District officials need to improve budgeting practices to more effectively manage general fund balance. The District accumulated unrestricted fund balance of more than $2.7 million as of June 30, 2018, or 29 percent of 2018-19 appropriations and exceeded the statutory limit by almost 25 percentage points. While District officials appropriated fund balance annually, none of the appropriated fund balance was actually used to finance operations from 2015-16 through 2017-18. Furthermore, for 2018-19, District officials appropriated $750,000 of fund balance to finance operations. However, the District is projected to realize an operating surplus of approximately $115,935 that year. Based on our review of the District's adopted 2018-19 budget, estimated revenues appear reasonable based on prior years' actual results. However, appropriations are projected to be overestimated by $812,500. Finally, the unemployment insurance reserve was overfunded and the retirement contribution reserve was not being used as intended.

The Board adopted realistic budgets and maintained reasonable fund balance levels in the general and highway funds. However, we project that 2018 sewer district expenditures will exceed the amounts budgeted by 41 percent and the fund will end 2018 with a budgetary deficiency of $40,000. As a result, the sewer district will require advances from the general fund totaling at least $41,506 to fund operations through year-end. We question the reasonableness of the unemployment insurance reserve with a balance of $24,100 because no funds have been expended from this reserve in at least 10 years and no unemployment insurance expenditures were made during our audit period. Finally, the Board did not develop or adopt comprehensive, multiyear financial and capital plans. Such plans would be useful tools for the Board to address the fund balance in the general fund and budgetary deficits in the sewer fund and to outline the Board's intentions for financing future capital improvements and maintaining the existing infrastructure.

We found exceptions with 62 of the 101 properties with exemptions that we reviewed. These exemptions lacked adequate supporting documentation to verify their eligibility or were incorrectly calculated. The properties with exceptions had their total taxable assessed value reduced by about $5.9 million. We reviewed 20 properties receiving agricultural exemptions and found that 17 lacked one or more pieces of supporting documentation necessary to verify their eligibility for the exemption. These 17 property owners may have inappropriately received $31,299 in County, Town and school district tax reductions for fiscal year 2018. We reviewed 28 properties receiving a senior citizen exemption and found 24 (86 percent) lacked either one or more pieces of supporting documentation to verify the eligibility and accuracy of these exemptions, or were calculated incorrectly. These 24 properties may have inappropriately received a total of $15,247 in County, Town, Village and school tax reductions for fiscal year 2018. Finally, we reviewed 53 properties receiving veteran exemptions, and found 21 properties (40 percent) lacking one or more pieces of supporting documentation to verify the eligibility and accuracy of these exemptions. These property owners may have inappropriately received $9,014 in County, Town, and Village tax reductions for fiscal year 2018.

District officials need to improve their budgeting practices by adopting more realistic estimates for expenditures and effectively managing fund balance. The District consistently realized average annual operating surpluses of $1.2 million because certain appropriations were overestimated. Furthermore, the District's unrestricted fund balance exceeded the amount permitted to be retained at the end of the 2015-16 through 2017-18 fiscal years. We compared the District's budgeted revenues and appropriations with actual results of operations from 2015-16 through 2017-18. While revenue estimates were reasonable, appropriations exceeded expenditures by an average of $2.1 million annually, or a cumulative total of more than $6.3 million. If the District had budgeted more realistically and not unnecessarily appropriated fund balance, unrestricted fund balance would have exceeded the statutory limit by $1.1 million, or 5.1 percentage points, as of June 30, 2018. When unused appropriated fund balance is added back, the District's recalculated unrestricted fund balance as a percentage of the subsequent year's budget ranged from 8.7 to 11.1 percent over the three-year period. In addition, the retirement contribution, insurance, unemployment insurance and employee benefit accrued liability (EBALR) reserves were overfunded.

Generally, tested employees' salaries were accurately paid. However, time sheets were not always approved. In addition, overtime was not consistently tracked or properly approved, resulting in possible over- or underpayments. We also found that seven employees were paid incorrectly for credit hours earned. Five of these employees were paid for more credit hours than were recorded, for a total of 28 credit hours ($1,820). The remaining two employees were not paid for all credit hours recorded, for a total of 23 credit hours ($1,495). Finally, the District relied on Orleans/Niagara Board of Cooperative Educational Services to recalculate an administrator's annual salary when a new contract was negotiated during the school year, resulting in an increased salary. We recalculated the salary using the approved formula and found that the administrator was overpaid $955.

The Board established adequate controls to help safeguard assets, and the legally required procurement policy, investment policy and code of ethics were in place. The Board is currently working on updating these policies and all of its other policies. We also found that the Treasurer's financial records and reports accurately and properly accounted for all financial activities. Although the Board did not perform a formal annual audit of the Treasurer's records, it reviewed the Treasurer's reports each month, including bank reconciliations and associated bank statements and cancelled check images, and performed a thorough audit of claims before they were paid to ensure they were supported and that funds were used for legitimate expenditures.

Although the District has experienced operating surpluses totaling over $1 million over the last three fiscal years, expenditure increases are outpacing revenue increases. Expenditures have increased by 8 percent while revenues have increased by only 5 percent over the same period. The increases in expenditures were primarily driven by personnel costs (8 percent) and BOCES services (8 percent). The District has explored numerous options to address the increasing costs. For example, District officials have hired a special education teacher which has allowed them to offer an additional class in-house. Officials calculated potential savings of over $150,000 per year by taking this action. Additionally, the District shares various services with a neighboring district. Furthermore, officials negotiated a change in the employee contracts to reduce the District's share of health insurance costs for new employees and retirees as of July 2018. The District used to pay 100 percent of the cost of retiree health insurance. As employees retire, the District will recognize a savings ranging from $922 to $2,604 per retiree, depending on coverage. District officials have not implemented plans to improve operating results in the cafeteria fund. It has had three successive operating deficits in each of the last three fiscal years totaling over $109,000. Total expenditures in the cafeteria fund have increased 24 percent over the last three fiscal years while revenues have only increased 6 percent. The main cost increases were associated with salaries and food price increases. Additionally, the District is receiving, on average, $3.84 per meal equivalent (ME), but it costs the District $4.18 per ME to operate the cafeteria, resulting in a deficit of $0.34 per ME.

The Assessor granted 306 non-NYS School Tax Relief Program (STAR) exemptions on non-municipal owned property on the 2017 assessment roll, which collectively reduced the Town's 2018 taxable assessed value by more than $12 million. We reviewed 85 exemptions totaling $9.3 million and identified issues with 68 exemptions totaling $6.9 million (74 percent). We reviewed the files related to the 85 granted exemptions and found that 68 exemptions (80 percent) totaling $6.9 million in Town-exempt assessed value lacked one or more required supporting documents to determine eligibility or verify the accuracy of the exemption calculation. For example, exemptions granted may have lacked the original application, income support, proof of age, proof of military service and a soil group worksheet or annual renewal form, where applicable. These property owners received $21,630 in 2018 Town real property tax reductions for unsupported exemptions. In addition, four agriculture exemptions totaling $177,299 in Town exempt assessed value were incorrectly calculated. These incorrect calculations had a net exemption difference of $31,449 for property owners in 2018.

Although the Board adopted policies governing the operations of the ECA funds, it did not ensure District officials implemented and enforced the policies. In addition, the Board-appointed comptroller, who functioned as the faculty auditor, did not perform adequate reviews of ECA fund records or the required comparisons between the student treasurers' ledgers and the central treasurer's ledger. We found that collections totaling $26,598 for 10 fundraising activities were not supported by adequate documentation. District employees also did not submit any documentation to show how funds from 10 cash advances totaling $19,997 were spent. The central treasurer made seven disbursements totaling $14,189 without adequate supporting documentation. Finally, we reviewed five fundraising activities during our audit period whose sales were taxable and found that sales tax was not collected or remitted to the central treasurer for any of the five fundraisers. Based on the recorded collections for the five fundraisers, we calculated sales tax totaling $264 should have been collected and remitted.

The Board did not adopt a fund balance and reserve policy or create comprehensive multiyear financial and capital plans. From December 31, 2014 through December 31, 2017, general fund unrestricted fund balance increased by $106,230 (110 percent). Over the same three-year period, highway fund unrestricted fund balance increased by $50,007 (24 percent). The Supervisor told us that when he was elected, his intent was to build up fund balance to allow for the repair and purchase of equipment as needed and, going forward, his intentions are to direct a greater portion of real property taxes to the highway fund. Town officials have identified financial and capital needs. However, without an evaluation of financial needs, and the adoption of a fund balance and reserve policy and a multiyear financial plan, the Board increases the risk that money will not be available when expenditures become necessary or that more taxes than necessary will be levied when adequate financial resources are already available. Moreover, raising real property taxes while increasing fund balance, without formal plans, does not provide transparency to Town taxpayers.

The Assessor granted a total of 633 non-New York State School Tax Relief Program (STAR) property tax exemptions for non-municipal owned property on the 2017 assessment roll, collectively reducing the Town's 2018 taxable assessed value by more than $34 million. We found that the Assessor granted exemptions without applications, renewal forms or supporting documentation. The Assessor also granted an ineligible exemption and did not correctly calculate granted exemptions. We reviewed 108 exemptions totaling $19.6 million and identified issues with 66 exemptions totaling $10.6 million. Specifically, we found 64 granted exemptions (59 percent) totaling $10.3 million in Town-exempted assessed value lacked one or more pieces of supporting documentation to determine the eligibility or verify the accuracy of the exemption calculation. For the 44 exemptions with sufficient supporting documentation, we found two exemptions (5 percent) were incorrectly calculated. Both were agriculture exemptions totaling $239,558 in Town-exempted assessed value. These incorrect exemption calculations had a net exemption difference of $7,261, for property owners in fiscal year 2018. Finally, the Assessor did not report the transfer of property with exemptions to the County as required.

We found that controls over payroll and time records were adequate to ensure the accuracy of payroll and time records. While the Town has a good system in place, we believe it could be further improved by filing approved timesheets electronically instead of printing them out only to have paper copies on file in order to save the time and expense of printing. Electronic files could provide the same documentation and with appropriate backup procedures could be just as safe. Electronic files also provide added functionality since they can be searched in different ways such as by pay period or multiple pay periods for a given individual.

Assess whether local governments and school districts that utilize aggregators for energy purchases are ensuring they are procuring electricity and natural gas at the lowest prices.

Although claims were supported by adequate documentation and for appropriate purposes, they were not always audited and approved before payment. Signed checks were printed before the claims auditor audited and approved the corresponding claims. We found that claims totaling $27,888 for 15 check disbursements made during the audit period were not audited and approved before payment. In addition, the Treasurer reviewed the debit card transactions on the monthly bank statements and recorded them in the accounting records. However, because these transactions were direct charges to the bank account, the claims audit process was circumvented. Further, these transactions were not subsequently audited and approved by the claims auditor. During the audit period, 45 debit card transactions totaling $24,405 were not audited and approved.

The Town granted a total of 1,278 non-STAR property tax exemptions for non-municipal-owned property on the 2018 assessment roll, collectively reducing the Town's 2019 taxable assessed value by more than $92.7 million. We reviewed 125 exemptions totaling $52.1 million and identified issues with 21 exemptions totaling $848,961 (2 percent). We found 16 exemptions (13 percent) totaling $738,693 in Town-exempted assessed value lacked one or more pieces of supporting documentation to determine eligibility or verify the accuracy of the exemption calculation. We also found five of the 109 exemptions (5 percent) with sufficient supporting documentation (all agriculture exemptions) totaling $507,566 were incorrectly calculated. Furthermore, although the Assessor certified the assessment roll was accurate, including exemptions granted prior to her tenure, she did not review the exemptions granted by previous assessors to ensure they had supporting documentation, were correctly calculated and continued to be eligible. Additionally, the Assessor did not review the clerk's work. Finally, the Assessor did not notify the County when transferred property had exemptions.

We found exceptions with 14 of the 116 real property tax exemptions that we reviewed. These exemptions lacked adequate supporting documentation to verify their eligibility. The properties with exceptions had their total taxable assessed value reduced by about $3.6 million. Specifically, we reviewed 32 properties receiving an agricultural exemption and found three exemptions lacked one or more pieces of supporting documentation necessary to verify their eligibility for the exemption. We also reviewed 25 properties receiving a senior citizens exemption and found five (20 percent) lacked either one or more pieces of supporting documentation to verify the eligibility and accuracy of these exemptions, or was calculated incorrectly. Finally, we reviewed 59 properties receiving veteran exemptions and found six properties (10 percent) lacked one or more pieces of supporting documentation to verify the eligibility and accuracy of these exemptions.

District officials did not always solicit competition by issuing requests for proposals when procuring professional services as required by the Board's policy. We reviewed the claims paid to 10 professional service providers, who were paid a total of $422,677 during our audit period, and found discrepancies with eight providers paid a total of $309,300. For example, the District paid an investigator $7,813 more than the Board-approved rate of $45,000. We also examined invoices from 20 vendors totaling $48,965 in the 2016-17 fiscal year to determine whether District officials complied with the District's purchasing policy for obtaining quotes. We found that the District procured goods and services from 12 vendors totaling $23,678 without obtaining the required number of quotes.

The District lacked adequate procedures to ensure Medicaid claims were submitted and reimbursed for all eligible services provided. As a result, claims were not submitted and reimbursed for 1,674 eligible services totaling $58,965 and service providers did not document 1,593 scheduled services totaling $54,054 in the special education system as having been provided to students. Had these services been appropriately claimed and documented, the District could have realized potential revenues totaling $56,510. District officials did not submit any claims for reimbursement from 2011-12 through 2014-15 or submit claims for all eligible services provided from 2015-16 through 2017-18 due to inadequate procedures.

The Board received monthly financial reports provided by the Treasurer that it used to monitor financial operations. However, we identified deficiencies related to the Board's claims audit process and annual audit responsibilities that it should address to improve its oversight of financial operations. For example, we tested 75 of 480 disbursements made during our audit period, totaling $31,300, and found that 15 totaling $7,159 were not audited and approved by the Board. In addition, the District used debit cards to make purchases totaling approximately $14,000. The Board did not audit and approve the associated claims before payment. The Board did not contract for an independent audit of its 2017 records as required by law. Finally, certain Treasury duties were improperly assigned to a professional service provider and third-party vendors (vendors) had access to District bank accounts to withdraw electronic payments.

The Board did not appoint a faculty counselor, faculty auditor or a central treasurer as required by the Commissioner's Regulations. Although not formally appointed by the Board, the District Treasurer performed the central treasurer's duties for ECA funds. She was responsible for receiving funds from the faculty advisors, disbursing club funds, preparing bank reconciliations, depositing funds and preparing reports for the Board. Because the clubs had no faculty counselor, there was no one to advise the faculty advisors on financial planning or the records they should maintain. Additionally, with no faculty auditor, there was no one responsible for reviewing ledgers maintained by the ECA clubs and comparing them to the central treasurer's records. The Treasurer recorded receipts for three clubs totaling $37,911. However, none of these clubs maintained sufficient documentation to determine how much was collected or that receipts were accounted for. In addition, we reviewed 28 deposits totaling $31,521 and found four deposits totaling $4,086 were deposited between 11 and 14 days after the date the faculty advisor brought the funds to the Business Office. The ECA clubs had 56 disbursements totaling $39,630 during the audit period. We also reviewed 20 disbursements totaling $32,553 and found two cash advances totaling $1,780 did not have the proper approvals.