From 2013-14 through 2015-16, the Board and District officials adopted budgets that appropriated $1.6 million of general fund balance and certain reserve funds to finance operating expenditures. During this period, the general fund incurred operating deficits totaling $4.8 million. As a result, the District used $3.2 million more fund balance and reserves than planned. This reduced total fund balance by $4.8 million (52 percent) to $4.4 million as of June 30, 2016. Although the general fund balance continued to decline in 2016-17, the actual operating deficit was less than planned. In 2016-17, revenue growth began to outpace expenditures, increasing by more than 5 percent, while expenditures increased by less than 1 percent. This revenue increase was average compared to historical trends, but the expenditures declined because District officials implemented cost reduction measures. More specifically, officials eliminated eight teaching positions from 2013-14 through 2016-17, which saved the District approximately $350,000. Furthermore, District officials told us special education costs stabilized once the District began providing certain special education programs in-house instead of using the Board of Cooperative Education Services (BOCES) to provide them.

The Board did not calculate the District's statutory spending limitation, hold a public hearing prior to adopting the annual budgets, or ensure that financial reports are accurate, reliable and in compliance with General Municipal Law's requirement for a uniform system of accounts. Also, the Board did not properly modify the 2016 budget to include an additional appropriation of approximately $390,000 for the purchase of a fire truck. Additionally, the Board did not establish written rental agreements with its affiliated fire department and companies. Finally, the District's insurance policies included coverage for the Department and Companies with insurance premiums totaling $43,334. Although the District may insure itself against loss from use of the Department's and Companies' properties for District purposes, it lacks the authority to purchase insurance to protect the Department and Companies against loss from use of their respective properties.

The District Clerk is responsible for maintaining leave accrual and usage records for all employees. There are no procedures or oversight for the District Clerk's input of leave usage into the electronic software. Therefore, we reviewed the leave accrual balances for 10 of the 165 employees from July 1, 2016 through June 30, 2017. We found 16 instances where the District Clerk did not record leave used by seven employees, resulting in leave balances being overstated by a total of 9.5 days, valued at $3,623. The errors found in accrual records for 70 percent of the 10 employees tested shows the system of controls over employee accruals is not working properly. For example, the Treasurer had six instances of leave time used totaling 3.5 days valued at $1,000 that were not recorded in the electronic software.

The Board needs to provide additional oversight of the Treasurer's financial duties. The Treasurer performed all financial duties including receiving and disbursing cash, signing District checks, conducting bank transfers and maintaining the accounting records with little or no oversight. The Treasurer was also responsible for reconciling the District's bank accounts. The Treasurer's accounting records provide manual cash receipt and disbursement journals and running cash balances, but she did not maintain any subsidiary accounts to classify actual revenues and expenditures by account code or type of expenditures. The Board did not annually audit the Treasurer's records to help verify that cash is properly accounted for and transactions are properly recorded. In addition, the Board did not properly establish its capital reserve fund and obtain voter approval prior to issuing $150,000 in debt. Finally, the Board did not require perpetual diesel fuel inventory records, leading to unaccounted-for fuel.

The Board and District officials did not properly manage fund balance and need to improve their budgeting practices. Although the Board's fund balance policy requires the District to maintain unrestricted fund balance within the statutory limit, the Board has allowed it to exceed the statutory limit for the past three years by two to seven percentage points. As of June 30, 2017, unrestricted fund balance totaled nearly $1.8 million and was 9 percent of 2017-18 budgeted appropriations, exceeding the statutory limit by more than $950,000, or five percentage points. In addition, although the Board adopted a reserve fund policy, the policy did not address optimal funding levels, conditions necessary for use or how and when reserve funds would be replenished. As of June 30, 2017, the District reported four general fund reserves with cumulative balances totaling approximately $3.9 million. We analyzed these reserves for reasonableness and adherence to statutory requirements and found that three reserves appear to be overfunded. The remaining reserve was reasonably funded.

The claims auditor approved claims for payment for purchases containing confirming purchase orders. The purchasing agent approved 34 percent of the purchases tested, or 74 invoices for $19,845, after the goods and services were ordered. Although all of these purchases appeared to be reasonable and legitimate, the routine use of confirming purchase orders circumvents internal controls and weakens the procurement and budget control process. In addition, when the purchasing agent approves purchases after they have been made, the opportunity for review of price comparisons as part of the approval process is lost. Furthermore, allowing the purchase of goods through Amazon has a high level of inherent risk because of the ease with which employees can make these purchases without pre-approvals. By not enforcing compliance with the District's procurement policy and providing sufficient oversight of the use of the District's Amazon account, District officials have limited assurance that all Amazon purchases were actual and necessary District expenditures.

District officials increased average daily participation (ADP) and sales by soliciting feedback from students and implementing suggestions on menu changes. District officials also brought about an increase in after-school meal sales, which contributed an average of over 10 percent to overall cafeteria sales. In 2015-16, cafeteria staff made hot meals available after school, which provided an important source of nutrition for students staying late for practices and games in a geographic region with few dining options. This focus on customer service has resulted in a 16 percent increase in ADP (or nearly 49 meals per day) over the last five fiscal years, despite a slight decrease in enrollment. Furthermore, overall cafeteria sales have increased. In fact, the District has the highest reported annual sales per student ($318) of all school districts in the County. District officials have accumulated excessive balances in some of the District's reserves. As of June 30, 2017, the District had seven general fund reserves totaling more than $2.5 million, including a workers' compensation reserve and an unemployment reserve, with balances of approximately $150,000 and $148,000, respectively. While the other five reserves had balances that were reasonable with respect to historical expenditures or future plans, the workers' compensation and unemployment reserves' balances were over four times and 30 times their historical expenditures, respectively. Although the Board has increased its use of the overfunded reserves since our previous audit, the Board placed excess fund balance into these reserves to maintain their current balances.

The Town's financial condition is not transparent to the Board and taxpayers because the Supervisor does not maintain adequate financial records. The Supervisor has a computer accounting system for recording transactions by account code in order to print budget-to-actual reports for the Board's review. However, he does not maintain the Town's fund balance, including reserves and does not record bank transfers; therefore, the cash balances are not accurate. As a result, the financial position reports in the accounting software cannot be used. In addition, the Board meeting minutes do not provide transparency because they do not contain sufficient detail of the Town's decisions and were not timely transcribed into the minutes book. In addition, the abstracts (which represent disbursements made) presented to the Board and taxpayers at the Board meetings were altered by the Supervisor after the Board's approval and he did not submit these changes to the Board at the next meeting. Finally, the Board did not adequately audit claims because some of the abstract changes should have been detected during its audit, such as erroneously being charged sales tax or amounts to be paid on the abstract did not match the supporting claims voucher packets attached.

The Board's budgeting practices included annually appropriating fund balance that was not used to finance operations and overestimated appropriations by more than $4.8 million (8 percent annual average) over a three-year period. As of June 30, 2017, unrestricted fund balance totaled more than $2.2 million and was 10 percent of the 2017-18 budgeted appropriations, exceeding the statutory limit by approximately $1.3 million or 6 percentage points. Finally, reserve funds are generally not being used and the retirement, repair and unemployment reserves are overfunded.

Cash collected from cafeteria sales was not always deposited. Cash register tapes generated from cafeteria and kiosk sales generally matched sales totals on the daily cash register reports, which are prepared by the cafeteria manager and provided to the Hospital accounting department. However, the corresponding bank deposits were not always made intact. In addition, the cafeteria manager did not maintain sufficient documentation to support the sales from the kiosk or vending machines. During 2016 and 2017, there were 90 weekdays for which no sales were recorded at the kiosk. The kiosk operates on a cash only basis Monday through Friday and the cafeteria management team is responsible for ordering inventory, stocking the vending machines and collecting and depositing the cash in the machines.

The Board adopted budgets with overestimated appropriations averaging $950,000. As a result, it did not use appropriated fund balance and, instead, increased taxes despite having sufficient fund balance and reserves to fund ongoing operations. Budget practices like these can mislead taxpayers by making it appear that the District needed to both increase taxes and use appropriated fund balance to close projected budget gaps. We recalculated unrestricted fund balance with the amounts of unused appropriated fund balance and the totals exceed the statutory limit by as much as 10 percentage points. In addition, the Board overfunded three reserves which totaled more than $2 million. The reserve balances were excessive when compared to the average annual costs for which the Board established.

Determine whether districts are providing adequate oversight over transportation functions to ensure the safe transportation of students.

The Board did not annually audit the Clerk-Treasurer's records and report or conduct a thorough audit of claims. Furthermore, the Board did not develop and adopt adequate policies and procedures over procurement and purchase cards. In addition, the Board did not ensure investments were made in compliance with New York State General Municipal Law. For example, an investment in a leasing fund resulted in a loss of about $62,000 for the cemetery fund. Finally, The Board did not designate an official to certify payroll or develop proper IT controls.

The Board does not audit Library claims prior to payment. Instead, the Board designates two members to audit Library claims prior to the monthly meeting of the Board as a whole. A warrant, which is prepared by the account clerk, is then approved by the Board during its monthly meeting. As a result, all available Board members at the monthly meetings do not audit and approve or disallow each individual claim to ensure they are for legitimate Library expenditures, properly supported and comply with Board-adopted policies.

The Board did not adopt written policies and procedures for critical financial operations including budgeting, reserves, payroll processing, IT, and claims auditing. Moreover, the Board has not reviewed or updated its online banking, general fund balance, and cash receipts policies recently. The Board also did not update the procurement policy for legal competitive bidding thresholds that took effect in 2010. The failure to develop and periodically review and revise formal policies and procedures weakened the Village's internal controls.

The Board did not adequately segregate the Clerk-Treasurer's duties or implement compensating controls. It also did not conduct an audit of the Clerk-Treasurer's records and annual financial report. Village officials also expended $76,200 in real property taxes over the last 12 years for two unused properties that did not benefit taxpayers. Finally, a Trustee, as co-owner of a local hardware store, had a prohibited conflict of interest. She received a direct or indirect monetary benefit as a result of 59 contracts totaling $2,398 between the store and the Village during our audit period.

The Board adopted an acceptable use policy in July 2016. However, officials have not designed or implemented procedures to monitor compliance with the policy or determine the amount of employees' personal use. Town officials did not maintain an inventory of IT assets. The IT consultant has a list of computers and servers, which are maintained under the managed services agreement with the Town. However, this list does not include the computers in departments not covered by the service agreement including the Highway, Recreation, Youth Bureau and Senior Center. The Board and Town officials have not developed, adopted and implemented a breach notification policy or local law because they were unaware of this requirement. Employees were not provided with IT security awareness training to ensure they understand how they could help protect IT assets and computerized data. Finally, the Board and Town officials have not developed, adopted and implemented a written disaster recovery plan.

The Board underestimated revenues, overestimated appropriations and appropriated fund balance that was not used. Also, the balances in three reserves were excessive. Despite budgetary surpluses and excess fund balance, the Board increased the tax levy by a total of $4.4 million from 2014-15 to 2017-18. Based on our analysis of the 2017-18 adopted budget and year-to-date operations, officials budgeted similarly to previous years and the District will likely experience an operating surplus and fund balance will continue to increase and exceed the statutory limit. Based on our review of the preliminary 2018-19 budget, these budgeting practices appear to have continued. Although the Board took appropriate action to ensure salaries and pay rates were properly authorized and documented, District officials did not implement procedures to ensure employees were paid at the correct rates. For example, three teachers were paid stipends at rates not established by a collective bargaining agreement (CBA), employment contract or Board resolution and one teacher reviewed and approved her own time sheets.

District officials did not use competitive methods to select nine professionals paid a total of $849,696. Additionally, the Board did not consistently seek competition for external audit services. Instead, the Board retained the services of the same external audit firm for at least 10 years, without any attempt at seeking competition. The Board authorized attendance at 14 conferences during the audit period, with total costs not to exceed $107,342. District officials could have saved $3,562 if they had used federal per diem lodging guidelines, $480 if they did not exceed their travel policy maximum, $1,077 if they did not pay for unauthorized travel dates and $144 if they did not pay for unnecessary travel costs. Furthermore, District officials are not monitoring the use of District-owned cell phones to ensure that all expenses are reasonable and for necessary business purposes. Expenses for cell phones totaling $7,250 (23 percent) were not properly approved, documented or necessary. The District has not developed fuel inventory records. In addition, District officials cannot identify who is responsible for overseeing fuel supplies. No one is required to be present during fuel deliveries or to measure the tanks before and after deliveries and District personnel do not record periodic fuel measurements. As a result, no one is maintaining inventory records or fuel consumption records or reconciling for fuel remaining to account for use. As a result, officials could not account for 20 and 73 percent of the gasoline and diesel fuel inventories, respectively, totaling $4,433.

The Board adopted a purchasing policy that required District officials to establish written procedures for procuring goods and services not subject to competitive bidding requirements, such as professional services, and officials did so. However, the procedures were not sufficiently detailed and did not provide adequate guidance for employees or the purchasing agent. We reviewed the District's procurement of 14 professional service providers that were paid approximately $1.46 million during our audit period to determine whether officials used a process that ensured the prudent and economical use of public funds, such as competitive bids, requests for proposals (RFPs) or written/verbal quotes, while acquiring these services. We found that the District used competition, such as an RFP process, or obtained two or more written quotes when acquiring the services of three providers that were paid $935,000 (64 percent). District staff also properly documented why two vendors were paid approximately $59,000 (4 percent) when the acquisition of these services did not require any procurement methods. However, the District did not seek competition, or did not document the selection basis, when awarding contracts to the remaining nine vendors that were paid approximately $467,000 (32 percent).