The Board was not aware that the District's procurement policy did not specify documentation requirements and the number of quotes required. As a result, District employees did not consistently use competitive methods to procure goods and services and did not monitor credit purchases. Also, credit purchases are not properly authorized, controlled and monitored. We also found that claims totaling $728,341 were paid without sufficient documentation. Finally, the District overpaid $5,844 for fuel.

The Board has not established adequate policies and procedures governing separation payments. The calculations for separation payments made to two employees during our audit period were incorrect, resulting in inappropriate payments totaling $1,271 for additional leave accruals that were not earned. The Town also paid $17,500 to a retiring employee to cover the subsequent year's health insurance premiums, with no documented Board approval. Additionally, separation payments totaling $50,128 were paid from an “Employee Benefit Reserve” in 2016, which was not appropriately established. Furthermore, payments for health insurance premiums are not authorized expenditures to be paid from such a reserve. The Board also did not establish policies and procedures governing the financial operations of the water and sewer districts; did not enter into inter-municipal agreements with the Village of Waterloo (Village) for water and sewer services provided to the Town; and did not require regular and adequate reports from the Village to monitor the financial operations of the water and sewer districts. Town officials also did not prepare formal water reconciliations to determine unaccounted-for water, which totaled 26.8 million gallons (30 percent) from January 1, 2015 through June 30, 2016, which is three times the federal goal for acceptable water loss. From 2013 through 2016, three water districts and both sewer districts experienced net operating deficits, ranging from a total of $11,742 to $82,676. Two districts incurred a continually growing deficit fund balance over the four-year period. The Board hired a consulting firm to analyze unaccounted-for water and was provided a report in 2015 with numerous recommendations to improve operations, most of which have not been addressed.

We found that the records maintained by the County Clerk and Surrogate's Court were up-to-date and complete, and we noted no material discrepancies. We also found that the Commissioner established adequate procedures, maintained appropriate records and properly reported court and trust funds and abandoned property to the State Comptroller as prescribed by statute.

Board members have not provided adequate financial oversight, which may be caused by their lack of training and understanding of their fiscal responsibilities. The Board did not audit District claims. Even though the financial duties are concentrated with the Treasurer, the Board did not receive or review bank statements or cancelled check images, review bank reconciliations or perform an annual audit of the Treasurer's records to ensure the accuracy of the monthly financial reports. The Board also did not ensure that the Treasurer prepared and filed the District's annual report for the 2012 through 2016 years. In addition, instead of paying a mileage allowance or reimburse actual expenses to the Department's chiefs for the use of their personal vehicles when responding to fire calls, the Board inappropriately allowed each chief to use 25 gallons of fuel every month (300 gallons annually). Finally, although District officials stated they had two reserve funds totaling $174,522 as of January 1, 2017, the Board did not establish the capital and repair reserves in compliance with General Municipal Law.

The Town did not follow the contract provisions when it billed the New York State Department of Parks, Recreation and Historic Preservation (Parks) for operation/maintenance and debt service costs for the joint transmission system. Although the contract required operation and maintenance costs to be billed based on each entity's (Parks, Town and the Village of Youngstown) proportionate share of sewer flow, the Town billed Parks based on water consumption. Furthermore, the Town billed Parks for certain debt service costs in a manner that appears to be inconsistent with the contract. We estimate that Parks was inaccurately billed by approximately $152,900 for operation and maintenance, debt service and a repair to a lift station.

The Board reviews and approves the abstracts without auditing the individual claims. Without a thorough and deliberate examination of each individual claim and the supporting documentation, the Board does not have enough information to determine whether the claims it approves are appropriate and legitimate. While Village Law authorizes certain claims to be paid in advance of audit, 10 of 18 claims totaling $163,725 were not authorized for such payment under Village Law. Village officials ensured that leave accruals and payments were recorded and calculated accurately.

We found that the records maintained by the County Clerk and Surrogate's Court were up-to-date and complete, and we noted no material discrepancies. We also found that the Commissioner established adequate procedures, maintained appropriate records and properly reported court and trust funds and abandoned property to the State Comptroller as prescribed by statute.

District officials need to improve budgeting practices to effectively manage the District's financial condition. The District's budgeting practices included appropriating fund balance not needed to fund operations and adopting budgets that overestimated appropriations by an average of about $874,000 (13 percent) from 2012-13 through 2016-17. As a result, unrestricted fund balance increased to $2.9 million on June 30, 2017, or 37 percent of the ensuing year's budgeted appropriations, exceeding the statutory limit by 19 to 33 percentage points from 2012-13 through 2016-17. Furthermore, the retirement contribution reserve may be overfunded.

Although the Board has developed a procurement policy and written procedures, the policy and procedures do not provide guidance on seeking competition for professional services, require documentation of actions taken or identify the individuals responsible for making purchases. As a result, eight professional service providers were paid $178,027 and 25 vendors were paid $353,418 without seeking competition. In addition, the Town has no policies or restrictions for Internet use. We also found numerous instances of personal Internet use.

The former Clerk-Treasurer did not appropriately record and report debt proceeds. The former Clerk-Treasurer failed to record a deposit and subsequent disbursement of $700,000 on August 12, 2010, to renew a bond anticipation note (BAN) issued on August 12, 2009. Additionally, the former Clerk-Treasurer incorrectly recorded a $3,892,000 long-term BAN, issued and held by the Environmental Facilities Corporation (EFC) in 2011; specifically, instead of recording the entire authorized amount as a revenue and cash held by the trustee as cash with fiscal agent, she recorded each disbursement from the EFC as if it were a BAN issuance. As a result, revenues and expenditures were understated in Village records and reports as well as annual update documents (AUDs) as of May 31, 2011 and short-term and long-term liabilities and cash were not accurately recorded and reported until the project was closed on January 21, 2014, and the long-term BAN was refinanced by the issuance of a serial bond totaling $3,655,000. In addition, the Board did not adequately monitor the capital project. Finally, the Clerk-Treasurer did not appropriately account for settlement proceeds and water-related expenditures.

The County's payroll processing procedures were reasonable and our testing of pay rates, deductions and withholdings did not identify any significant deficiencies. However, the County could improve oversight for leave usage. During our initial meeting, County officials told us the Director of Probation (Director) was under investigation for taking leave from work without charging his leave accruals. He was placed on unpaid administrative leave and reached a retirement settlement with the County that deducted 71 days from his remaining leave balances. Also, the County uses an electronic timekeeping system (ETS) that records the times employees punch in and out and allows edits of timeclock times. For example, the ETS allows the designated department administrators to manually edit the start times and end times that are automatically recorded in the ETS when employees clock in and out of work. According to County officials, edits were made primarily due to employees either forgetting or not having access to punch in or out, flextime or overtime work at offsite locations. We tested 108 edits and found that 54 edits were not approved in writing by the employee's department head; 49 edits did not have support and 22 edits were done by the employees themselves. As a result, the County lacks assurance it is paying for hours worked and services rendered.

The Town did not establish adequate internal controls over water district operations. The Board has not adopted and implemented adequate policies and procedures to guide employees in the performance of their jobs. The duties related to billings, collections, deposits and recordkeeping were not adequately segregated. Also, the Board did not approve water billings and customer account adjustments, and did not perform an annual audit of the clerk's records and reports. Furthermore, the Board appointed the Deputy Town Clerk to serve as the water district clerk even though these positions are incompatible.

The Board did not ensure that the Superintendent complied with the Town's procurement policy when making highway department purchases. As a result, the Superintendent made purchases without soliciting bids or quotes as required, which resulted in the Town paying $8,800 more than necessary for a dump truck and purchasing $32,000 in road materials without obtaining competitive bids. In addition, the Superintendent did not obtain quotes for $27,000 in tool and auto part purchases. We reviewed available State and county contracts for $8,200 of the auto parts and all the tools and found that the Town could have saved approximately $1,200 for the auto parts and $1,100 for the tools had it purchased them through the contracts. Finally, the Board did not adopt a fleet management policy, and the Superintendent did not keep up-to-date maintenance logs for the department's fleet of vehicles and equipment.

Although Town officials consistently budgeted sales tax revenue in the town-outside-village (TOV) general and highway funds and reduced the real property tax levy in those funds to zero, they improperly budgeted sales tax revenue in the refuse district. Town officials were unaware that sales tax revenue could not be budgeted in the refuse district. From 2012 through 2016, Town officials budgeted and recorded $557,378 of sales tax revenue in the refuse district, which encompasses less than the entire TOV area. The 2016 refuse district budget included estimated revenues of $137,692 from sales tax and $19,308 from user fees to fund appropriations totaling $157,000 for refuse collection and disposal services provided by an independent contractor. For 2016, if Town officials allocated sales tax revenue to decrease the County real property taxes levied in the TOV area, the County tax rate per thousand of assessed valuation would have decreased from $7.79 to $6.65 (a reduction of 14.6 percent) for real property located in the TOV area. For example, the average assessed valuation of a single family residence in the Town is approximately $150,000. In 2016, the County tax bill on this property would have decreased by approximately $170, from $1,170 to $1,000 if Town officials had applied sales tax revenue to reduce the County taxes, rather than allocating it to the refuse district.

Town officials did not establish adequate internal controls over recreation fees. The Board did not adopt adequate written policies or ensure that an annual audit of the Department was performed. The Director did not develop procedures to segregate cash receipt duties or provide adequate oversight of the cash receipt function. As a result, a single Department employee had almost complete control over the cash receipt function without adequate oversight. Although the Department's point-of-sale system maintained an adequate record of the recreation fees collected, Town officials did not review or use these records to ensure that cash receipts were properly accounted for, recorded accurately or deposited in a timely fashion. Despite the risk created by these poor internal controls, we found that recreation fees were generally recorded accurately and deposited in a timely fashion.

During our audit period, the Board managed two capital projects; the Internet project and the salt shed project. The Board did not provide adequate oversight and management of the capital projects because it did not adopt appropriate financial plans, monitor project expenditures against estimated costs, approve project change orders (additional modifications in construction or scope of work) or authorize additional funding to address cost increases. Further, the Board did not establish a plan to adequately fund both projects until aid or permanent financing was received, resulting in the general fund cash balance declining by more than $390,000 over the last three fiscal years.

The Board should improve its budgeting practices to effectively manage and monitor the Town's general and highway fund balances and reserves. The Board adopted budgets based on unreasonable estimates of revenues and expenditures. As a result, appropriated fund balance was not used to finance operations as planned and the Town accumulated unrestricted fund balances totaling $1.2 million in the general and highway funds, which is excessive when compared to the Town's expenditure levels. In addition, the Board did not adopt a reserve fund policy or document plans for expected future use for two of its five reserve funds, which totaled approximately $83,000 as of December 31, 2015. Further, except for $193,000 expended from the equipment reserve in 2014, the five reserves, totaling $637,200 have not been used to fund reserve related expenditures since at least 2010. The Town also does not have a comprehensive multiyear financial plan. We reported similar findings in our previous audit report issued in July 2010.

Although a previous Office of the State Comptroller audit recommended that the District adopt policies and procedures that restrict users' financial software application permissions to only those functions that are necessary for their job duties, the District did not act on this recommendation. The District also has not adopted a formalized process for monitoring user activity for appropriateness. As a result, we identified 24 user accounts, or 69 percent of the established accounts, that had inappropriate or unnecessary access rights or permissions. We also confirmed that the former District Treasurer attempted to manipulate her paid leave accruals by adding 60 unauthorized sick days valued at approximately $10,000. District officials notified us at the onset of our audit that they had discovered through an informal review of leave records that the former District Treasurer attempted to manipulate her paid leave records. District officials corrected the leave records, and the former District Treasurer did not receive any undue benefit.

Although District officials sufficiently reviewed and approved these payments, they have not developed written policies or procedures to formalize this process. Therefore, we reviewed the terms of separation for each of the 23 employees who left District service during our audit period to determine those eligible for a separation payment and if the payments were properly calculated per the Board-approved employment contract or policy terms. We found that nine of these employees were eligible for and paid separation payments totaling $152,607, all of which conformed to the terms of the written agreements. While the procedures in place provide a good system of controls over separation payments, the lack of written procedures results in a risk of the procedures not being followed or changing over time. Formal, written policies and procedures will help District officials ensure that separation payments to District employees are accurate and in accordance with the applicable employment agreements.

The Board has not adopted a comprehensive multiyear financial and capital plan or a fund balance policy. Furthermore, the Board has adopted budgets that overestimated expenditures for the Town-outside-village (TOV) highway fund. As a result, the town-wide general and TOV highway fund balances at the end of 2015 were $409,000 and $267,000 or 133 percent and 68 percent of 2016 appropriations, respectively. In addition, the Town's 2016 tax levy exceeded the property tax cap for that year by $4,260. Further, the Board did not perform annual audits of the books and records of Town officials or employees who received or disbursed moneys. As a result, the Town's tax levies may have been higher than necessary, including $4,260 that was required to be set aside to reduce the 2017 tax levy. However, because the Board did not use the $4,260 to reduce the 2017 levy it should create and fund a reserve equal to $4,260 and use it to offset the 2018 property tax levy. In addition, the Board's ability to monitor the Town's financial operations is severely diminished.