The Board did not develop adequate information technology (IT) security policies and procedures. The Board has not adopted IT security policies addressing password management, breach notification, protection of PPSI, wireless technology, mobile devices, remote access, sanitation and disposal of IT equipment, user accounts, online banking and data backups. School officials did not provide IT security awareness training to employees. The Board did not develop a disaster recovery plan. The Board adopted inadequate IT service provider contracts. School officials also did not maintain IT software inventory records or implement strong access controls.

The Village Clerk/Treasurer and Deputy Clerk/Treasurer performed incompatible duties. As a result, they controlled all aspects of their respective cash functions with little or no oversight. The conflicting nature of duties assigned to these two key staff created areas of significant weakness in the internal control structure and there was no evidence of Board review to reduce the effect of those weaknesses. In addition, competition was not sought for 14 professional services totaling $926,188. The Village also did not enter into written agreements with five professional service providers who were paid a total of $169,330. We examined 23 purchases from the various Village departments, totaling $205,128, during 2015-16 and 2016-17 and found that Village officials did not solicit quotations for 11 of the 23 purchases totaling $102,543. Water rates were not clearly documented resulting in underbillings totaling $4,065 and overbillings totaling $7,620 for 494 bills during the eight quarters we reviewed. Finally, the Board did not adopt a comprehensive information technology policy.

Based on the results of our review, we found the significant revenue and expenditure projections in the proposed budget are reasonable. In addition, the City’s proposed real property tax levy complies with its tax levy limit. However, the Council has not yet approved the fees needed to realize the estimated revenues in the newly established refuse fund for solid waste management and bulk refuse collection fees. These fees are necessary to finance the City’s solid waste and recycling collection and disposal (waste and recycling) services. In addition, the minimal contingency appropriation in the proposed refuse fund budget provides the City with a limited amount of flexibility in the event of unforeseen circumstances that may require additional funds. The City’s capital plan for the purchase of equipment and vehicles for the general and refuse funds also remains unfunded through the proposed budget and instead will be financed by issuing debt. City officials should also consider the potential financial impact of the settlement of any of the City’s five expired collective bargaining agreements (CBAs) in 2019.

Based on the results of our review we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The Town’s 2019 tentative budget complies with the property tax cap levy limit.

The Board overestimated appropriations by an average of approximately $1.9 million annually from 2014-15 to 2016-17, which resulted in accumulation of excess unrestricted fund balance.

The Board did not segregate payroll duties or properly certify payrolls. In addition, the Board did not implement policies and procedures over payroll. For example, direct supervisors did not review or approve 244 of 309 timecards (79 percent) totaling $171,092 and timecards lacked documentation. The Secretary did not document the reasons for adjustments of 151 of 158 payroll hours (96 percent) totaling $4,451. Commissioners or direct supervisors did not approve 178.25 of 196 overtime or double-time hours (91 percent) totaling $7,833.

We found that access to the District’s financial application was not properly segregated. The Treasurer along with eight BOCES employees who provide support services have administrative rights to the financial application. The District did not have adequate bank agreements for online transactions, online banking transactions were not adequately secured and online banking users had excessive permissions. In addition, the web-filtering software did not enforce the District’s Internet-use policy. As a result, employees accessed websites such as shopping, personal email and social networking that did not always comply with the District’s Internet use policy. Finally, while District officials established a disaster recovery plan, it did not address critical business processes for District-wide operations such as disruptions to its IT environment; it only addressed business continuity for the District’s financial application.

The Board did not appoint a Treasurer to oversee financial operations as required by Village Law. The Board also did not seek competition for six professional services totaling approximately $559,311 and professional service providers did not have written agreements. Village officials also paid $155,640 to four vendors for capital improvements ($62,200), sewer repairs ($34,840), park rehabilitation ($21,262) and general maintenance ($37,338) without competitively bidding. The Board did not grant annual vacation leave in accordance with its policy. As a result, 14 current employees’ vacation leave exceeded the maximum amount they were allowed to carryover to 2017 by more than 4,510 hours with an estimated value of $213,058. Finally, officials did not monitor assets or properly safeguard information technology (IT) assets.

The amount collected for water operations in 2017 was approximately $213,000 less than the cost of water services. As a result, the general fund had to advance funds to the water fund to cover its operational costs. This advance and similar advances in prior years occurred because the water fund’s collections have historically not been sufficient to sustain operations. As of December 31, 2017, the water fund owed the general fund $340,000 for accumulated advances that had not been repaid. The Board also does not review or approve billing adjustments. The Budget Officer made billing adjustments in 2017 for water for $184,025 and for sewer for $44,121 due to inaccurate beginning meter readings. Furthermore, three town employees perform administrative duties (billing, recording and collecting) for the water and sewer funds. However, none of these employees’ salaries or related benefits are charged to the water or sewer funds. As a result, the water and sewer funds do not pay administrative costs for services they receive from the general fund. Finally, we reviewed all customer accounts for 2017 and determined that customers were overcharged for water and sewer penalties in 2017 by $8,654.

Officials did not properly account for retiree health insurance billings. We reviewed all of the 115 current billings applied to the retirees’ accounts in the accounting system totaling $37,572 for the month of October 2017. We compared the billings above to Human Resource’s spreadsheet to determine if the billings were correct. We found that 20 accounts were overcharged by $4,878 and 13 accounts were undercharged by $2,157 for a total aggregate error of $7,035 (or 19 percent). In addition, officials did not ensure the continued eligibility of retirees. As a result, the College inappropriately paid $2,092 in health insurance premiums for two deceased individuals. Finally, officials did not adequately segregate the payroll manager’s duties and access to the financial software. We also found that checks were being issued outside of the normal payroll process.

Over the audit period, County officials were aware that recurring revenues were not keeping pace with the expenditure growth, which resulted in operating deficits. The County appropriated $201 million of fund balance over the past five years and used $81.1 million to fund operations, with about half of that used in 2017. Financial condition continued to decline in 2017 when it experienced an operating deficit of $32.2 million in the general fund. As a result, fund balance declined by 23 percent during the period. Cash balances have also declined by 54 percent during the audit period, from $180.2 million in 2013 to $83.7 million in 2017. Furthermore, the County had a debt service obligation of $159.7 million in 2017 (7.6 percent of the budget), an increase of $25.1 million (18.6 percent) since 2013. These obligations included $11.8 million in recurring operating expenditures over the past five years that were under-budgeted for in the 2015 and 2017 annual budgets. Finally, the general fund owes the sewer funds $50 million.

The Board did not adopt policies and procedures over the preparation and review of time sheets. We reviewed all 67 time sheets completed by the Justice Court Clerk (Clerk) during her employment with the Town and found 63 time sheets, (approximately 94 percent) showed no evidence of review and approval by a Justice. We found that the Clerk reported 405 hours on her Town time sheets totaling $5,868 that coincided with hours worked at other municipalities. The Clerk also did not allow for travel time between the Town and another municipal employer. As a result, we estimate she was paid an additional $1,800 for 123 hours not worked. The Clerk claimed 112 hours of sick leave at a cost of $1,795 on her Town time sheets on days that she also reported working at another municipality. Except for minor discrepancies that we discussed with Court officials, we found that the Court funds and documents were in proper order.

The Board adopted an employee handbook that states that time records must be verified and signed by department heads. However, this policy was not enforced for the Clerk’s time sheets. We reviewed all 77 time sheets completed by the Clerk during her employment with the Town and found 70 time sheets, (approximately 91 percent) showed no evidence of review and approval by a Justice. The Clerk reported 384 hours on her Town time sheets totaling $5,559 that coincided with hours worked at other municipalities. The Clerk did not allow for travel time between the Town and another municipal employer. As a result, we estimate she was paid an additional $1,800 for 123 hours not worked.

The Board annually appropriated fund balance that was not used to finance operations and adopted budgets that overestimated appropriations by a total of approximately $3 million (13 percent) from 2014-15 through 2016-17. District officials also improperly restricted nearly $1.2 million in a debt reserve in the debt service fund from 2014-15 through 2016-17, which made it appear that unrestricted fund balance was within the statutory limit each year. When these funds are added back to the general fund, recalculated unrestricted fund balance exceeded the 4 percent limit each year by 12 to 14 percentage points. Reserve funds are generally not being used as intended. We found that the balance in the retirement contribution, unemployment and tax certiorari reserves were excessive and the property loss and liability reserve may not be needed. The remaining five reserves were reasonably funded. In addition, with the exception of the capital and unemployment reserves, the reserves are not being used as intended.

While the Board’s budget estimates were reasonable, the Board adopted structurally unbalanced budgets and relied on fund balance to finance recurring expenditures over the past several years. More specifically, the general fund incurred planned deficits totaling $1.2 million, reducing total fund balance from $2.9 million at the beginning of 2014-15 to $1.7 million at the end of 2016-17, or a 41 percent reduction. While reserve fund balances were generally reasonable, as of June 30, 2017, the District’s unrestricted fund balance was less than .5 percent of 2018 appropriations. Furthermore, as of June 30, 2017, the school lunch fund owed the general fund over $100,000 that officials may not be able to pay back. The District experienced another significant deficit of $286,000 for 2017-18, which has completely depleted unrestricted fund balance. Beginning in the spring of 2018, the Superintendent and Treasurer have started to take steps to improve the District’s declining financial condition.

The Board overestimated appropriations by as much as 9 percent and appropriated an average of $9.4 million of fund balance that was not always used. Additionally, District officials underestimated revenues by as much as $3 million or about 3 percent. District officials’ practice of overestimating expenditures and underestimating revenues contributed to annual operating surpluses and increasing amounts of unrestricted fund balance in three of the four years reviewed. At the end of the last four fiscal years, the District reported unrestricted fund balance which ranged from 2.8 percent to 4.8 percent of the ensuing year’s appropriations, exceeding the statutory limit in two of the years. During the same period, the District incurred operating surplus in three of the four years. When unused appropriated fund balance was added back to unrestricted funds, the District’s recalculated unrestricted fund balance as a percentage of the subsequent year’s budget ranged from more than 9 to almost 11 percent or a much as 6.7 percentage points over the legal limit. In addition, we found the workers’ compensation, retirement contribution and employee benefit accrued liability (EBALR) reserves to be overfunded. The District’s payroll policy did not have adequate guidance relating to overtime. The majority of the non-emergency overtime (about 59 percent) was paid to two security supervisors (securities), each under separate employment contracts. These securities earned a total of $207,460 in overtime ($178,321 at time and one half and $29,139 at double time). We found that $91,378 of the total payments to them did not have adequate pre-approval of overtime. Based on their contracts, the securities work a standard eight-hour day, or 40-hour week. Hours worked in addition to the regular schedule must have prior approval from the supervisor in charge and the Superintendent, and will be paid at the rate of time and one half. The District paid the securities an extra $7,285 in double time for work on Sundays. However, it is neither authorized by agreement, nor Board resolution. District officials did not monitor overtime; therefore, they were not aware that these employees were paid double time.

Town officials have an adequate process to ensure that salaries and wages are paid accurately. We reviewed the annual salaries paid to all 13 elected and appointed officials totaling $211,598 from January 2017 through May 2018 and found they were paid the correct amounts. We selected six payrolls totaling $41,766 from January 2017 through May 2018 and found that except for minor deficiencies related to clerical errors, employees were paid at the approved rate and for the correct number of hours. There were no recommendations as a result of this audit.

Town officials have adequate procedures to ensure that salary and wages are paid accurately.

The Board's policy requires the claims auditing process to determine that the submitted voucher (invoice) is in agreement with the purchase order or contract upon which it is based. The policy includes a checklist which the claims auditor completes, signs and attaches to each batch of claims to certify they have been audited. The checklist requires claims to be reviewed to ensure that they are mathematically correct, are for proper District expenditures, have receipt of goods or services attached, do not include sales taxes or late fees (if applicable) and have been checked against purchase orders. However, the policy's checklist is deficient because it does not state that claims should be compared to quotes, bids or applicable contracts to determine that the District was correctly charged. In addition, employees are not required to attach the quotes, bids or contracts to the claims packages. The claims auditor told us that such documentation is available from the department that initiated the purchase. However, he does not routinely request the documentation. For example, the claims auditor approved claims for $20,264 for special education therapy services, $20,152 for diesel fuel and $10,600 for home care nursing services without verifying the rates charged were consistent with the written agreements for these goods or services.

District officials ensured the accuracy of compensation and benefits provided to employees. Using a combination of manual techniques and computer assisted auditing techniques (CAATs), we reviewed the payroll records of all 287 employees to identify high-risk transactions. This resulted in testing of more than 5,000 checks and direct deposits totaling $10,904,517. Except for some minor discrepancies, which we discussed with District officials during fieldwork, salaries and wages paid and benefits provided to employees agreed with collective bargaining agreement (CBA) stipulations and Board-approved contracts. We commend District officials for effectively designing and implementing policies and procedures that ensure the accuracy of compensation and benefits provided to employees.