City officials need to improve internal controls over IT assets to help ensure that IT systems are sufficiently secured and protected against unauthorized access and loss. The IT department's acceptable computer use policy was not signed or acknowledged by all employees. City officials have also not classified personal, private and sensitive information (PPSI) based on its level of sensitivity and the potential impact should that data be disclosed, altered or destroyed without authorization. In addition, City officials have not ensured that employees received adequate cyber security training and have not adopted a breach notification policy or a disaster recovery plan. IT department officials did not maintain accurate and up-to-date IT inventory records and were unable to locate 140 items listed on the City's inventory. We also identified significant weaknesses in the use of web filters. As a result, City employees were able to access websites unrelated to City activities, such as personal online brokerage and trading, personal email and social media. Further, we found deficiencies in the City's online banking activities to protect financial assets because City officials did not adopt a written policy addressing electronic banking transactions, develop specific written procedures for electronic transfers, provide adequate monitoring of online bank account activities or implement appropriate online banking security controls and alerts.

The Board did not oversee the Village's financial affairs and did not adopt policies and procedures for cash receipts and disbursements, processing of user charges, payroll, and information technology (IT). The Clerk-Treasurer and her Deputy collect receipts using the same cash drawer, share responsibility for depositing receipts, and record them using the same user name. Similarly, key financial procedures in billing and collecting water and sewer charges were not adequately segregated. In payroll processing, we found that leave accruals were not calculated in accordance with applicable contracts or the personnel policy, resulting in the overstatement, understatement or incorrect use of accrued leave. The Board has not adopted IT policies and procedures related to acceptable use, online banking and breach notification, and also had no disaster recovery plan. We also found that the Board's ability to carry out its fiduciary responsibilities was limited because the four Trustees did not review the monthly Treasurer's report for the three operating funds. The Board did not make budget transfers on a timely basis to control spending during the year.

The Council and City officials did not effectively manage the City's financial condition. The City incurred operating deficits from 2013 through 2015 totaling $4.5 million. As a result, unassigned fund balance that totaled $1.8 million at the end of 2013 declined to a deficiency of more than $1.6 million at the end of 2015. To fund the cash needed for operations, the Chamberlain issued revenue anticipation notes (RANs) of $3 million in 2014 and $4 million in 2015, based on the anticipated receipt of State aid. However, the State aid revenue was not appropriately restricted in a special bank account when received, as statutorily required. As a result, the City used RAN proceeds to fund City operations and the RANs were not repaid until the subsequent years because reducing general fund balance would have created a $2.5 million cash deficiency at December 31, 2015. To help offset revenue losses, the City entered into agreements with the County to consolidate personnel costs for the street and buildings and grounds departments and agreements with the County and other surrounding municipalities to share services for animal control, code enforcement and assessment enforcement services. In addition, the City increased real property taxes by 12 percent over the past three years and joined the County's insurance plan in 2016. Although the Chamberlain projects an operating surplus for 2016 of $167,000, the City's operating plan does not include a provision to retire the outstanding $4 million RAN. Because City officials failed to maintain accurate, complete and timely accounting records, the year-end 2015 balance sheet account balances were not available until August 2016, and included significant inaccuracies. Additionally, the 2014 AUD was filed more than one year late and the 2015 AUD was not filed as of May 2, 2017.

The Department's inadequate computer system produced unreliable data and reports for use in monitoring and enforcing unpaid accounts. The Department was unable to produce a complete and accurate listing of outstanding balances for all open cases and of unpaid victims and amounts held on their behalf. We combined various reports from different sources to estimate that the Department had open cases with over 2,800 obligations with outstanding balances totaling approximately $3.1 million. Of that amount, approximately $2.7 million (86 percent) was for cases opened prior to our audit period, some cases dating back as far as 1985. Because of the Department's inadequate enforcement efforts, this aging amount is unlikely to be collected. In addition, a general lack of oversight by the Board, County Administrator and Director − such as failure to develop policies and procedures, segregate key financial duties and provide for an annual audit and require a financial report − has resulted in pervasive deficiencies throughout Department operations. The principal typist controlled most cash accounting responsibilities but did not maintain a running cash balance. Therefore, she could not determine the source or purpose of an unidentified cash balance of approximately $11,400. This amount is likely undisbursed restitution that should have been provided to crime victims.

District officials need to improve budgeting practices to effectively manage the District's financial condition. While unrestricted fund balance was within the statutory limit at the end of 2011-12 and 2012-13, it exceeded the statutory limit by a range of 4.2 to 8.1 percentage points over the last three years. Year-end unrestricted fund balance exceeded the statutory limit by about $1.8 million in 2013-14, $3.5 million in 2014-15 and $2.2 million in 2015-16. Based on information provided by District officials, we project a $2.2 million operating surplus in the current year, most of which the Board plans to transfer to the capital reserve. Consequently, we estimate unrestricted fund balance will be about $4.1 million at the end of 2016-17, more than 9 percent of next year's anticipated budget appropriations. The Board does not plan to appropriate any the excess fund balance to finance the 2017-18 budget. Further, the Board did not use the budget process to fund reserves in a transparent manner. The Board passed resolutions to fund reserves at year-end instead of including appropriations in its adopted budgets to fund reserves. As of June 30, 2015, the District had six reserves totaling over $9 million, which included reserves for capital, compensated absences, property loss, retirement, tax certiorari and unemployment. While the Assistant Superintendent provided the Board with an annual report on the status of reserve funds and reserve balances were generally reasonable, total reserves increased by $4.6 million over the past five years outside of the budget process.

District officials could improve their management of fund balances. Total fund balance has increased by $6.3 million (38 percent) to $22.6 million from 2013-14 through 2015-16. While District officials have maintained unassigned fund balance in compliance with the statutory limit each year, they consistently overestimated expenditures and appropriated fund balance that was not used. When the unused appropriated fund balance was added back, the District's recalculated unassigned fund balance significantly exceeded the statutory limits. Furthermore, District officials maintained and established some informal written guidelines for six reserves totaling $16.9 million. While three reserves had adequate support and plans for the balances, three reserves did not, including the retirement contribution reserve, unemployment reserve and insurance reserve.

The Board needs to improve its oversight of District operations. The Board did not provide adequate oversight of the District's Length of Service Award Program (LOSAP). Specifically, it engaged professional service providers for managing various facets of LOSAP without first soliciting competition or entering into written contracts with them. Further, neither the District nor its LOSAP administrator could provide documentation to show how much the District paid for these services. The Board also did not maintain essential financial documentation to detail how LOSAP funds were invested and disbursed. The Board designated a financial advisor to act as custodian of the District's funds, instead of a bank or trust company as required by General Municipal Law (GML). The Board also borrowed $100,000 each year from District reserve funds to fund operating expenses, which is not in compliance with the law. Finally, the Board has not adopted an online banking policy that defines the process for authorizing, processing and monitoring transactions.

The District did not seek competition for five professional service contracts totaling $265,706. Although we found the services procured were for legitimate and appropriate District purposes, without a competitive process, District officials and the Board do not have assurance that professional services are being procured in the most economical way and in the best interests of residents. We also examined 73 invoices totaling $105,728 requiring quotes and found 64 invoices totaling $44,956 in which no quotes were documented. The District generally complied with competitive bidding statutes.

District officials specified that the Treasurer and Deputy Treasurer are authorized to process online banking transactions and developed secondary approval requirements for electronic fund transfers (EFTs) based on each user's access. However, the Board did not adopt an online banking policy defining authorization, process and monitoring of online banking transactions. The bank provides email notifications for each EFT but District officials do not review them to verify transfer accuracy and legitimacy. In addition, while the Treasurer uses a computer designated strictly for online banking transactions, the Deputy Treasurer does not. Finally, not all employees involved in the online banking process have received Internet security awareness training.

The facilities department purchased 4,030 gallons of gasoline and 921 gallons of diesel fuel for vehicles and equipment used to maintain the buildings and grounds. The facilities department's informal procedures require employees that dispense fuel to fill out a log sheet with the vehicle, odometer reading, gallons dispensed and their names. However, because employees did not record the meter reading showing the total gallons dispensed to date, officials do not have sufficient information to ensure that the log is complete and accurate. In addition, facilities department staff did not maintain a physical inventory record showing the amount of fuel in the tanks based on periodic stick readings. We attempted to reconcile fuel purchases to usage from July 1, 2015 through December 31, 2016 but were unable to do so due to missing information on the log sheets. Without adequate fuel inventory records and reconciliations to physical inventory readings, District officials have no assurance that fuel purchased is properly accounted for and used only for proper District purposes. In addition, there is an increased risk that fuel leaks or losses could remain undetected, which could prove costly over a period of time.

Village officials did not adequately monitor or develop a plan to address the causes for the difference in water produced by the Village's water system to the amount metered. For the 2015-16 fiscal year of billing, the Village pumped 93.2 million gallons of water, but only metered use of approximately 27.5 million gallons. The Village could not account for approximately 65.7 million gallons of water, approximately 71 percent of the water pumped, valued at approximately $42,000. The Board did not sufficiently audit claims to ensure they were all for proper Village purposes. Instead, the Board only reviewed the abstract of claims and particular invoices of claims it had questions about, which is inconsistent with New York State Village Law. Village officials paid 161 claims totaling approximately $43,000 without proper Board approval. The Board did not adopt a comprehensive IT policy governing the Village's IT system. Although the Board established policies and procedures addressing acceptable computer use, it did not enforce these policies and did not address disaster recovery plans.

The Board needs to improve its oversight of Village financial operations to ensure that the adopted budgets are reasonable, adequate fund balances are maintained and competition is sought when procuring professional services. Village officials developed budgets for the general fund that had insufficient appropriations and adopted sewer fund budgets with overestimated appropriations. As a result, from 2013-14 through 2015-16 the unrestricted general fund balance decreased by approximately $375,000 (65 percent) due to operating deficits caused primarily by underestimated budget appropriations for legal expenditures, while the unrestricted sewer fund balance increased by approximately $78,000 (20 percent) due to operating surpluses of approximately $167,000 caused primarily by the overestimated budget appropriations of approximately $140,000. Finally, Village officials did not always seek competition when selecting professional service providers. Therefore, the Board does not have adequate assurance that services were procured in the most economical manner and in the best interest of Village residents.

The District's adopted budgets were unrealistic and included appropriated fund balance not used as planned to fund operations. The budgets overestimated appropriations by almost $1.2 million or 7.7 percent from 2013-14 through 2015-16. Unrestricted fund balance increased to almost $854,000 or 15 percent of the ensuing year's budgeted appropriations, exceeding the statutory limit by 11.1 percentage points as of June 30, 2016. Finally, the retirement contribution reserve and unemployment insurance reserves appear overfunded.

The Board and District officials did not ensure that budget estimates and fund balance were reasonable. The Board adopted budgets for fiscal years 2013-14 through 2015-16 that appropriated a total of $19 million in fund balance to finance operations. However, because the District overestimated expenditures by $19 million over the three-year period, the appropriated fund balance was not used. As a result, the District's unrestricted fund balance has exceeded statutory limits. When adding back the unused appropriated fund balance, the District's recalculated unrestricted fund balance averaged 10.8 percent of the subsequent year's appropriations, exceeding the statutory limit by almost 7 percentage points.

District officials did not apply for all the transportation State aid to which the District was entitled for bus purchases. We found that District officials had not submitted any State aid forms to SED for the 35 buses purchased during our audit period. The District was in danger of losing approximately $1.7 million in transportation State aid, consisting of $509,000 that the District would have received from 2013-14 through 2016-17 and $1.2 million that we project the District would have received from 2017-18 through 2021-22. District officials also did not adequately safeguard personal, private and sensitive information on District servers. Although District officials properly segregated duties within the financial software, they could better manage network user accounts and improve safeguards of IT resources by developing and implementing a disaster recovery plan. Because of the sensitivity of some of information, we did not discuss all results in this report, but instead communicated some confidentially to District officials.

We found that certain billings to school districts of residence were not accurate and student enrollment and attendance was not always adequately supported. For students with less than full-time enrollment, School officials incorrectly calculated the FTEs and overbilled by more than $6,250. In addition, School officials did not retain proof of residence documents for 44 of the 55 students (80 percent) we examined, or retain the 2015-16 attendance records for computing FTEs and billing during the majority of our audit period. As a result, School officials could not provide data to support billings in case of a dispute and may not be in compliance with records retention requirements.

The Board should improve its oversight of the District's fiscal operations. The Board adopted unrealistic budgets that contributed to the growth of total fund balance by 21 percent between 2014 and 2016 (to $1.6 million). District officials have not established the levels of fund balance to be maintained or thresholds for reserves. As a result, the Board increased the tax levy by 7 percent, needlessly taxing the residents and overriding the tax levy cap in 2016 and 2017. Furthermore, the Treasurer was performing all financial transactions without sufficient oversight or mitigating controls. Although the Board established a financial and internal audit policy that would provide mitigating controls to safeguard District money, the Board was not following it. As a result, there is an increased risk that errors or improper payments could occur and not be detected.

District officials need to improve internal controls to help ensure that extra-classroom activity cash receipts and disbursements are properly accounted for. Although central treasurers deposited collections in a timely manner, student treasurers did not maintain adequate supporting documentation for cash receipts totaling $127,553. Student treasurers did not collect sales tax on all applicable sales and faculty advisors were not aware that sales tax needed to be collected on certain sales. In addition, 25 disbursements totaling $37,217 made by the central treasurers and 117 disbursements requested by student treasurers totaling $80,817 lacked the proper supporting documentation. Student treasurers, generally, did not maintain cash receipt and disbursement ledgers and none of them prepared profit and loss statements for fundraising activities. Further, the Board did not appoint a faculty auditor to periodically compare student ledgers with central treasurer ledgers and investigate and resolve differences.

The Village's Point System is not consistent with General Municipal Law and points were not awarded in accordance with the Point System. Our review of the length of service award program (LOSAP) records for 47 of the Department's 138 active volunteers showed that at least 27 of these volunteers did not receive accurate LOSAP points. As a result of these deficiencies, volunteer firefighters may not be properly receiving LOSAP points for certain qualifying activities. Twelve of the 47 volunteer firefighters did not meet the 50-point minimum and therefore have not received accurate LOSAP service credit, which may result in their potential loss of future benefits or, conversely, in the Village incurring more LOSAP costs than necessary.

The Office of the State Comptroller, as Fiscal Agent for the City of Yonkers (City), determined that the City's adopted budget for fiscal year 2017-18 and the related justification documents are in compliance with the requirements of the Fiscal Agent Act (Chapter 488 of the Laws of 1976). The City's 2017-18 budget totals $1.15 billion. The budget includes operating and debt service funding of $590.7 million for the Yonkers Public Schools (District) and $563.6 million for the City. The 2017-18 budget is $38 million more than the City's budget for 2016-17, an increase of 3.4 percent. The 2017-18 budget relies on nonrecurring revenue, such as fund balance, to balance its budget. The City could potentially face a shortfall of approximately $1.7 million in revenue if income tax surcharges remain at 2016-17 levels. The City could potentially face a shortfall of $515,000 if revenue estimates from the Parking Violations Bureau are not realized. Police overtime costs could potentially be over budget by as much as $2.6 million based on the 2016-17 fiscal year overtime costs. The City plans to borrow up to $13 million for tax certiorari settlements in the 2017-18 fiscal year. Social Security tax payments are underestimated by approximately $828,000 in the 2017-18 budget. The City's adopted budget does not include a contingency appropriation, which leaves the City vulnerable to unexpected events. With the 2017-18 budget, the City will have exhausted 93.21 percent of its taxing authority and the City's ability to increase property taxes may be limited in future years if property values do not increase. Over the last 10 years, the City's outstanding debt has grown 15 percent and the City's debt service payments have risen 38 percent.