The Board's continual appropriation of nonexistent fund balance has weakened the financial condition of the town-wide (TW) general fund and central water district. The Board also did not adequately manage the finances for a capital project to upgrade its transfer station. In addition, interfund services were not properly tracked and billed back to the appropriate fund, resulting in taxpayer inequities. The Board has not performed an annual audit of the books and records of most Town officials or employees who received or disbursed cash (with the exception of the Town Justice). Finally, the Board did not adopt information technology (IT) policies and procedures for breach notification, access rights, disaster recovery and backups, and has not provided IT security awareness training.

We reviewed 60 general fund claims totaling $298,123 and 10 extra-classroom activity claims totaling $2,705 to determine whether the claims audit process in place had verified they were properly supported, audited and approved before payment. We found the claims audit process was adequately designed and that it had been properly implemented. Because District officials established and implemented a well-designed system for processing claims, there were no recommendations as a result of this audit.

The Board and District officials did not properly manage fund balance and reserves. District officials overestimated appropriations by an annual average of $2.3 million. As a result, appropriated fund balance, which annually averaged $1.8 million, was not needed to finance operations. The Board and District officials also did not transparently budget to fund a capital reserve. The Board did not review all reserves and District officials did not prepare an annual report of reserves, as required by the District's policy. The unemployment insurance reserve is overfunded ($604,000) and the debt reserve is improperly restricting $245,000.

Village officials have not adopted realistic budgets and the general fund available fund balance has increased by $321,000 to $592,786 (or 167 percent of 2017 expenditures) from the beginning of 2014-15 through May 31, 2017. Conversely, from the beginning of 2014-15 through May 31, 2017, available water fund balance decreased by $36,000 (or 35 percent), to $67,400. Operating deficits occurred in the last two fiscal years because Village officials had unexpected pump repair costs and transferred $10,000 to the water fund's capital reserve at the end of each year. Finally, the Board has not developed any long-term multiyear financial and capital plans or established a fund balance policy.

The District experienced revenue shortfalls in tuition and State aid along with expenditure overruns in special educational costs during 2016-17. The combination of these events caused the total general fund balance to decrease by over $567,000 (39 percent) to $889,800 at the end of 2016-17. While officials acknowledged fiscal concerns, they did not realize the full extent and incorrectly projected the 2016-17 ending fund balance. Accordingly, District officials budgeted to use $300,000 of fund balance in the 2017-18 fiscal year, when only $226,400 was available to appropriate as the remaining fund balance of $663,400 was restricted in reserve funds. However, officials began taking corrective action during the 2017-18 budget development process to budget more conservatively. In addition, the cafeteria fund incurred operating deficits in the last three fiscal years totaling over $48,700. As of fiscal year ending June 30, 2017, fund balance decreased to ($57,300) and the cafeteria fund owed the general fund $65,400, which is unlikely to be paid back. These deficits occurred even after the general fund transferred $10,000 to the cafeteria fund each year from 2014-15 through 2016-17. Without adequately addressing the financial condition of the cafeteria fund, deficits and reliance on the general fund will continue, potentially impeding the general fund's financial recovery.

The Board has not adopted financial policies for investment, procurement, claims processing or written procedures concerning financial recording and reporting. The Board is not adequately monitoring the District's financial operations as monthly budget status reports, bank reconciliations, bank statements and cancelled check images are not provided or reviewed. The Board's lack of review of the Treasurer's records greatly diminishes its oversight of the District's finances and could lead to errors and misstatements that remain undetected and uncorrected. Additionally, the Board is not ensuring that the Treasurer is in compliance with applicable laws, rules and regulations. District officials explained they have discussed having an audit conducted but never followed through with having one done. Finally, the Treasurer has not submitted the District's annual update document (AUD) to OSC for fiscal years 2012 through 2016 as required by NYS General Municipal Law.

The Treasurer did not maintain accurate accounting records. For example, the Treasurer did not record collections totaling $10,517 that were deposited during the audit period. Company officials did not ensure that collections from donations and fundraising were adequately documented. The Treasurer paid claims totaling $14,405 without sufficient supporting documentation to allow officials to determine whether the expenses were for valid purposes. The Treasurer did not comply with the bylaws for 35 claims totaling $15,318 that required membership-authorization before payment.

The Board did not provide adequate disbursement process oversight. The Board did not ensure all disbursements were approved before payment, listed on an approved abstract and supported and for proper purposes. In addition, beginning on March 1, 2016, the Board directed the Village's attorney (attorney) to enforce the collection of $212,000 in delinquent real property taxes. Delinquent tax collections nearly tripled from 2015-16 through 2016-17, the first year the attorney began enforcement procedures. In 2017-18, delinquent collections nearly doubled the amounts collected in 2015-16. While these actions have helped reduce delinquent balances by 18 percent over the last two years, the balance as of February 28, 2018 is approximately 24 percent of the 2018-19 tax levy.

The Board has not adopted a cash disbursement policy. The Treasurer provides the Board with an abstract, or list, of claims and the corresponding claims and documentation each month for audit and approval. We examined 72 claims totaling approximately $524,000 paid during the audit period and determined that all of the claims were for appropriate District purposes and adequately supported. However, 24 claims (33 percent) totaling approximately $7,300 were not audited and approved before payment was made. Most of these claims were for reimbursement of meal allowances and mileage. While the Treasurer reviewed them, she did not know that the Board should have audited them prior to payment. Had the Board adopted an adequate written policy, the Treasurer may have had appropriate guidance on how to properly process these claims.

Determine if municipalities are utilizing resources to perform FSPM inspections of residential buildings with three or more dwelling units, at a minimum of every three years and confirming that known violations are corrected.

While the District has acceptable use policies, they are not monitored or enforced. In addition, the policies do not address connecting personal mobile computing and storage devices to the District's network. Connecting personal devices to the District's network can create security vulnerabilities and allow inappropriate access to District IT assets and data. Further, the District's staff acceptable use policy does not require cybersecurity training. In addition, the Board has not adopted other IT security policies addressing password management, protection of PPSI, wireless technology, remote access, sanitation and disposal of electronic media, user accounts, access rights, online banking and data backups. The Board did not develop a formal disaster recovery plan to address potential disasters. The IT Director maintained a hardware inventory for the District, however, it was not up-to-date at the time of our audit. Finally, the District has not implemented comprehensive procedures for managing, limiting, securing and monitoring user access.

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.