The Board needs to improve its budget development practices. For the years 2013 and 2014, the Board appropriated more general fund balance than was actually available to finance operations. Using fund balance as a revenue source resulted in a fund balance deficit of $25,420 in 2014. Although the Board did not appropriate fund balance in the 2015 and 2016 general fund budgets, the Town's projected 2016 fund balance is a deficit of $35,285. In addition, although the Town increased the sewer rates in its two sewer districts in 2015, Sewer District 2 is in fiscal stress with a projected deficit fund balance of $7,667 in 2016. The 2017 budget does not provide for any remedy for the deficit fund balance. Although Sewer District 1 has a projected positive fund balance of $622 in 2016, it still owes the general fund $7,500 for an unanticipated pump repair. The 2017 budget does not provide funding to reimburse the general fund for the $7,500 advance. As a result, both Districts face financial uncertainty. Furthermore, the Board has not developed a multiyear financial and capital plan to address the Town's long-term priorities. The Town Clerk did not issue receipts when collecting property taxes, sewer fees and licenses, as necessary, and did not maintain adequate cash receipt records. She also did not deposit property tax moneys in a timely manner. For example, for the 2015 property tax levy collection, the Clerk deposited 19 of 38 deposits between two and eight days late, totaling $838,730 or 45 percent of total tax collections. The Clerk did not remit tax collections to the Supervisor on a weekly basis as required. The Clerk also did not perform monthly bank reconciliations and accountabilities comparing the available cash to the known liabilities. Finally, the Board did not audit or provide for an annual audit of the Clerk's records.

The Supervisor did not maintain complete and accurate accounting records and reports. He also did not adequately oversee the bookkeeper's work during our audit period. The lack of oversight and the bookkeeper's failure to record all transactions in a timely manner and prepare monthly bank reconciliations resulted in accounting records that were inaccurate and incomplete. As a result, the Supervisor was unable to provide the Board with sufficient monthly financial reports allowing it to adequately monitor and manage the Town's financial operations. The Supervisor also did not file the required 2013, 2014, and 2015 annual financial reports with the State Comptroller in a timely manner. In addition, the Supervisor did not ensure all deposits were made intact and in a timely manner. The bookkeeper was solely responsible for receiving and depositing collections with little oversight. For instance, the Supervisor did not examine and compare documentation of collections, such as duplicate receipts and cash journals with the detailed deposit slips and deposit receipts, to ensure collections were deposited intact and in a timely manner. In addition, the Supervisor did not require the bookkeeper to always issue duplicate receipts for all collections, prepare duplicate deposit slips for all deposits and make deposits within 10 days after receipt, as required by law.

The Clerk and the Justice did not maintain complete and accurate accounting records. As of April 11, 2016 we identified shortages of $106 and $471 for the Clerk and Justice, respectively. Because the Board did not perform an annual audit of the Clerk or Justice, these shortages were not detected.

We found that, generally, disbursements were properly accounted for, audited and/or certified, where required, and were for legitimate Town expenditures. However, we found significant control weaknesses with regard to the Town Clerk (Clerk) and the Firm's accountant who were able to make disbursements without the Supervisor's knowledge. We examined disbursements and wire transfers totaling approximately $617,000 (92 claim vouchers – $128,000, 30 wire transfers – $43,000, 17 interfund transfers between Town bank accounts – $412,000 and three payrolls – $34,000) and found that the Supervisor did not control the custody of his signature stamp and allowed the Clerk to affix his signature to checks.

Internal controls over the Clerk's office operations need to be improved. The Clerk did not have guidance that required her to issue duplicate receipts when receiving moneys or to perform monthly bank reconciliations. The Clerk did not issue press-numbered duplicate receipts for all transactions and did not perform monthly bank reconciliations. Furthermore, the Clerk did not submit a monthly report of all moneys received and disbursed to the Supervisor and did not make disbursements to the Supervisor and State agencies in a timely manner. The Board did not provide adequate oversight of the Clerk's financial activities and did not provide for an annual audit of her records. Finally, Town officials have not implemented policies and procedures for the sale of Town garbage bags and the Clerk does not maintain an inventory record of them; therefore, there is no assurance that all garbage bags are properly accounted for.

Bank reconciliations were not accurate and accountabilities were not prepared. The Justice's cash exceeded known liabilities for each of the 22 months in our audit period by an average of $15,700. In addition, the pending bail report was not accurate. Employees made 12 Town credit card purchases without receipts totaling $1,916. Disbursements were appropriate but were not always processed properly. Employees were not required to obtain prior authorization to make 204 reimbursed purchases totaling $9,078.

The Town annually operates a community pool and skating rink for seasonal periods. Although skating rink deposits were made timely in 2015 and 2016 and pool deposits were made timely in 2015, pool deposits were not made timely in 2016. Additionally, collection records were not adequate because they did not include the form of payment (i.e. cash or check). As a result, we were unable to determine if deposits were made intact. Furthermore, we found total deposits exceeded the amounts recorded as collected for the pool in 2015 and 2016. We also found that amounts included in individual deposits for 2015 skating rink collections did not agree with the associated collection records. Also, the Board did not properly allocate sales tax revenues. If a town contains a village and the village receives sales tax directly, the town must allocate all sales tax revenues to the part-town (PT) funds to eliminate the tax levy prior to allocating the revenues to the town-wide funds. During the period 2014 through 2016 the Board improperly allocated sales tax revenues totaling $130,615 to the town-wide funds without eliminating the tax levy in the PT funds, creating a taxpayer inequity.

The Board did not provide sufficient oversight of the Town's financial operations. As of December 31, 2016, the unrestricted fund balance in the general town-wide fund was about $1.2 million, or 273 percent of the ensuing year's budget. This was caused partly by the lack of a policy for the level of fund balance to be maintained. In addition, the Board did not adopt multiyear financial or capital plans to address long-term priorities. Further, the Board hired an accounting firm to perform bookkeeping and payroll duties without a written contract or proper oversight from the Supervisor and the Board did not perform annual audits of the books and records of officers or employees who received or disbursed money. Because the accounting firm kept the records off site, the Town's financial records were not available for public inspection during reasonable times as required by law. In addition, the Board did not receive necessary information such as detailed statements of money received and disbursed and the firm performed payroll duties without oversight. As a result of the lack of financial oversight, the Board levied higher property taxes than necessary and its ability to effectively manage the Town's finances was severely diminished.

The Justice did not deposit, record and account for Court moneys accurately and in a timely manner. In addition, the Board did not audit the Court's financial records and reports or ensure sufficient controls were in place to prevent or detect fraud or abuse. As a result, based on the records available to us, we found a cash shortage of at least $6,073 occurred during our audit test period, which was the final three years of the Justice's six-year tenure. We also found that the Supervisor's financial records were not complete and not sufficiently monitored. The Supervisor did not create or provide the Board with budget-to-actual reports or statements of cash flows to enable the Board to sufficiently monitor the Town's financial position. Furthermore, the annual report was not filed timely and the Board did not audit the Supervisor's books and records as required. As a result, the Board does not have the financial information it needs to effectively monitor the Town's operations which increases the risk that errors or irregularities could occur and not be detected or corrected in a timely manner.

As of October 2016, the Director Administration and Finance (Director) had issued credit cards to 57 employees. The cards had credit limits ranging from $500 to $90,000 with a combined total credit limit of $730,000, and eight individuals had credit limits in excess of statutory bidding thresholds and could make purchases without obtaining competition as required. Although the Director established credit limits for each card, he did not establish dollar limits for individual purchases, set daily limits or block certain types of vendors as required by the policy. As a result, cardholders can make purchases of any amount within their overall established credit limit from any vendor they choose, and the Town has little control over the volume and type of credit card purchases being made by employees. The Director and numerous department heads told us that employees are encouraged to use credit cards for virtually all purchases. Credit card purchases averaged $184,000 per month and totaled more than $3.8 million during the period January 2015 through September 2016. We reviewed credit card statements and supporting documentation for 1,135 credit card purchases totaling more than $607,000 made by five Town departments for a three-month period. We found discrepancies with 536 purchases (47 percent) totaling approximately $113,900 (19 percent).

The Board adopted unrealistic budgets for the general fund and highway fund during the 2013 through 2015 fiscal years. The Board overestimated appropriations by more than $925,000 (33 percent) for the general fund and $820,000 (33 percent) for the highway fund, and appropriated unneeded fund balance. The Board's budgeting practices made it appear that the Town needed to both raise taxes and use fund balance to close projected budget gaps. However, the general fund realized operating surpluses in each of the last three fiscal years, totaling $456,597. Therefore, none of the appropriated fund balance was used and the general fund's unrestricted fund balance increased for the period. In addition, the highway fund realized a $42,801 operating surplus during the 2013 fiscal year and operating deficits of $14,291 in 2014 and $8,354 in 2015, which were smaller than planned. As a result, the Town used less than 3 percent of the appropriated fund balance during those three years and the highway fund's unrestricted fund balance increased. While we found that the 2016 budgeted appropriations for the general and highway funds were more realistic than in recent years, we still project that the Board has overestimated appropriations, which will likely result in the Town not using the entire appropriated fund balance.

Town officials did not effectively manage the Town's financial condition. The Board has not established goals for the level of unrestricted fund balance to be maintained, which contributed to the appropriation of imprudent amounts of fund balance. From 2013 through 2015, officials used one-time financing sources to fund recurring expenditures, adopting budgets that were not structurally balanced by appropriating fund balance totaling $567,500. As a result, the Town's four major operating funds (town-wide general, part-town general, town-wide highway and part-town highway) have experienced combined operating deficits in each of the past three years, totaling more than $310,000. These operating deficits caused the combined unrestricted fund balance for the four major operating funds to decline by $141,067, from $228,376 as of December 31, 2013 to $87,309 as of December 31, 2015. The combined restricted fund balance (reserves) for these funds declined by $40,493 during the same period.

The Justices did not accurately and completely collect, record, deposit, disburse or report Court money in a timely manner. Neither Justice properly pursued collections for those cases where defendants failed to appear in Court. Over 230 Vehicle and Traffic Law (VTL) cases from 2011 through June 2016 remained outstanding. Based on the Town's average dismissal rate and average fines for adjudicated VTL cases, we estimate these outstanding tickets equate to approximately $33,000 in unearned revenues for the Town. In addition, although the current Justice properly updated and closed cases previously entered into the accounting software by the former Justice, she did not record new cases in the accounting software. The current Justice did not deposit money in a timely manner. The current Justice filed six of the seven monthly reports to the Justice Court Fund (JCF) late, by an average of 62 days. Furthermore, neither Justice properly reported closed cases to the Department of Motor Vehicles (DMV). During our audit period, 55 cases were reported to JCF as closed, while five were reported to DMV as disposed.

The Board could improve its fund balance management. Over the past 20 years, the Board accumulated money in the general fund in anticipation of an appeal of pending tax assessment cases. During this time, the general fund balance grew to more than $2 million at the end of 2008 in anticipation of having to pay significant sums for successful appeals. However, the appeals were settled in the Town's favor and the general fund accumulated fund balance totaled almost 4,600 percent of the 2008 tax levy of $45,391, (the equivalent of 46 annual tax levies). The Board has taken some steps to reduce its significant fund balance over the last 10 years. For example, a significant portion of the general fund balance (approximately $1.2 million) was used for infrastructure improvements. The Board authorized and constructed a new Town hall complex and a new highway garage in 2009 and 2010 using fund balance as the financing source and reduced the tax levy by nearly 95 percent from 2005 through 2009. Since then, the Board has adopted general fund budgets that included planned use of fund balance. However, the Board increased real property taxes to finance operations and its conservative budgeting practices nullified the Board's plan to spend fund balance as intended. As a result, general fund balance totaled $623,000 at the end of 2016, more than 950 percent of the tax levy and approximately three times actual expenditures that year. From 2014 through 2016, Town officials appropriated an average of $79,000 in general fund balance each year and spent a total of $25,800. This resulted in a 4 percent decrease in overall general fund balance over these years.

The Town lacked effective procedures to ensure water and sewer charges were accurately billed, collected and enforced. Town officials did not implement adequate compensating controls to reduce the risk involved in concentrating key water and sewer district financial responsibilities with the secretary. Although the Board generally adopted water and sewer rates, no one reviewed or approved the quarterly billing registers to ensure all water and sewer customers were properly billed. As a result, customers were not billed in accordance with the Board-established rates, resulting in customers being underbilled by $1,703. Delinquent customer accounts did not always include late payment penalties in accordance with Board policy.

The Justice should improve controls to ensure Court money is adequately safeguarded. Because the Court uses electronic case files in lieu of paper files, the original tickets issued by police officers, correspondence and supporting documentation are scanned into the electronic case files. The Court's actions on the tickets are documented by directly importing data from the Court's accounting software into the case files that are stored on the Court's computers. The Justice and the clerk access the case files by entering their own respective passwords on the Court's computers. The Justice's adjudication is documented in the case files through the use of comment boxes. However, both the Justice and the clerk have the ability to modify or delete these comments without the original data being documented in the case file.

We found that, as of May 31, 2015, a total of $5,681 in documented collections received during the audit period had not been deposited into a Court bank account. Further, the Court did not report collections totaling $5,999 to the Justice Court Fund, and some collections were deposited up to 14 days beyond the required 72 hours. Additionally, as of May 31, 2015, Justice Smith's fine and fee account had a cash shortage of $3,250 and his bail account had an unidentified balance of $152, and Justice Durant's fine and fee account had a cash shortage of $3,060 and his bail account had an additional cash shortage of $250. These discrepancies occurred because the Justices did not ensure that bail records were accurate and complete, and bank reconciliations and accountability analyses were not performed for the Court bank accounts. Further, the Justices did not establish policies and procedures for enforcing unresolved traffic tickets, and did not compare pending-ticket reports from the DMV to their caseload activity. The Board also did not audit the Justices' records as required, which could have helped identify the missing funds and other deficiencies found during our examination.

The Clerk-Treasurer did not accurately and completely account for, record and report all financial transactions in a timely manner. The inaccuracies prevented the Board from making informed financial decisions. Consequently, the Board was unaware of the Village's true financial position and adopted unrealistic budgets. In addition, the lack of accurate accounting records also increases the risk of loss or unauthorized use of Village funds. Because the Board did not perform an annual audit of the Clerk-Treasurer's books and records, these errors and deficiencies went unidentified and uncorrected.

We found that the Board did not provide adequate oversight to safeguard Department assets. The bylaws do not adequately segregate financial duties and instead assign them all to the Treasurer. They also do not provide for mitigating controls such as requiring someone other than the Treasurer to review and reconcile the bank account statements to the accounting records. Additionally, we found the financial provisions in the bylaws confusing and contradictory. For example, one section states that all purchases must be approved by an elected Department officer, then says approval is required for purchases over $25. Other sections set different approvers and differing amounts. Additionally, Department officials did not follow the purchasing requirements outlined in the bylaws. The bylaws are limited, and the Board has not developed any additional policies and procedures over financial operations to provide guidance in areas such as cash receipts and disbursements, purchasing and prior approvals, credit or debit card use or sufficient accounting records, reconciliations and reviews. Finally, the Board does not conduct an annual audit of the Department's records, as required by the bylaws. As a result of the Board's inadequate oversight, various control weaknesses put the Department's assets at greater risk of loss or theft.

The Treasurer, also serving as the purchasing agent, has the ability to submit requisitions, creating a situation where purchases could be requested, approved and received by the same individual. Although the Deputy reviews purchase orders (POs) for appropriateness, the reviews are subsequent to the purchase. Therefore, we reviewed 100 POs issued during our audit period, totaling $7.4 million, to determine whether they were independently authorized and for appropriate purposes. Except for minor discrepancies which we discussed with District officials, POs were independently authorized and purchases were for appropriate District purposes. However, the review of the Treasurer's purchases should occur prior to the purchase and by an individual in a higher position of authority that does not report to the Treasurer.