Audit Objective
Did the Town of Lee (Town) Town Board (Board) effectively manage the general and highway fund balances?
Audit Period
December 31, 2021 – April 25, 2025
Understanding the Audit Area
A key measure of a town’s financial condition is its level of fund balance, which represents the difference between revenues and expenditures accumulated over time. Unrestricted fund balance is the portion of total fund balance that is not restricted for a particular purpose. Maintaining a reasonable level of unrestricted fund balance provides a cushion against unforeseen expenditures or revenue shortfalls, enabling town officials to continue providing necessary services during times of uncertainty. It is a town board’s (board) responsibility to determine what is a reasonable level after considering factors like the timing of receipts and disbursements, the volatility of revenues and expenditures, and the availability of reserve funds. The board should manage fund balance to help ensure levels do not exceed a reasonable amount and funds are not unnecessarily being withheld from productive use.
The Town’s general and highway funds had a total of $8.3 million in fund balance as of December 31, 2024 ($8 million in the general fund and $300,000 in the highway fund). Appropriations in the Town’s 2025 budget totaled $2.3 million ($1 million for the general fund and $1.3 million for the highway fund).
Audit Summary
The Board did not effectively manage the general and highway fund balances, allowing excessive unrestricted fund balances to accumulate in both funds. In addition, the Board did not develop or adopt written fund balance or reserve policies, as well as written multiyear financial and capital plans. By developing these policies and plans, the Board would provide more transparency regarding the Town’s long-term financial needs and goals and help guide the Board and officials as they develop the Town’s annual budgets.
At the end of 2024, the general and highway funds had a total of $8.3 million in unrestricted fund balance. When compared to the general and highway fund appropriations in the Town’s 2025 budget, the amount of unrestricted fund balance at the end of 2024 could fully fund over three and a half years of operations at current spending levels.
Although the Town levied no real property taxes for the general and highway funds, the unrestricted fund balance has continued to increase due to annual operating surpluses. If reasonable fund balance levels are not established, and beneficial uses of fund balance are not identified and implemented, this unnecessarily withholds funds from productive use. Officials should consider using the identified excess fund balance in a manner that benefits taxpayers.
The report includes three recommendations that, if implemented, will improve the Town’s management of fund balance. Town officials generally agreed with our recommendations and indicated they planned to initiate corrective action.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and the State Comptroller’s authority as set forth in Article 3 of the New York State General Municipal Law. Our methodology and standards are included in Appendix C.
The Board has the responsibility to initiate corrective action. A written corrective action plan (CAP) that addresses the findings and recommendations in this report should be prepared and provided to our office within 90 days, pursuant to Section 35 of the New York State General Municipal Law. For more information on preparing and filing your CAP, please refer to our brochure, Responding to an OSC Audit Report, which you received with the draft audit report. We encourage the Board to make the CAP available for public review in the Town Clerk’s office.