The District currently holds individual whole life insurance policies with face values totaling $280,000 for seven employees, officers and former officers who were provided these benefits by Board resolution (three managerial employees, three current Board members and one former Board member). As of December 31, 2015, these policies had a combined cash surrender value of $119,871. Because General Municipal Law only authorizes group life insurance for officers and employees of a water district, the District is not authorized to offer individual life insurance policies for its managerial employees and Board members by Board resolution. Also, to the extent these policies have a cash surrender feature with the cash value payable to the District as owner, this may constitute an unauthorized investment of District funds. The District paid over $16,600 in premiums during our audit period for individual whole life insurance coverage for the seven individuals, even though there was statutory authority only to provide group life insurance.

The Board and District officials need to improve the budget process to ensure reserves and fund balance are maintained at reasonable levels. From fiscal years 2011-12 through 2015-16, the Board adopted budgets that resulted in operating surpluses each year ranging from $216,000 to $2.6 million. The Board used surplus funds to increase reserves and accumulate fund balance up to the 4 percent statutory limit. Restricted funds grew from $285,000 as of June 30, 2012 to $4.5 million by June 30, 2016. The appropriation of fund balance and transfers of surplus funds to increase reserves at year-end resulted in the District's reported unrestricted fund balance remaining within the 4 percent statutory limit. By not establishing adequate reserve policies and not funding reserves through budget appropriations, the Board may have missed the opportunity to use fund balance as a financing source, fund one-time expenditures or reduce the tax levy. We also found that the Board did not ensure that employees received only the reimbursements they were entitled to. The District reimbursed three employees $15,000 for use of personal vehicles to commute from home to work which was not provided in a written agreement. The District also reimbursed an ineligible employee for $4,726 in daycare expenses.

The Board did not implement adequate claims processing procedures to ensure claims were adequately supported, properly authorized and for valid District purposes. The Treasurer compiles bills and invoices and provides a listing of bills to be paid (abstract) to the Board to authorize the payment of claims. The Board Chairman and Treasurer indicated that the Board does not perform a deliberate audit of each claim by comparing the claim as listed on the abstract against available supporting documentation. Instead, the Board reviews the abstract and documents its approval of claims by signing the abstract and passing a resolution to approve claims for payment. However, the resolutions do not include information necessary to determine the number and dollar amount of the claims authorized for payment. Furthermore, without a thorough and deliberate examination of the individual claims and supporting documentation, the Board does not have enough information to determine whether the claims it approves are appropriate and legitimate, and there is an increased risk that improper claims could be paid.

The Board and District officials did not prepare accurate budgets for the 2012-13 through 2015-16 fiscal years as appropriations were overestimated by an average of $5.5 million per year, or 15.8 percent. Furthermore, appropriated fund balance was never used as budgeted because the District's budgeting practices produced operating surpluses in all four fiscal years reviewed. When unneeded appropriated fund balance is added back to unrestricted fund balance, unrestricted fund balance exceeds the statutory limit by 9 percentage points. Finally, the employee benefit accrued liability reserve, the unemployment insurance reserve and the insurance reserve are overfunded.

The Board did not ensure that high school extra-classroom activity (ECA) funds were properly safeguarded. The Board did not adopt an adequate ECA policy to provide comprehensive guidance for District officials and students or appoint a faculty auditor to ensure that receipts were issued, disbursements were supported with adequate documentation and that student ledgers were maintained and reconciled with the Central Treasurer's records. As a result, the ECA had apparently unaccounted-for cash totaling $3,563. We identified disbursements totaling $33,167 that were either approved for payment without adequate supporting documentation or did not evidence proper approvals prior to payment. Additionally, we noted four ECAs had no student records, as required, and three additional ECAs had only partial records, one of which reported receipts totaling $400 less than the Central Treasurer's records.

The Board needs to improve its oversight of the District's finances. The Board was unaware that the Treasurer has not filed an annual financial report with OSC for the last three years (2013 through 2015). Also, the Board did not contract for an independent annual audit of the Treasurer's records even though the District received more than $345,000 in revenues during 2015. Board members told us they did not know they were required by law to have an audit. In addition, while the Treasurer provides the Board with monthly reports of budget-to-actual results, cash balances and bills to be approved for payment, she does not present bank reconciliations and bank statements to the Board for review. The Treasurer told us she provided monthly bank reconciliations and statements to the Board only when requested and Board members told us they never requested them for review. We reviewed the Treasurer's bank reconciliations through the end of our audit period and found that the cash balance in the savings account was $30,000 higher than was reported in the District's accounting records. The Treasurer accounted for this transaction in the savings account bank reconciliation as an outstanding transfer due back to the bank since November 2011. Board members were unaware of this reconciling transaction until we brought it to their attention. District officials then contacted the bank and obtained a copy of a $30,000 check that was deposited in the District's savings account in November 2011. They also located Board meeting minutes indicating that the funds originated from the sale of a District pumper truck.

District officials need to improve their payroll procedures and employee time and attendance practices to ensure employees' salaries and wages are accurately paid and leave accruals are properly maintained and recorded. We found that the Treasurer controlled the entire payroll process and the Superintendent's payroll certification was inadequate. Board minutes did not clearly identify payroll-related actions taken by the Board. The Board did not authorize the stipends or salary amounts paid to 10 employees totaling more than $80,000. In addition, leave records were not correct because the secretary inaccurately recorded leave time and comp time use. As a result, the Treasurer's vacation leave balance was overstated by 69 days. Finally, the Board appointed the head custodian (custodian), as assistant clerk of the works (assistant clerk) for a District construction project. This individual is also the District's transportation supervisor and a part-time bus driver. Over the two-year audit period, the custodian was paid $162,673, or about $81,000 for each year, when including his overtime for the extra bus runs and the assistant clerk duties. Because the custodian did not maintain time records for his different positions and ineffectively maintained his assistant clerk time records, there is no assurance that the custodian was accurately paid for his various positions.

The Board did not adopt adequate policies and procedures for cash receipts and disbursements. While the Board reviews certain non-recurring disbursements exceeding $500 at its monthly meetings, it does not review all claims. The Board adopted a disbursement policy granting the Assistant Treasurer the authority to pay certain claims when they are recurring or when necessary to avoid late fees; however, these claims are not subsequently audited or reviewed by the Board. The Board's inadequate oversight of the disbursement process creates a risk that payments may not be for appropriate purposes.

While the Board has not adopted written policies and District officials have not developed written procedures over the payroll function, we found no significant exceptions with the accuracy of the payment of salaries, wages or separation payments. While our testing did not identify material exceptions, opportunities exist for the Board and District officials to improve internal controls over the payroll process.

Company officials have ensured that disbursements were for the benefit of the entire Company membership. However, they have not ensured that all cash receipts were deposited in full. Company officials have not established adequate internal controls over cash receipts. They did not maintain sufficient documentation to indicate the amount of money received at each fundraising event and did not always maintain adequate records to identify the source of each bank deposit. While our audit did not find any significant exceptions, the inadequate internal controls increase the risk that disbursements could be made for non-Company purposes or receipts collected may not be deposited, and such errors or irregularities may not be detected or corrected.

We identified revenue and expenditure projections in the adopted budget that are not reasonable and could result in an increase in the City's accumulated deficit. Several appropriation amounts, such as health insurance, New York State Employees' Retirement System payments and debt service payments, are nearly $2.4 million higher than required. The City's 2017 budget also includes $600,000 in revenue from the sale of a property that was included in the City's 2016 adopted budget with estimated revenues of $550,000. However, the property did not sell in 2016, and, therefore, the City incurred a revenue shortfall of $550,000. In addition, the City appropriated $1,617,746 in the budget for overhead services that the general fund provides to the various City funds. However, there is no documentation to support these allocations. The City complied with the real property tax law by adopting a local law to override the tax cap.

The clerks deposited receipts for fines collected intact and in a timely manner. However, Village officials have not established sufficient procedures for collecting unpaid parking violation fines or set a benchmark for collection rates. Although the Village's parking ticket collection rate exceeded 80 percent during fiscal years 2011 through 2015, the Village had $2.2 million in cumulative unpaid parking tickets outstanding as of June 30, 2016. This included 25,532 parking tickets totaling approximately $1.7 million that have been outstanding for more than five years and 5,323 unpaid parking tickets totaling $459,540 outstanding for less than five years. The Village has implemented some informal procedures for collecting parking ticket fines, such as contracting with the vendor. However, as of June 30, 2016, the tickets remained on the vendor's report of unpaid parking tickets and no additional actions were taken to collect these amounts.

We reviewed 27 purchases totaling $77,314 that required two written quotes to determine if District personnel obtained the required quotes. District officials were unable to provide evidence that they obtained quotes for eight of these 27 purchases totaling $19,700. In three instances for purchases totaling $5,207 the purchase order was dated after the invoice date and there was no evidence that any quotes were obtained. These three purchases included signs for $2,085, trophies for $1,565 and mechanic services for $1,557. We also reviewed 12 purchase contracts totaling $115,334 that required four written quotes. We found that all these purchases were properly documented, purchased from vendors with OGS contracts or from sole source providers. In addition, we reviewed all purchases from 11 professional service providers who were paid a total of $707,652 to determine if RFPs or other methods of competition were used to obtain these services. District personnel did not solicit competition for seven of these 11 providers who were paid a total of $127,705. For example, professional services for firefighter physicals costing $26,945 were not supported by documentation showing that proposals were obtained from similar providers. These services appeared to be for routine medical services. Furthermore, District officials were unable to provide us with documentation to show that they sought alternate proposals for the annual dinner costing $21,900 or equipment cleaning services costing $22,060.

College officials ensured that tuition and fees were properly billed, collected, recorded and refunded. However, we identified weaknesses in the College's use of a computerized program to maintain records of tuition and fee billings and collections. Specifically, we found that employees were using one computer account to process parking decals and not retaining information related to deleted receipts. In addition, College officials were not using a tracking feature to identify changes made within the computer system.

District officials overestimated appropriations in the adopted budgets for the 2012-13 through 2015-16 fiscal years. While the District appropriated fund balance to help finance operations, it was not needed because the District's budgeting practices produced operating surpluses. As of June 30, 2016, unrestricted fund balance totaled $2.9 million and was 9.1 percent of 2016-17 budgeted appropriations, which exceeded the statutory limit by 5 percentage points. This trend is projected to continue through 2016-17. The District also overstated certain liabilities and the reserve for encumbrances, which effectively reduced the amount of unrestricted fund balance available for appropriation to reduce the real property tax levy.

The District paid 325 claims totaling $814,379 during our audit period. We reviewed 70 check disbursements and corresponding claims totaling $517,140. The Treasurer told us he writes and dates checks prior to Board approval but does not mail them to the payees until after the Board reviews the claims and approves the abstracts at the monthly meetings. However, checks for 19 claims totaling $32,320 were cashed prior to Board approval. Thirteen of those 19 checks were cashed prior to Board approval because the Board made a motion to delay acceptance of the abstract until the following month. The remaining six checks were on abstracts that were approved by the Board during the same month, but the checks were still cashed prior to approval. Under Town Law, none of these claims were allowed to be paid prior to the Board's audit and approval. We also found four claims totaling $2,267 that did not have sufficient supporting documentation. These claims were for purchases at a local delicatessen and a repair shop and two credit card payments. Although the Treasurer told us they were for appropriate District purposes, without supporting documentation, the Board has no way to determine whether these claims were appropriate. Although fire districts are not required to pay sales tax on purchases and services they obtain, eight claims contained sales tax totaling $210. In addition, one credit card claim included unnecessary late fees and finance charges totaling $138.

The Board failed to fulfill its basic responsibilities of stewardship, oversight and leadership. Board members and Village officials did not perform many of the duties of their positions which resulted in significant Village-wide dysfunction. For example, the Board and Village officials have not addressed the repeated deficiencies to previous audit findings related to the audit of claims and the completion of bank reconciliations. Village departments are operating without sufficient oversight or clear guidance on the lines of authority. As a result, significant errors occurred in key business functions. Water rents are a major revenue source for the Village water fund. However, we found that water bills are often generated on meter readings or estimated readings that did not appear to be reasonable. In addition, when the Treasurer and Account Clerk/Deputy Treasurer positions were vacant, the Board instructed the Village Clerk to prepare the payroll. The Clerk did not receive any training on processing payroll. As a result, she overpaid four employees over $8,600 and processed a duplicate payroll for 52 employees. The Clerk also did not properly issue receipts for all money received and did not deposit collections in the bank in a timely manner. The Village has experienced significant employee turnover in key positions. The Board's lack of effective leadership has likely contributed to the significant turnover which, in turn, added to the negative working environment. Furthermore, the Village has no succession planning procedures in place to assure service continuity when the Village experiences employee turnover.

The Commissioner, who is also the District Secretary, provided us with a credit card policy. However, two other Commissioners were not aware of the policy and there is no record of the Board adopting the policy. The District issued five credit cards to the Commissioners and three to chiefs. However, the District also issued one card to the maintenance mechanic even though he was not an authorized user. District officials told us that although there is nothing documented in the Board minutes, the Commissioners were aware the mechanic was issued a card. District officials and the maintenance mechanic made 252 credit card purchases totaling $60,240 during the audit period. We reviewed all 252 purchases and determined that 32 purchases totaling $4,846, or 13 percent, lacked documentation or were for an improper purpose. For example, thirty-one purchases totaling $4,823 did not have the receipt of goods or services documented. District officials told us the Board generally requires documentation verifying the receipt of goods or services and receipts or invoices before approving purchases for payment but could not explain why some purchases were approved without such documentation.

The Board has not properly managed reserve funds. District officials could not provide evidence that approximately $3.3 million was required to be restricted in the debt reserve. The District also maintains an unauthorized E-Rate reserve totaling approximately $342,000. Furthermore, the District inaccurately reported the capital reserve totaling $330,000 and overfunded the tax certiorari and unemployment insurance reserves totaling approximately $297,000. Additionally, Business Office officials improperly restricted cash totaling approximately $1.2 million in reserve funds that was not approved by the Board.

The Board needs to improve its oversight of District financial operations. The Treasurer maintains custody of foreign fire insurance revenues on the Department's behalf. The foreign fire insurance money was placed in the District's general fund checking account and commingled with the District's other funds. Because the Treasurer did not keep separate accounting records showing the receipts, disbursement and balance of each fund, the Treasurer could not determine how the money was spent or the amount of foreign fire insurance money currently on hand. Furthermore the Board, rather than the Department membership, determined how the foreign fire insurance money was to be spent. The Board did not audit and approve all claims before payment, ensure that the Treasurer filed annual foreign fire insurance reports with the State Comptroller or adopt a code of ethics as required by General Municipal Law