City officials did not properly monitor Business Improvement District (BID) financial operations. The Council did not enter into a written agreement with the district management association (DMA) or monitor the manner in which the DMA used BID funds. City officials allowed the DMA to use BID funds at its own discretion with little oversight. City officials did not maintain adequate records to properly account for BID funds. The BID charges were not used in a transparent manner. BID charges exceeded the statutory limit for 11 of the past 13 years by a total of approximately $464,000 or an average of $42,000 each year.

Village officials accurately paid gross salaries and wages to employees. However, the Board did not segregate the Clerk-Treasurer's payroll processing duties and did not establish adequate compensating controls to oversee payroll processing. Even though the Mayor reviews the payrolls, he does not review supporting documentation including time records, bank statements, direct deposit listings or cancelled checks. In addition, all employees did not complete detailed time records and supervisors did not always approve time records. The Clerk-Treasurer credited two employees a total of 10 vacation days before they were earned.

We found that the significant revenue and expenditure projections in the proposed budget are reasonable. This budget review did not contain any recommendations.

The Authority did not establish a formal process or procedures for reviewing penalties on water and sewer bills. The Authority does have an informal process for account adjustments. However, these procedures are not formally documented, and the Authority does not require that all account adjustments be reviewed periodically for appropriateness. The Authority's unaccounted-for water in 2016 totaled 195 million gallons (19.7 percent). Based on the Authority's average cost paid to purchase water from all suppliers during the year, the unaccounted-for water in 2016 resulted in an approximate $404,000 cost to the Authority for which no benefit was received. This exceeded the Environmental Protection Agency's 10 percent goal by 95,963,000 gallons (almost 10 percentage points), costing over $198,643. The Board last updated its computer and Internet use policy in 2011. However, we found that Authority employees do not adhere to this policy and Authority officials do not enforce adherence to it. Some employees use the Internet during working hours to engage in questionable activities that put the Authority's systems at risk. Authority officials also have not provided employees with cybersecurity awareness training. In addition, the Authority's IT vendor does not provide education or training as part of its services to the Authority. Finally, the Authority does not prohibit its third-party vendors from disclosing information about the Authority's water and wastewater systems. The service level agreements between the Authority and its vendors do not contain terms specific to information disclosure, and officials do not periodically review publicly available content for inappropriate disclosure.

The Board and District officials have not effectively managed fund balance. Unrestricted fund balance increased from $9.5 million as of June 30, 2014 to $18.3 million as of June 30, 2016. Unrestricted fund balance was 62 percent of 2016-17 budgeted appropriations and exceeded the statutory limit by $17 million (58 percentage points). While the vast majority of accumulated fund balance resulted from retroactive aid payments from the State and payments from the federal government which were outside the District's control, even without these payments, unrestricted fund balance would have exceeded the legal limit as of June 30, 2016 by approximately $5 million, or 17 percentage points. The Board and District officials also have not effectively managed four reserve funds with balances totaling approximately $4.1 million. We also found that employee salary step information was not clearly identified in a prior Collective Bargaining Agreement (CBA). As a result, it was not clear what the proper salary step placement was, at the time of the agreement, for three employees in our audit sample. The Board also has not adopted written policies and District officials have not developed written procedures formalizing controls and oversight associated with the payroll function. We found no discrepancies with four separation payments totaling $41,525 paid to former employees.

The Board did not provide adequate direction for staff to follow when determining employee compensation and allowed the former Superintendent to establish employee compensation without adequate oversight. School officials told us that before the collective bargaining agreement was ratified, the former Superintendent (who resigned in April 2017) determined annual salaries and other compensation including any stipends for all employees. He provided the clerk with a computerized spreadsheet, which listed the salary or hourly pay rate for each employee. The clerk used this spreadsheet's information to enter the pay rates into the computerized payroll system, but did not print or retain a secure version of the original spreadsheet. The former Superintendent did not document decisions in the employees' personnel files and employees were not provided with annual salary notices or written documentation of their salaries for the upcoming fiscal year.

The Board has not adopted a procurement policy and Library officials told us they do not require competitive quotes for purchases. However, the Library belongs to the Pioneer Library System, which facilitates decision-making on the management of library collections and coordinates purchasing of books. Between January 1, 2016 and November 20, 2017, the Library paid 389 claims and/or vouchers totaling $129,320, of which 227 totaling $67,854 were for payroll, utilities and service contracts. Our review of the remaining 162 claims found none were subject to competitive bidding and that the only aggregate purchases in excess of $500 were for books and resource materials purchased through the Pioneer System. While the purchases during our audit were minor, the lack of a procurement policy and procedures to address price comparisons increases the risk of the Library acquiring goods and services at higher costs than necessary if larger purchases are made in the future.

District officials accumulated unrestricted fund balance of approximately $4.8 million or 15.6 percent of the 2017-18 budgeted appropriations and exceeded the statutory limit by about 11.6 percentage points. Officials need to improve budgeting practices to more effectively manage fund balance. While officials appropriated fund balance annually from 2014-15 through 2016-17 to finance operations, these amounts were not used to finance operations because of overly conservative expenditure estimates. The Board and District officials have not developed formal, written multiyear financial or capital plans. The Board and District officials did not adopt and implement procedures governing the operations of extra-classroom activities (ECA) funds, as required, for the 32 clubs with total cash balances of $103,571 as of June 30, 2017. As a result, the central treasurer, faculty auditor and faculty advisors were not provided with guidelines to properly account for and oversee ECA clubs. Officials were unaware the central treasurer and the student treasurer did not maintain separate independent records to properly record and account for all cash collections and disbursements for each ECA.

Significant revenue and expenditure projections in the proposed budget are reasonable. While the County budgeted $544.5 million in revenue for sales tax collections, we estimate total collections to be closer to $538.4 million. The County budgeted $246.6 million in State aid revenue, which may be overestimated. Four of the County's collective bargaining agreements (CBAs) have expired and the County faces potential significant increased salary and wage costs when these agreements are settled. The County's adopted budget includes a tax levy of $705,565,775, which is within the limits established by the law. Monitor sales tax and State aid revenues throughout the fiscal year and make any needed budget amendments if revenues fall short of estimates. Consider the potential financial impact of the settlement of the expired CBAs and be prepared to provide the necessary funding in the event that any are settled in 2018.

The Board did not adopt policies and procedures for acceptable computer use and granting, revoking, modifying and monitoring individual access rights to the networks through Active Directory. In addition, the Board has not adopted a comprehensive disaster recovery plan or policies and procedures for password security management. The Board also has not implemented a process to address the deactivation of user accounts. The Authority's Active Directory has 19 network user accounts, seven (37 percent) of which are inactive. In addition, the Board did not provide users with security awareness training to help ensure they understand security measures necessary to protect the network. Authority officials did not ensure that the server was in a secure location and did not maintain an inventory of its software. Finally, three employees use the Authority's financial application and share one user account.

Before leasing buildings, the Board usually hires an outside firm to perform a rent analysis based on the cost per square foot in comparison to other buildings in the area. Based on these analyses, SANY was receiving a fair price for the leased buildings at the beginning of the leases. However, the Board did not explore other options such as determining whether purchasing the buildings would have been more cost effective than leasing them. We performed a cost analysis of the four buildings that were leased during our audit period. Our analysis compares the cost of lease payments with 4 percent annual increases over a 15-year period, with the cost of purchasing (including loan interest) and renovating the buildings. Assuming the cost of completed and future renovations are accurate, we estimate SANY could have achieved savings of nearly $3 million from August 2014 to June 2032 by acquiring and renovating the buildings rather than leasing them.

The Treasurer relinquished most of his duties to the Secretary, even though the bylaws state that holding dual offices is not permitted. The Secretary performed the majority of the financial activities and therefore, the duties were not properly segregated and no compensating controls were put in place. The Board and Directors do not receive formal, detailed reports of cash receipts and disbursements, nor are bank reconciliations consistently prepared and provided for review. In addition, the Board has not filed the required Internal Revenue Service (IRS) Form 990 for tax-exempt organizations. Finally, the Department is not properly reporting payments, as required by law, made to an individual, as an employee or an independent contractor, who provides custodial/maintenance services. The Board approved 21 payments totaling approximately $7,500 to this individual for the period January 1, 2016 through July 31, 2017. However, there was no documentation detailing the individual's duties and compensation, such as a signed contract, or a determination regarding this individual's status as an employee versus an independent contractor.

The Board has not established written policies for cash receipts, and Library officials have not established procedures to record all receipts at the time of collection and ensure individual accountability for all fines and fees received. Library personnel collect money for fines, copies, faxes, donations, memorial books, used books and DVDs. During our audit period, the Library deposited about $25,000 of these cash receipts. However, Library officials could not determine whether these deposits represented all receipts collected during that time period, because the Library has weak controls over the collection and recording of receipts. During our audit period, Library employees waived about $21,000 in Library fines, which represents about 75 percent of all fines levied. A privately contracted payroll vendor has access to the Library's bank account to withdraw funds for payroll and fees. Finally, the Board does not audit claims before disbursements are made.

Each year, the Board appropriated over $1 million more in fund balance than was needed to finance the budget. This led to a negative or low unrestricted fund balance in fiscal years 2014-15 through 2016-17, which made the District's financial position appear worse than it actually was. Although the Board appropriated significant amounts of fund balance each year, it did not need to use most of the fund balance because it overestimated appropriations by an average of $1 million annually (10 percent), or a cumulative total of about $3.1 million from 2014-15 through 2016-17. These overestimations were spread throughout the budget. In addition, the District has retained over $425,000 in the debt service fund and has not used the fund to pay off the related debt. Finally, the District has not developed a multiyear financial plan to address its financial condition.

The Council and City officials did not develop adequate information technology (IT) policies and procedures to address acceptable use, sanitization and disposal and breach notification. In addition, the City relied on an IT vendor for IT services and technical assistance, as needed. Although the City has a retainer services agreement (agreement) with the IT vendor, the agreement does not sufficiently define the roles and responsibilities for each party or include the type of services provided. The agreement also does not address confidentiality or protection of personal, private and sensitive data. City officials also did not provide IT security awareness training for City employees. The Council did not develop a disaster recovery plan. Finally, City officials did not maintain an inventory of the City's IT equipment, including computers and hard drives or installed software applications.

The Board's 2018 adopted budget for the town-outside-village (TOV) highway fund includes plans to spend $110,000 of fund balance to finance recurring expenditures. However, this is almost $23,000 more than what is available. Since 2015, the Board has budgeted for, and used, TOV highway fund balance to finance budget shortfalls in the TOV highway fund. This practice has caused the total TOV highway fund balance to decrease by 59 percent to $87,500 as of December 31, 2017 (or 13 percent of TOV highway fund expenditures). Conversely, the town-wide (TW) fund balance more than doubled during the same period. This occurred because the Board was not aware of the fiscal stability of any of the Town's funds. Although the Supervisor provided the Board with monthly budget-to-actual reports and bank statements, he never provided the Board with balance sheet reports, including fund balance levels. Additionally, the Supervisor has not filed the annual update document (AUD) with the Town Clerk or OSC since 2008. Furthermore, the Board did not perform an annual audit of the accounting records or reports of the Supervisor. Our previous Report of Examination included similar findings.

The Board could improve its fund balance management. While Town officials have taken steps to reduce excessive fund balance levels over the last several years, town-wide (TW) and town-outside-village (TOV) fund balances grew by 28 percent and 79 percent, respectively, from 2014 through 2017. As of December 31, 2017, TW fund balance exceeded 300 percent of annual TW expenditures, while TOV fund balance exceeded 200 percent of annual TOV expenditures. While revenue variances were generally reasonable, budgeted appropriations exceeded expenditures by an annual average of $104,500 (19 percent) in TW funds and $81,000 (31 percent) in TOV funds. The Board's budgeting practices, combined with maintaining significant fund balance levels, may place an unnecessary tax burden on Town residents.

Based on the results of our review, except for certain items, we found that the significant revenue and expenditure estimates contained in the proposed budget were reasonable. While the Council submitted a corrective action plan for the 2017-18 budget review and did implement certain corrective actions, the Council and City officials have not implemented certain other corrective actions that the Council indicated would be undertaken. For example, Council and City officials should restore the contingency appropriation to at least the previously recommended levels. The City also currently faces pending litigation relating to the North Union Street capital project that may require additional funds of approximately $1.3 million, the City estimates, to cover projected costs. The City's proposed budget does not include any appropriations for these potential costs. Additionally, as of May 31, 2017, the City reported seven completed capital projects with deficit balances totaling approximately $900,000 that may require money from the general fund to close out, which could result in a further reduction of general fund balance. Furthermore, the City's outstanding debt has grown by 36 percent in one year, increasing from approximately $33.4 million as of May 31, 2016 to approximately $45.3 million as of May 31, 2017. Finally, in adopting the 2018-19 budget, the Council should be mindful of the legal requirement to maintain the tax levy increase to no more than the tax levy limit as permitted by law, unless it obtains the proper voter approval to override the tax levy limit.

The three Justices did not prepare monthly bank reconciliations or accountabilities. Therefore, we prepared bank reconciliations from January 1, 2016 through May 31, 2017 and conducted a cash count and accountability analysis on June 14, 2017. We found that errors went undetected and uncorrected. In addition, the Court did not ensure timely adjudication and reporting of vehicle and traffic cases. We reviewed the TSLED pending ticket report for the period January 1, 2016 through June 21, 2017 and identified 2,069 pending tickets, of which 245 (12 percent) were referred to the Scofflaw Program because of nonpayment or no appearance at Court.

The Board adopted a resolution designating the Board President and another Board member to audit claims on its behalf and evidence their audit by signing the warrant. The Board President told us he reviews claims to ensure they contain adequate supporting documentation and are for legitimate purposes, and then signs the warrant to evidence his review. He acknowledged, however, he does not review every claim. Rather, the Board President reviews specific claims only when questions arise such as unrecognized vendors or unreasonable or high dollar amounts as shown on the warrant. In addition, he acknowledged that he reviews claims after several warrants have been generated. Therefore, claims are paid prior to audit. The Board President communicates the results of his review and any findings to the rest of the Board during its meetings. District officials indicated that the second Board member appointed to audit claims serves as a back-up and does not routinely audit claims. Therefore, all 100 claims we reviewed, totaling $1,517,352, were paid prior to audit.