Audit Objective
Did the Town of Hornellsville (Town) officials properly distribute foreign fire insurance (FFI) tax proceeds?
Audit Period
January 1, 2023 – August 6, 2025
Understanding the Audit Area
Town officials are responsible for distributing FFI tax proceeds in accordance with New York Insurance Law Sections 9104 and 9105 (Insurance Law). In the absence of a special act stating otherwise, the statute states that FFI tax proceeds should be distributed to fire departments and companies for the use and benefits of the membership. Furthermore, in accordance with relevant case law, in the case of a multi-company fire department, FFI tax proceeds must be distributed between the fire companies in proportion to the active membership of each company. Proper distribution of FFI tax proceeds helps ensure FFI funds are distributed in accordance with the statute, relevant case law, and are accounted for and documented.
In the Town, the Arkport Joint Fire District (District) provides fire protection services for a portion of the Town. The remaining area of the Town, outside of the District, constitutes the Town’s two fire protection districts, for which the Town contracts with the North Hornell Volunteer Fire Department (Department) and the South Hornell Fire Protection Company, Inc. (Company) for fire protection services.
The Town Supervisor (Supervisor) is the chief financial officer and is responsible for the day-to-day financial operations, including the allocation and distribution of FFI tax proceeds. The bookkeeper assists the Supervisor with the Town’s accounting functions, including calculating the FFI tax proceeds disbursements. The Town disbursed FFI tax proceeds totaling $6,238 in the calendar years 2023 and 2024.
Audit Summary
Town officials did not properly distribute the 2023 and 2024 FFI tax proceeds in accordance with Insurance Law and relevant case law because the bookkeeper miscalculated the allocation of FFI tax proceeds. The bookkeeper allocated the FFI tax proceeds to each of the three fire units based on the number of active members. However, the District should receive its portion of FFI tax proceeds directly from DFS, in accordance with Insurance Law. Therefore, the District was not entitled to receive additional FFI tax proceeds from the Town.
Furthermore, the Supervisor did not obtain documentation to support the number of active members used in the bookkeeper’s 2023 and 2024 allocation calculations. The Board did not receive or review the bookkeeper’s allocation calculation to ensure the FFI tax proceeds were accurately and properly distributed to the two fire companies providing fire protection to the Town’s two fire protection districts before approving the disbursements. As a result, the District received $2,569 more than it should have received. Consequently, the Company and Department received $2,444 and $125 less than their pro-rata share of the FFI tax proceeds sent to the Town, respectively.
The report includes six recommendations that, if implemented, could improve the Town’s FFI tax proceeds distribution. Town officials generally agreed with our recommendations and indicated they plan 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.