Audit Objective
Did the Town of Hornellsville (Town) Town Board (Board) effectively manage fund balance?
Audit Period
January 1, 2022 – August 6, 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. Maintaining a reasonable amount of unrestricted fund balance within operating funds is an important financial consideration for town officials because it is available for appropriation to reduce taxes, fund one-time expenditures and other uses.
The Board is responsible for the general management and control of the Town’s financial affairs, which includes adopting the annual budget and multiyear financial and capital plans and establishing financial policies, such as those for fund balance.
As of December 31, 2024, the Town’s fund balances totaled approximately $2 million.
Audit Summary
The Board did not effectively manage the Town’s fund balance. Despite maintaining significant unrestricted fund balances, the Board overrode the tax levy limit1 each year and adopted budgets that increased real property taxes by a total of 18 percent in calendar years 2022 through 2025. As a result, the Board maintained unrestricted fund balances that, as of December 31, 2024, were sufficient to fund more than five years of water, three years of sewer and half of the combined town-wide (TW) funds’ 2025 budgeted appropriations.
In addition, the Board did not treat taxpayers equitably because it inappropriately allocated sales tax revenues totaling $1.1 million to the TW funds instead of the town-outside-village (TOV) funds in calendar years 2022 through 2024. As a result, there is an inaccurate depiction of the actual fund balances of the TW and TOV funds which limited the Board’s ability to accurately assess the funds’ financial condition.
The Board also did not adopt a written fund balance policy until February 11, 2025 (after our audit notification) or adopt comprehensive written multiyear financial or capital plans that could have assisted it and officials in developing and adopting realistic budgets and planning for the Town’s financial future.
Although we provided recommendations in our prior audit report2 to help the Board improve financial management, the Board did not implement adequate corrective action to address the deficiencies. Therefore, certain deficiencies remained and impaired the Board’s ability to effectively manage the Town’s fund balance.
Without realistic budgets, properly allocating revenues, a written fund balance policy establishing a reasonable amount of unrestricted fund balance to maintain in all funds or comprehensive written multiyear financial and capital plans, it is difficult for the Board to properly manage the Town’s fund balance. As a result, the Board cannot ensure real property tax levies are not more than necessary.
The report includes 10 recommendations that, if implemented, could improve the Town’s financial management. Town officials disagreed with certain aspects of our findings but indicated they initiated corrective action. Appendix D includes our comments on the Town’s response.
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 E.
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.
1 New York State General Municipal Law Section 3-c (Law) established a tax levy limit for local governments, which was effective beginning in the 2012 fiscal year. The Law generally precludes local governments from adopting a budget that requires a tax levy that exceeds the prior year tax levy by more than 2 percent or the rate of inflation, whichever is less, unless the governing board adopts a local law to override the tax levy limit.
2 Town of Hornellsville – Financial Management and Town Clerk Operations (2014M-21), released in May 2014.