The District's total general fund balance declined by more than $21.5 million (70 percent) from 2009-10 through 2012-13. As of June 30, 2013, the District's unrestricted fund balance was less than $320,000 and fund balance totaled $9.3 million. Additionally, during 2012-13 the District used $4 million of employee benefit accrued liability reserve money to fund District operations, which was 54 percent more than the amount authorized. District officials also have not developed a multiyear financial plan to address the use of fund balance or reserve funds to finance operations. District officials took action to improve the District's financial condition by cutting costs in the 2013-14 budget. We also found that the District's claims auditor did not report to the Board or prepare any written reports for the Board showing the claims audit results. In addition, budget transfers were not made in a timely manner and budget account codes were overspent before the transfers were made. The claims auditor approved claims for payment without ensuring that sufficient budget appropriations existed to fund the cost of goods or services purchased. Our review of the District's 2012-13 budget codes showed that District officials overspent 77 budget appropriation codes by more than $4.3 million.

The Supervisor did not properly maintain accurate and complete financial records. While the secretary provided monthly reports, including the bank reconciliations, to the Supervisor, the Supervisor did not provide those financial reports to the remaining Board members. As a result, the Board did not receive adequate information to properly monitor the Town's financial affairs. We found various exceptions in the accounting records including missing bank reconciliations, revenues not being recorded and tax penalties not remitted in a timely manner. In addition, one property tax payment totaling $3,365 was returned by the bank for insufficient funds, but was not relevied and remains unpaid.

The Town has unaccounted-for water over the past two years of approximately 38 million gallons, or 40 percent. By reducing unaccounted-for water, the Town could save money; each million gallons of water purchased costs approximately $5,700. The annual water accountability analysis prepared by the Supervisor did not enable Town officials to monitor water loss throughout the year and take appropriate action. Although officials identified some water leaks, we found that inaccurate master meters (which measure water provided to the districts), customer meters and customer underbillings have contributed to the unaccounted-for water and to the deteriorating financial condition of the Town's water districts.

Generally, foreign fire insurance (FFI) tax money may be spent for any purpose which the membership of the fire department or company determine to be for the benefit of the fire department or company, provided the expenditure is not illegal or contrary to public policy. We examined all 61 FFI expenditures totaling $34,822 during our audit period for adequate support, approvals and propriety and did not identify any concerns. However, we did find that the Finance Director did not prepare or file the 2015 and 2016 annual reports with OSC, as required by General Municipal Law. The Finance Director stated that she was unaware of the requirement. After the end of our field work, the Finance Director filed the 2015 and 2016 annual FFI reports on June 29, 2017.

The majority of purchases are made by the Chief or two assistant chiefs and invoice approval is typically the Chief's responsibility. While the claims we reviewed were for valid purposes they did not always include approval by the official who made the purchase or have adequate supporting documentation, such as evidence that officials obtained the required number of quotes. Officials also used debit cards to make purchases totaling more than $7,300. The Board has not adopted a written claims processing policy.

Town officials did not seek competition for purchases from 23 vendors totaling $455,638. A Board member has a prohibited interest in contracts totaling approximately $2,540. In addition, several properties were not charged for water system debt according to the local law; including a mobile home park that was underbilled by $7,157. Finally, Town officials need to improve safeguards for computer resources and data.

The Clerk issued duplicate receipts for Clerk fees and recorded collections in the accounting system but did not record the form of collections in either record. The Clerk told us she was not aware that the payment form should be recorded. The Clerk also did not perform monthly bank reconciliations to verify the accuracy of Town records or accountability analyses comparing cash on hand and on deposit to known liabilities. In addition, we found deposits were not made intact. Furthermore, the Clerk did not maintain adequate records of tax collections and tax collections were not deposited timely. Budgetary estimates for certain town-wide accounts were not realistic. From 2014 through 2016, the town-wide (TW) general fund realized a total of $66,000 (7 percent) more revenue than estimated and expended $102,000 (11 percent) less than planned. During the same period, the Board adopted reasonable estimates for revenues (actual total revenues were 2 percent more than estimates) in the TW highway fund; however, actual expenditures were $318,000 (13 percent) less than estimated amounts. The combination of receiving more revenues than planned while spending less money than planned created operating surpluses for the TW general and highway funds. As a result of the operating surpluses in the TW general and highway funds, the fund balance of the TW general fund increased by $167,494 (24 percent) and the TW highway fund balance by $241,567 (89 percent) from the beginning of 2014 to the end of 2016. Furthermore, because the 2017 budget does not include realistic estimates of revenues and appropriations, it is likely these funds will realize operating surpluses in 2017, further increasing total fund balance. The Board did not establish a fund balance policy. The Board did not adopt a long-term financial or capital plan.

The Town made 27 payments totaling $83,328 to 10 vendors that were for professional services. However, Town officials were unable to provide documentation showing that they sought competition for these services. This occurred because the Town's procurement policy specifically exempts professional services from being obtained through proposals or quotations. According to the Supervisor, one vendor that was paid $21,862 was selected using competitive methods, such as a request for proposal. Because the Town did not always require or encourage using competition when awarding professional service contracts, Town officials cannot assure taxpayers that they have procured these services in the most economical manner without favoritism.

The Board did not establish comprehensive written policies and procedures to adequately account for the unsold inventory and sale of bags or ensure that collections were deposited intact and in a timely manner. As a result, Town officials could not account for 17 cases containing 431 rolls of bags with an approximate sales value of $6,100. Twelve of these cases valued at $4,500 were distributed to the transfer station. Due to the lack of sufficient accounting records and Board oversight, we could not determine what happened to these bags, and Town officials could not provide any explanation.

In 2007 the Board adopted an IT policy on acceptable computer use. However, the policy has not been updated since then and does not address data backup, disaster recovery, breach notifications or security awareness training. Furthermore, the Town's server is not located in a secure location. As a result, there is an increased risk that computerized data could be lost or compromised or that Town operations could be seriously disrupted.

During our audit period, the Board and District officials did not develop reasonable budgets or effectively manage the District's financial condition to ensure that the general fund's unrestricted fund balance was within the statutory limit. Over the last four fiscal years, the District spent nearly $3 million less than planned and only used $1.5 million of the over $4 million of appropriated fund balance that was budgeted to finance operations. As a result, the District's year-end unrestricted fund balance as a percentage of the next year's budgetary appropriations averaged about 41 percent over the last four years, which is more than 10 times the statutory limit. In addition, the District accumulated a total of $2,339,680 in its six reserve funds as of June 30, 2015. We analyzed these reserves for reasonableness and adherence to statutory requirements. Five of the six reserves appeared to maintain reasonable amounts and adhere to statutory requirements. However, the funding and current balance of the tax certiorari reserve was questionable.

The District is serving nutritious meals to its students and the meals are being prepared economically. However, the District's productivity level for meals per labor hour is below the industry averages. Although the industry averages may not be achievable given certain District conditions, District officials can use the industry averages to monitor operations and work towards increasing productivity. We commend District officials and cafeteria staff for providing nutritious meals in a cost effective manner.

The Board did not establish adequate policies and procedures, formally designate who should perform certain payroll functions or separate incompatible payroll functions. In addition, employees did not use leave request forms or timesheets that included hours worked. As a result, employees were paid for hours that did not match the payroll registers, at rates that were not Board approved and had deductions that did not match personnel records. In addition, employees received and were paid for leave time to which they were not entitled and received reimbursements that were not Board authorized, at Board approved rates or supported. The Town had contracts with two fire companies and one ambulance company for its two fire protection districts and paid approximately $576,000 and $580,000 in 2015 and 2016, for their services. However, the Town did not hold public hearings regarding the contracts. Additionally, because one of the companies, (Minisink Hose Company No. 1) operates in two towns, the public hearing is required to be published in both towns.

Town officials need to improve overtime payroll procedures to ensure overtime payments are accurately budgeted for and overtime worked and paid is in accordance with collective bargaining agreements (CBAs). The Board and Town officials did not develop overtime budgets based on known needs and historical trends. Each year, officials adopted overtime budgets with appropriations that were significantly less than the actual overtime expenditures of preceding years for the Police, Highway and Sewer departments. Officials did not adequately monitor adopted budgets and allowed them to be over-expended each year. We also found that although the Police Department's CBA allows officers to accumulate up to 80 hours of overtime during the year, Town officials did not adhere to those limits. Moreover, overtime and other payroll information was not accurately and consistently recorded, causing significant discrepancies in overtime records. Our review of work schedules, time sheets and payroll summaries for two payroll periods disclosed discrepancies between these three records in 24 of 50 instances tested.

The Board could improve its management of the Town's financial condition. While the combined town-outside-village (TOV) funds have sufficient fund balances to maintain operations, the Board adopted budgets that relied on fund balance to fund recurring expenditures and the Supervisor did not provide the Board with sufficient information to monitor fund balance or file the Town's annual update documents with our office in a timely manner. As a result, the Town had significant operating deficits and a deterioration in fiscal health and the transparency of the Town's financial management was limited.

City officials could better safeguard the City's water and wastewater systems. There is no formal process for staying current on system cybersecurity threats. Water and wastewater personnel do not receive alerts to such threats from key sources including the U.S. Department of Homeland Security's Industrial Control System Cyber Emergency Response Team (ICS-CERT) or the Water Information Sharing and Analysis Center (WaterISAC). The Superintendent indicated that they rely on the City's third-party vendors for threat information. However, we found no evidence that such information is routinely shared and the service level agreements between the City and these vendors do not require them to do so. In addition, officials have not provided employees with cybersecurity awareness training. Finally, officials do not prevent or monitor public disclosure of information that could jeopardize the City's systems.

The Court needs to improve its enforcement and collection of unpaid parking violations. The Board did not establish written policies and procedures to govern parking violations and Town officials did not adequately enforce unpaid parking ticket collections. As a result, the Town had 6,900 parking violations outstanding since September 1990. Based on the associated fines for these violations, we estimated that the Town is owed approximately $992,000 for outstanding unpaid parking violations as of June 30, 2016. Ensuring that collection efforts are working as intended can increase the Town's revenues from parking tickets. In addition, Court officials need to improve oversight to ensure that parking tickets are properly accounted for. Clerk duties were not adequately segregated and one clerk was responsible for all aspects of Court ticket functions without oversight. In addition, Town officials did not develop policies and procedures to account for all parking tickets. As a result, there is an increased risk that errors or irregularities could occur and not be detected or corrected in a timely manner.

Current officials of the participating municipalities were unaware they had entered into an intermunicipal agreement (agreement) establishing the Joint Youth Program (Program). Consequently, we found that several agreement provisions were not adhered to. In addition, the Program's agreement did not include provisions establishing adequate oversight of the Program's financial activities and we found that oversight of Program financial activities was inadequate. As a result, non-resident swim program fees in 2015 were not remitted to the bookkeeper for deposit and the swim program fees in 2016, which were remitted to the bookkeeper were not supported by adequate documentation, such as duplicate press-numbered receipts or daily collection reports. In addition, the Town's governing board did not establish or approve the salaries of any Program employees paid by the Town, except for the Town's recreation director. Furthermore, we found that 13 claims totaling $9,553 were not certified by a recreation director indicating their approval. We question the appropriateness of five claims totaling $856 for services provided that should most likely have been payroll disbursements, which were not supported by adequate documentation, and two claims totaling $1,894 for bus rentals that were not Program activities.

Town officials need to improve the fuel inventory recordkeeping to help ensure fuel is safeguarded. The Highway and Parks departments did not maintain records for 10,636 gallons of diesel fuel and 11,329 gallons of gasoline (collectively valued at about $35,600) dispensed from the mobile transfer fuel tanks and the Parks Department did not keep adequate records showing the amount of fuel used to fill its mobile tanks. The Board did not enter into written shared service agreements with any of the eight municipalities permitted to use Town fuel. Additionally, the Highway Department did not implement adequate procedures to ensure that municipalities are accurately billed for all fuel used. Parks Department officials did not establish procedures over the sale, inventory and accounting for nonresident parking permits to adequately monitor cash collections and permits issued. The Parks Department did not have written procedures requiring that the number of permits purchased be periodically reconciled with the number of permits sold, and Parks Department staff did not maintain any inventory records for these permits.

The Supervisor did not provide oversight of the accountants' duties related to maintaining the accounting records. Consequently, we found significant deficiencies with the Town's accounting records. From 2010 through 2016, the Town did not allocate sales tax revenue to its part-town funds to eliminate property tax levies in those funds before allocating any remaining sales tax revenue to its town-wide funds. As a result, $277,744 was improperly allocated to the town-wide general fund causing taxpayer inequities to occur. The Town lacked effective procedures to ensure water and sewer charges were accurately billed, collected and enforced. Finally, 26 of 50 claims reviewed (52 percent) totaling $59,113 were not audited and approved by the Board prior to payment.