District officials need to improve budgeting practices to ensure that budgets are realistic and to address the reasonableness of fund balance. The District's fund balance policy requires the District to maintain unrestricted fund balance within the statutory limit, but District officials have allowed unrestricted fund balance to exceed the statutory limit from fiscal years 2014-15 through 2016-17 by 4 to 6 percentage points. As of June 30, 2017, unrestricted fund balance totaled nearly $1.3 million and was 8 percent of 2017-18 budgeted appropriations, exceeding the statutory limit by more than $650,000 (4 percentage points). While officials appropriated fund balance annually, the appropriated fund balance was not needed to finance operations because District officials overestimated appropriations. In addition, as of June 30, 2017, the District reported five general fund reserves with balances totaling approximately $2.6 million. We analyzed the reserves for reasonableness and adherence to statutory requirements and found that three reserves with balances totaling more than $1 million appear to be overfunded.

The Treasurer did not maintain accurate accounting records. As a result, the accounting records were not accurate as of December 31, 2017. Cash accounts were incorrectly recorded, the operating bank account balance was understated by more than $377,000 and the capital reserve balance was overstated by $200,790. In addition, 44 general ledger accounts (92 percent) did not comply with the Office of the State Comptroller's (OSC) uniform system of accounts for fire districts. Finally, District officials did not always solicit competition when procuring professional services

The District generally complied with New York State General Municipal Law (GML) and its purchasing policy when seeking competition for purchases. We selected payments to 22 vendors totaling $153,597 that required quotes and found that District officials obtained the required number of quotes. We selected 10 vendors who were paid a combined total of $5.1 million to determine whether the purchases were competitively bid. We found that District officials appropriately followed GML and the District's purchasing policy for competitive bidding for these purchases. Therefore, we had no recommendations for this audit.

Although we determined that the 2018-19 budget materially complies with the provisions of the Fiscal Agent Act, we identified the following issues which impact the City's financial condition in the current and future years. The City's 2018-19 budget relies on nonrecurring revenue of $59.2 million, such as fund balance and State aid, to balance its budget. Police overtime costs could potentially be over budget by as much as $2.5 million based on the 2017-18 fiscal year overtime costs. Firefighting overtime costs could be over budget by as much as $949,000 based on the 2017-18 fiscal year overtime costs. The City plans to borrow up to $15 million for tax certiorari settlements in the 2018-19 fiscal year. The City plans to issue debt of up to $9.8 million for water fund improvements and will incur additional debt and interest costs if it issues debt for these special projects. The City's adopted budget does not include a contingency appropriation for the general fund, which leaves the City vulnerable to unexpected events. Over the last 10 years, the City's outstanding debt has grown 16 percent and the City's debt service payments have risen 31 percent. Finally, with the 2018-19 budget, the City will have exhausted 92.3 percent of its taxing authority and the City's ability to increase property taxes may be limited in future years if property values do not increase.

The District reported about $6.2 million of unrestricted fund balance in the general fund as of June 30, 2017, which amounts to 9.9 percent of the next year's appropriations and is more than double the 4 percent statutory limit. Our previous audit also found excessive unrestricted fund balance and recommended that the Board and District officials consider reducing it by paying off debt, financing one-time expenditures, increasing or establishing necessary reserves and/or reducing District property taxes. District officials have done some of these things. For example, property taxes have decreased by almost $2 million over the past three years and reserve funds have increased, and the District is paying cash for its buses rather than borrowing. While we commend the Board and District officials for taking corrective action, the District still has excessive unrestricted fund balance due, in part, to unrealistic budget estimates.

The Board did not establish a comprehensive policy for debit cards to help ensure all charges were adequately supported and for business-related purposes. The School has two debit cards that are issued to the Executive Director and the Director of Finance. We observed that the School's purchasing practices included the Executive Director's prior approval for all purchases, except for purchases made using a debit card. Therefore, when the Executive Director or Director of Finance uses a debit card, the School does not, as a matter of practice, have another individual provide documented prior approval before the purchase is made. Debit cards were used for travel-related purposes (for example, hotels, airfare and taxi fares) and for items such as food, electronic/media devices, School and office supplies, items for School sponsored events and job advertising fees. None of the purchases included purchase requisitions or purchase orders to indicate prior approval or any indication that the Board reviewed charges. We reviewed all 404 disbursements totaling $56,079 made during our audit period. We found 190 purchases totaling $21,583 that appeared questionable or for which School officials could not furnish sufficient documentation to confirm that the purchases were for appropriate School expenditures.

Determine whether Board of Cooperative Educational Services (BOCES) milk bidding practices foster competition.

The Business Manager prepared summary budget-to-actual information and presented it to the Board quarterly, however, it only included totals for revenues and expenditures. There was no detailed information for individual revenues and expenditures. Additionally, the reports were submitted on a quarterly basis. Furthermore, for the 2016-17 fiscal year, reports were submitted between 47 and 125 days after month-end, with no reports being submitted for the months ending April 30, 2017 through the end of the audit period. Additionally, the first quarter budget to actual summary report in 2017-18 was not presented until November 13, 2017. The Treasurer prepares the bank reconciliations and includes them in her report to the Board. However, the reconciliations are not prepared and presented to the Board timely.

We reviewed 30 bank reconciliations performed by the Treasurer from May through September 2017 to determine whether they were accurate and timely. The bank reconciliations we reviewed were prepared in a timely manner. The bank reconciliations were accurate, except for the reconciliations for the payroll bank account. The Treasurer's bank reconciliation showed the reconciled payroll bank account balance as of September 30, 2017 to be $11,331. Our reconstructed balance as of September 30, 2017 was $3,032. The difference of $8,299 included 81 negative amounts that were included in the list of outstanding checks. However, these negative amounts were manual adjustments to the payroll general ledger and did not represent outstanding checks. Some of these amounts were dated as far back as 2006 and were carried on the outstanding-check list for years in order to reconcile the payroll bank account. These negative amounts were shown as outstanding checks rather than being identified and the records being adjusted. Although the bank reconciliation did clearly identify errors in the accounting records, adjustments were not recorded and the reconciling amounts were carried forward for years. Finally, the bank reconciliations were reviewed by a District official who was not independent of recording cash and journal entry transactions.

The Board has not adopted adequate information technology (IT) security policies and School officials do not have formal procedures to address breach notification, disaster recovery, data backup, password security management, IT asset inventory and user access rights. We found that the network had 16 inactive user accounts that have not been used in over six months, six of which were never used. Five of the accounts were unnecessary and five were for students that are no longer enrolled at the School. In addition, although the IT Director provided us an inventory list that he maintained, it was not accurate or complete. We also identified inappropriate or questionable computer use on six computers such as: online shopping, travel planning, social networking and gambling websites.

The Supervisor and Board delegated their oversight duties to the Budget Officer, who is contracted through a certified public accounting (CPA) firm. However, the Budget Officer is the bookkeeper's spouse, and the Board and Supervisor do not provide compensating controls to account for this relationship. The bookkeeper records the Town's financial activity, makes deposits and reconciles the bank accounts. The Supervisor signs checks and reviews payroll reports. The Board audits the claims presented on the abstracts monthly. The Budget Officer reviews bank reconciliations and performs analytical reviews of revenues and expenditures. However, the Supervisor does not oversee the Budget Officer's work by reviewing supporting documentation, and the Board does not perform an annual audit of the Supervisor's records and reports. Therefore, no one independent of the recordkeeping, deposit and bank reconciliation processes is periodically or annually reviewing check images or ensuring that all disbursements are presented to the Board for approval, all water and sewer billing adjustments are proper and all receipts are deposited.

Officials lacked adequate bank agreements for online banking transactions. The Board did not adopt an online banking policy and officials did not adequately segregate online banking duties. In addition, officials did not ensure that authorized access to online bank accounts was limited because a dedicated separate computer was not used for these transactions, personal computer use was not limited and users were not provided cybersecurity awareness training. Officials also did not establish security controls with all the banks for online banking, such as secondary authorizations for online transfers, wire transfers and ACH debits. Although secondary authorization is required by one bank for wire transfers, the Treasurer is the initiator and a secondary authorizer.

District officials need to improve budgeting practices and more effectively manage the District's fund balance. In the last three fiscal years, the District experienced operating surpluses averaging $345,000 annually. As a result, total fund balance increased by $791,000: from $827,000 as of June 30, 2015 to $1.6 million as of June 30, 2017. While approximately $478,000 of the fund balance is restricted in reserve funds, nearly $1.04 million is unrestricted, which is equivalent to 61 percent of the ensuing year's budgeted appropriations. Despite increasing fund balance levels, the Board appropriated only $100,000 of fund balance in 2016-17 for the ensuing year. During the three years, unrestricted fund balance exceeded the statutory limit by 25 to 57 percentage points, or $441,000 to $971,000. In addition, the Board did not ensure that the reserves were properly established or develop plans stating the level to which each reserve should be funded or when the balances would be used. The District also overfunded its unemployment insurance and employee benefit accrued liability reserve (EBALR) by approximately $35,000.

The Justices did not accurately and completely collect, record, disburse, reconcile and report Court money in a timely manner. Further, because the Justices did not provide adequate oversight to ensure that Court staff maintained accurate records and reports, Court records were unreliable. As a result, the Justices could not provide an accurate monthly accountability to reconcile the Court's cash assets and outstanding liabilities for any of the Court's fine or bail accounts. Because bail reports were inadequate and unreliable, the Court's bail amounts were understated for the current Justices by approximately $60,000. The reports also indicated that the Court had more than 200 outstanding bails totaling over $54,000 that were more than six years old. Furthermore, because the Justices did not ensure that all tickets were properly disposed in a timely manner or that fines and fees were properly collected, the New York State Department of Motor Vehicles (DMV) pending ticket report and the Court's balance due report were inaccurate. As a result, the Court did not request the driver's license suspension for the majority of individuals who had outstanding ticket balances greater than 60 days. As of June 5, 2017, the Court reported uncollected amounts due totaling more than $600,000 and the DMV pending ticket report indicated that nearly 6,000 tickets dating as far back as 1985 appear to be pending and potentially unpaid. The Court did not refer approximately 4,000 (67 percent) of these tickets to the DMV Scofflaw Program.

The Board did not ensure that the Comptroller completed his duties in an effective manner. The Board did not receive or review budget-to-actual reports, balance sheets or any other financial reports to monitor the Town's financial condition. We also found multiple accounting errors and routine tasks that were not completed timely or accurately, which ultimately cost the Town $7,955. In addition, the Comptroller and the Confidential Secretary tracked their own leave accruals and usages and they inappropriately carried over a combined 183 hours of leave time, with a value of $4,321, they were not entitled to accrue. The Comptroller also performed most aspects of the cash receipts process including making deposits, recording receipts and preparing bank reconciliations without sufficient oversight. Finally, the Comptroller did not prepare bank reconciliations accurately or timely. The Town has 19 bank accounts that should be reconciled to the accounting records each month. More than half of the completed 2016 bank reconciliations (122 of 228) were not completed timely, and none of the 2017 bank reconciliations (114) were completed. Of the bank reconciliations that were completed, there were unreconciled variances that Town officials did not resolve. For 2016, unreconciled variances ranged from a negative amount of $63,300 to a positive amount of $5,150.

The Board did not adopt a fund balance and reserve policy to establish the levels of fund balance to be maintained and the reserves to be funded and used. In addition, the Board did not create comprehensive multiyear financial and capital plans that set long-term objectives and goals. From January 1, 2015 through December 31, 2017, total fund balance increased in the general fund by $94,855 (49 percent) and highway fund by $130,589 (58 percent). Each year during this period, the Board appropriated $32,000 of fund balance in the general fund and $31,000 of fund balance in the highway fund. However, the Town experienced operating surpluses each year, and the appropriated fund balance was not needed to finance operations. This occurred because of the Board's conservative budgeting practices. In addition, Town officials have not established any reserves to finance future financial or capital needs. Without formal long-term capital plans and reserves in place, 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.

The Board has not adopted IT policies to sufficiently protect its IT assets and did not ensure the adopted computer use and inventory policies were enforced or monitored. Town officials also did not adequately segregate online banking duties and did not dedicate a separate computer for online transactions to limit access to online bank accounts. We also found users were able to make changes, additions, deletions and adjustments without authorization or subsequent review and Town officials did not generate or review audit trail, exception and change reports. The Supervisor also did not sufficiently control the use of his electronic signature. In addition, the Board did not ensure that they had adequate written agreements with the IT service provider or banks used for online banking, and the Board did not adopt a disaster recovery plan. The Board has not adequately monitored the Town's finances. It has not reduced excessive fund balance; adopted a comprehensive multiyear financial or capital plan, or an adequate fund balance policy; or developed policies and procedures to govern budgeting practices. Our previous audit identified these issues and corrective action was insufficient. The Board adopted a procurement policy, but it does not require competition for professional services or the submission of documentation with claims to support competition was sought. In addition, the Board adopted a credit card policy, but has not adopted a policy related to the use of store purchase cards or lines of credit. We calculated that the Town could have saved approximately $29,780 by not purchasing an unnecessary product and purchasing from other vendors. Also, the Town's code of ethics does not include recommended provisions for purchasing activities or procedures for reporting or identifying outside business interests or private employment. As a result, the Town made 23 payments totaling $1,422 to a Board member's business without the interest being publicly disclosed.

We compared budgeted revenues and appropriations with actual operating results for fiscal years 2014-15 through 2016-17. While revenue estimates were generally reasonable, the Board overestimated appropriations by an average of $1 million annually, or a cumulative total of more than $3.1 million (13.5 percent). Because the Board overestimated appropriations, it appeared the District needed to use appropriated fund balance to close projected budget gaps. The Board annually appropriated an average of $557,000 of fund balance as a financing source in the 2014-15 through 2016-17 budgets. When fund balance is appropriated for the subsequent year's budget, the expectation is that there will be a planned operating deficit equal to the amount of fund balance that was appropriated. However, due to overestimated appropriations, operating surpluses, averaging approximately $500,000, occurred every year (totaling $1.5 million). The District used approximately $1.1 million of these operating surpluses to make unbudgeted transfers to the capital projects fund at fiscal year-end. By appropriating fund balance that was not needed and making unbudgeted transfers to the capital projects fund, the Board was able to reduce unrestricted fund balance levels to within the 4 percent limit allowed by Real Property Tax Law. However, when unused appropriated fund balance is added back to the reported unrestricted fund balance, recalculated amounts ranged from 10.6 to 11.0 percent. Finally, as of June 30, 2017, the District reported six general fund reserves totaling approximately $2.3 million and a debt reserve of approximately $385,400 in the debt service fund. We analyzed the reasonableness of balances in each of these reserves as of June 30, 2017 and found that all of the reserves, with the exception of the capital reserve, are overfunded and not being used.

Officials did not adequately segregate the Treasurer's wire transfer duties and mitigating controls were not implemented. The Treasurer made mistakes in filing the District's federal payroll reports and in timely submitting federal payroll payments which resulted in $93,569 of financial penalties. To address the penalties, the Treasurer overpaid amounts for regular payroll tax submissions via wire transfer on five occasions and made an extra wire transfer on one occasion. Officials only learned of the penalties and payments upon the resignation of the Treasurer at the start of our audit. Finally, because the Assistant Superintendent did not review or require someone to review the Treasurer's financial records and reports, errors went undetected.

The Board consistently adopted sewer fund budgets with estimated revenues that exceeded actual revenues and appropriations that were less than expenditures for the 2014-15 through 2016-17 fiscal years. The Board overestimated revenues by a total of $118,684 (7.8 percent) and underestimated appropriations by a total of $52,288 (3 percent) for the three-year period. The Board's consistent practice of overestimating revenues and underestimating appropriations resulted in the sewer fund realizing operating deficits in all three years and a significant decline in the sewer fund balance from $174,375 to a deficit of $36,539. The Board has started to address this with a more conservative budget for 2017-18 that will likely produce a surplus of about $10,000 if there are no unexpected events. In addition, although the Board adopted general and water fund budgets with realistic estimates for revenues and expenditures, both of these funds experienced cash flow issues during the years 2014-15 through 2016-17 because both funds advanced money to the sewer fund for its operating costs.