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.

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.