The District needs to improve its claims audit process to help ensure all claims are properly audited and approved before payment. The Board appointed a claims auditor to assume its powers and duties to examine and approve or disapprove claims. However, health insurance claims and Medicare reimbursement payments to retirees do not go through the claims audit process. During our audit period, the District paid claims totaling $3,313,264 for health insurance and $141,082 in Medicare reimbursements that were not audited and approved by the claims auditor. Lastly, we identified 13 scholarship disbursements totaling $5,700 for the audit period. We reviewed 11 payments totaling $5,500 (96 percent). All of the awards we reviewed were approved by the trust representatives, adequately supported and complied with trust requirements. However, none of the scholarship payments were audited and approved by the claims auditor.

Our previous audit found that the District accumulated excessive unrestricted fund balance in the general fund. The audit recommended that the Board develop a plan to reduce fund balance by financing one-time expenditures, funding reserves, reducing District property taxes or paying off debt. From 2015-16 through 2017-18, the District reduced its unrestricted fund balance from $15.9 million (51 percent of the next year's budget) to $1.9 million (5.9 percent of the next year's budget). The District exceeded the 4 percent statutory limit by about $609,000 (2 percentage points) at the end of 2017-18. The Board and District officials used most of the excess unrestricted fund balance to fund the District's reserves, which increased by $13.6 million (479 percent) from 2015-16 through 2017-18. They also used excess fund balance to finance one-time expenditures. For example, in 2016-17, District officials transferred $4 million from unrestricted fund balance to the capital projects fund to finance a voter-approved roofing project. The District also created a capital reserve for security and safety improvements and funded it in 2017-18 with $2 million. Furthermore, the District created a repair reserve in 2016-17 and initially funded it with $5.1 million of the excess fund balance. The Board increased the reserve to approximately $11 million at the end of 2017-18. From 2015-16 through 2017-18, the Board also decreased the tax levy by about $535,000 (8 percent).

We found that the Clerk did not always remit real property taxes totaling $3.1 million in 2017 and $3.0 million in 2018 to the Town Supervisor (Supervisor) and County Treasurer in a timely manner. For example, in 2017 the Clerk collected $929,290 from January 20, 2017 through February 8, 2017 before remitting any funds to the Supervisor. Similarly, in 2018 the Clerk collected $852,219 from December 29, 2017 through February 2, 2018 before remitting any funds to the Supervisor and did not remit all outstanding collections to the Supervisor at time of remittance. In addition, we reviewed all facility use applications completed during our audit period and found that the Clerk waived 10 fees totaling $1,650 for non-resident applicants. Finally, during the 2017 and 2018 tax collection periods, 29 transactions totaling $56,308 were deposited from one to 19 days late.

Company officials did not adequately safeguard cash assets. Consequently, there is a significant risk that funds were possibly misspent, possibly misused or improper. This amount included debit withdrawals ($67,303) and check payments ($78,441) to questionable businesses in which there was no evidence that they provided any services to the Company. We also found unsupported and questionable payments to restaurants, grocery stores and office supply companies. Without appropriate documentation confirming that these purchases were for valid Company purposes, the risk exists that they could have been for personal use. This misuse of Company funds occurred because of inadequate oversight by Company officials and because the former Treasurer circumvented what minimal internal controls were in place. Moreover, Company officials issued inherently high risk debit cards to various officers. The Board did not conduct a comprehensive audit of all the bills prior to payment as required. Furthermore, the former Treasurer did not have canceled checks or check images on file which would allow for a thorough review of disbursements made by check.

The Legislature has not audited claims since 2015. These deficiencies occurred primarily because the Legislature did not consider other options available to it by law, such as establishing a comptroller position responsible for auditing claims or retaining the Legislature's claims audit responsibility. After we informed the Legislature of the significance of the claims audit function, they advertised to fill the County auditor position. However, the position has not been filled, and as of November 2018, the Legislature had not started to audit claims. In addition, the Finance Office clerks have access rights in the financial software to enter disbursements and apply the Treasurer's signature to checks at the time of printing, without direct supervision. Finally, the Treasurer did not control his signature during check printing.

The Board has not annually audited the records of all officials who received or disbursed cash. Although two Board members annually audited the Justice's records, the Board did not annually audit the Supervisor's and Clerk's records. In addition, although the bookkeeper and Supervisor reviewed claims before payment, the entire Board did not do so. Instead, the Board reviewed and approved the abstracts. While the claims were available to the Board members to review, one Board member told us that they reviewed a claim only if there was a question on the abstract. The Supervisor told us that it would be time consuming for the entire Board to review every claim and believed that their process was sufficient.

The Board did not annually audit the Clerk-Treasurer's records from 2014-15 through 2017-18 to ensure all money was properly accounted for. Because the Board did not audit claims before payment, claims were paid without adequate supporting documentation and vendors may have been selected without seeking competition. In addition, the Board did not follow its procurement policy when selecting professional services, and did not periodically seek competition for those services. Finally, the Board did not comply with New York State Village Law, Section 5-506 when presenting the budgets for 2015-16 through 2017-18. None of the budgets we reviewed contained a schedule of actual revenues and expenditures for the last completed fiscal year. The budgets also did not include an estimate of fund balance at year-end.

The Town granted a total of 1,479 non-NYS 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 $89.02 million. We reviewed 147 exemptions totaling $38.68 million and identified issues with 70 exemptions totaling $22.46 million (58 percent). We found 28 (19 percent) totaling $15.34 million in Town-exempted assessed value lacked one or more pieces of supporting documentation to determine eligibility or verify the accuracy of the exemption calculation. For the 17 exemptions tested, we found six senior citizen and one person with disabilities exemptions were ineligible or incorrectly calculated. Of the 119 exemptions with sufficient supporting documentation, we found that 42 (35 percent) totaling $7.12 million in Town exempted assessed value were ineligible or incorrectly calculated. The incorrect and ineligible exemption calculations with sufficient support had a net exemption difference of $1.07 million and those with insufficient support had a net exemption difference of $60,755 for property owners in fiscal year 2018. Finally, the Assessor did not report the transfer of 10 (of 37) properties with exemptions to the County as required when the new owner was no longer eligible for the exemptions.

We compared budgeted revenues and expenditures with operating results for 2013 through 2017 and found that expenditure estimates were generally reasonable except for police special detail. However, the Board underestimated revenues by an average of $3.08 million each year, for a cumulative total of more than $15.4 million. Because the Board underestimated revenues, it appeared that the Town needed to both increase its tax levy and use fund balance to close projected budget gaps. However, those unrealistic revenue estimates actually created annual operating surpluses, resulting in the accumulation of significant fund balance. The Board's underestimation of revenues resulted in the accumulation of unassigned fund balance totaling $15.7 million as of December 31, 2017, which is about 40 percent of the Town's budget. Although the Town's tax levy has remained fairly consistent, by underestimating budgeted revenues the Board may be placing a higher tax burden on Town taxpayers than is necessary to provide services for Town residents.

The Board established an initial amount of nearly $2.6 million to be used from its capital reserve for a project to construct a new Town Hall. However, it did not prepare an itemized project budget and did not appropriately monitor the project. As a result, the Town incurred total project costs of approximately $4.55 million. The Board did not appropriately approve 14 change orders totaling approximately $265,000. We did not identify, and were not provided with, evidence to support that the Board reviewed or approved these change orders, as appropriate. Finally, when the anticipated project funds were exhausted during the initial construction process, the Board determined it would need to seek additional funding sources to complete the project. Therefore, in 2015, rather than borrowing from outside sources, the Board passed resolutions to utilize approximately $1.1 million of available fund balance and borrow an additional $885,000 (to be paid back over a period of five years with interest) from the Tax Stabilization Reserve to fund the remaining project costs.

The Town adopted a computer privacy policy that states that computers are to be used for business purposes only. However, officials did not design or implement procedures to monitor compliance with the policy or determine the amount of employees' personal use. Furthermore, the Board did not adopt policies and procedures for breach notification or security management and awareness training. Although the Town performs data backups daily, the Board did not have a disaster recovery plan. Finally, the Board did not provide users with security awareness training to help ensure they understand security measures needed to protect the network.

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.