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.

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.