewed and did not have references checked. We also verified they were all properly Board-approved. We input our sample of volunteers into the District's software and a State Sex Offender Registry web portal and verified they were not listed on State or federal registries.

District officials did not use a request for proposals process or seek competition for three professional service providers paid $220,748. Although the Board adopted a purchase policy that required bidding when purchasing either a single item or group of similar items over $5,000, competitive bidding was not always used. Four vendors were paid $48,816 for goods procured without a competitive bid as required by District policy. Due to the District's inconsistent purchasing policies, officials do not have clear guidelines to follow when making purchases and therefore, officials may not be procuring goods and services as intended by the Board.

District officials obtained parental consent to submit Medicaid claims for reimbursement of services provided to 43 eligible students during 2017-18. We reviewed the records of services provided to 20 of these students (47 percent) and found that claims were not submitted and reimbursed for all eligible services provided. Claims were not submitted and reimbursed for 628 of 2,168 (29 percent) eligible services totaling $24,179 recorded as being provided in the special education system (system). As a result, the District did not realize revenue totaling $12,090. In addition, except for receiving notification of the total amounts of claims submitted for reimbursement by the vendor on the District's behalf, District officials did not receive or review any other documentation of claims submitted for reimbursement. As a result, officials had no way to ensure that claims were submitted for all eligible services provided or any rejected or disallowed claims were resubmitted.

The Treasurer did not accurately record and report Village financial transactions in a timely manner. There was a complete lack of internal controls over the Village's financial activities. The Treasurer collected, recorded and deposited cash, processed payroll, made purchases and prepared abstracts and checks without Board oversight. The Treasurer was solely responsible for calculating and preparing real property tax and water bills; collecting, recording and depositing payments; and making adjustments to water customer accounts. The Treasurer did not always issue press-numbered receipts and did not prepare bank reconciliations or provide monthly reports to the Board that contained sufficient financial information to allow it to effectively perform its oversight duties. Additionally, the Board did not annually perform or provide for an annual audit of the Treasurer's records and financial reports. This lack of oversight allowed the Treasurer to misappropriate Village funds and make questionable payments to herself totaling as much as $4,442.