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.

School officials effectively designed and implemented procedures to ensure that compensation payments were accurate, and properly authorized. School officials accurately paid 15 employees who were paid $123,754 over four payroll periods during the audit period. We reviewed the gross pay calculations of these employees to determine whether salaries and pay rates were authorized, accurately paid and supported by time records. We found that employee compensation was accurate, adequately supported and properly authorized. School officials established and adhered to an effective payroll process that decreases the risk that errors or irregularities in processing and paying payroll could occur.

The Supervisor neither maintained nor required the bookkeeper to maintain complete, accurate and up-to-date accounting records and reports, which included performing bank reconciliations for all bank accounts. The bookkeeper maintained two sets of cash ledgers; in addition to the Town's accounting system, she also maintained manual cash ledgers. For the bank reconciliations that were completed, the bookkeeper did not reconcile the bank statements to the Town's accounting system, but instead reconciled them to the manual cash ledgers which were not accurate. When we reviewed the cash ledgers, we found several recording errors in the Town's accounting records and manual cash ledgers. We also found that the bookkeeper had delegated her duties to her private accounting firm and her employees were performing bookkeeping duties on her behalf. For example, we noted several instances where her employees were signing off on bank reconciliations as completed and/or reviewed. The Supervisor did not provide the Board with adequate monthly financial reports to make sound financial decisions for the Town. Due to the lack of timely and accurate records provided by the Supervisor, the Board was unable to properly assess the Town's financial condition. The Board appropriated fund balance of $90,241 and $75,726 in 2017 and 2018, respectively, in the general town-wide fund. The financial statements prepared by the CPA subsequent to the preparation of the 2017 budget showed that the general town-wide fund had a deficit of ($86,345) in unassigned fund balance as of December 31, 2016; therefore the Board appropriated fund balance that did not exist. As of July 17, 2018, neither Town officials nor the CPA could provide preliminary financial information for December 31, 2017. However, upon reviewing the Town's unaudited financial records, we anticipate that the general town-wide fund's financial condition likely worsened.

The Village's governing board agreed to participate in the Commission in coordination with the Town's governing board. However, the boards did not enter into an agreement or formally outline the Town's or the Village's roles and responsibilities. The governing boards also did not establish policies or procedures for Commission operations or outline the Board of Commissioners' (Board) responsibilities. The Commission's financial activity was not properly recorded and reported and the Board did not approve salaries and stipends. Furthermore, the Board cannot ensure all collections were remitted and deposited. Collection records were inadequate and the collection of certain fees was not enforced. Finally, claims were not audited before payment.

The Board never prepared an itemized budget for the town hall expansion project outlining the financing sources needed to fund the estimated cost. This also contributed to budget status reports for the project not being presented to the Board during the audit period. As a result, the Board could not effectively monitor the project, ensure financing sources were sufficient to fund expenditures incurred, or ensure expenditures did not exceed the estimated cost. In addition, accounting records for the project were not maintained throughout the fiscal year. We also found that the Board did not authorize $79,155 in interfund advances made from the general fund to the project, which were used to pay for project expenditures prior to the Town receiving $1.1 million in debt proceeds on November 18, 2016. An additional general fund advance of $38,000 was made on February 13, 2018, which was approved by the Board on February 12. As of March 31, the project owed the general fund $117,155 for these interfund advances. We project expenditures will exceed the financing sources for the project by approximately $98,000 (7 percent), resulting in the project not being able to repay interfund advances made from the general fund.

The Treasurer did not adequately secure unused check stock. In February 2016, the Treasurer discovered three missing, unused checks and properly reported them to the Board. However, the Treasurer did not initially place a stop-payment order on the missing checks because he believed that no one would try to access the check stock in his private office, but contacted the bank to place stop-payment orders after we asked about the checks. District officials believe that, in December 2017, an individual with temporary access to the Treasurer’s private office submitted two fraudulent checks ($850 and $2,357) to the bank, one of which ($850) was processed before the stop-payment order; the bank refused to accept the other check. District officials promptly reported the theft to law enforcement and were fully reimbursed by the insurance company. In addition, the Board did not approve disbursements prior to payment. However, as a result of our audit, District officials implemented a voucher system to ensure Board approval. We commend them for taking prompt corrective action. Finally, the Board did not ensure annual financial reports were filed. The Treasurer did not file the AUD for 2010 through 2016 because officials were unaware of the statutory requirement to do so. As a result of our audit, the Board contracted with an accounting firm to file all the outstanding AUDs.

District officials need to improve budgeting practices to more effectively manage the general fund balance. The District has accumulated unrestricted fund balance of more than $1.8 million as of June 30, 2017, or 15.25 percent of the 2017-18 budgeted appropriations and exceeded the statutory limit by 11.25 percentage points. While District officials appropriated fund balance annually to finance operations, none of the appropriated fund balance was used to finance operations for the 2015-16 through 2017-18 school years. The budgets overestimated appropriations by more than $2.03 million or 6 percent from 2015-16 through 2017-18. As a result, the District experienced operating surpluses from 2015-16 through 2017-18, total fund balance increased and unrestricted fund balance exceeded the statutory limit by 7.77 to 10.69 percentage points. The Superintendent is aware that prior adopted budgets included overly conservative estimates and informed us that District officials planned on including more reasonable estimates in the 2018-19 budget.

The Board or membership did not ensure that the bylaws were adequate or adopt supplemental financial policies or procedures. They also did not conduct or contract for an annual audit of the books and records of the Treasurer and Financial Secretary. In addition, they did not audit claims prior to payment and ensure there was sufficient supporting documentation for all claims. Finally, the Association entered into transactions to purchase new insurance policies, whereby an insurance agency received 15 percent of the gross premium. At the time of those transactions, one Board member, who also served on the Association's two-member insurance committee, was employed by the insurance agency. The Board member informed us that he was paid 50 percent of the insurance agency's 15 percent fee in the first year and 40 percent of that fee in each renewal year. Therefore, he received commissions totaling $596 for 2016 and $483 for 2017. Under these circumstances, he appears to qualify as an “interested person” under the policy. However, we found no documentation in the minutes of the Board member's disclosure of the financial interest, the Board's process and determination of whether his financial interest constituted a conflict of interest, or the Board's action to address his interest in the contract, as required by the policy.

The Treasurer did not maintain accurate accounting records and failed to file required annual financial reports for the last four fiscal years. Although the Treasurer records the deposits to appropriate revenue codes and disbursements to appropriate expenditures codes, he does not maintain an appropriate general ledger reflecting accurate cash, payable and receivable balances. In addition, revenues and expenditures are not recorded timely. The Treasurer's practice of recording deposits and cleared checks as shown on bank statements and identifying accruals through a review of Board minutes at year-end or later, rather than from internal source documents of receipts and disbursements, continues to provide unreliable and inaccurate financial records and reports, including the monthly budget-to-actual reports provided to the Board. As a result, the Board did not adequately monitor the Village's financial condition. The general fund's unrestricted fund balance decreased from $213,327 as of fiscal year-end 2014 to $30,487 as of fiscal-year end 2018. While budget-to-actual results were generally reasonable, deficits occurred in two fiscal years because revenues were overestimated and in 2014-15 the budgeted appropriations were overexpended.

The Board-adopted 2014-15 through 2016-17 budgets overestimated appropriations by an average of 9 percent over these years. District officials' budgeting practices generated almost $3.7 million in surpluses over this three-year period. To reduce the unrestricted fund balance to within the statutory limit, officials transferred more than $3.5 million to the capital building reserve and $200,000 to the capital bus reserve over this same period. As a result, reserve fund transactions were not transparent to the public, because each year the funding transfers were not included in the adopted budgets but instead transferred at year-end. The Board has also not adopted comprehensive multiyear financial and capital plans. In addition, District officials retained an annual average of $798,735 in the debt service fund over the past four years (2013-14 through 2016-17) without using this money for debt service payments. Finally, District officials did not apply for transportation aid in a timely manner. As a result, the receipt of aid totaling approximately $148,672, which could have been used to reduce real property taxes or for other purposes, was delayed.