Audit Objective
Did Town of Gorham (Town) officials properly distribute foreign fire insurance (FFI) tax proceeds?
Audit Period
January 1, 2023 – July 23, 2025
Understanding the Audit Area
Town officials should properly distribute FFI tax proceeds to ensure that local fire departments receive the financial support they need. This helps maintain the safety and morale of firefighters, who play a crucial role in protecting the community. FFI tax proceeds can be used for various purposes that benefit the membership, such as purchasing equipment, funding social functions and supporting community initiatives. If funds are not distributed correctly, some departments may receive less than they are entitled to, impacting their operations and resources. Proper distribution can help ensure accountability and avoid legal issues.
The Town Supervisor (Supervisor) is the chief executive and financial officer and is responsible for the day-to-day financial operations, including the allocation and distribution of FFI tax proceeds. The Town disbursed FFI tax proceeds totaling $11,401 in calendar years 2023 and 2024.
Audit Summary
Town officials did not properly distribute the 2023 and 2024 FFI tax proceeds in accordance with New York State Insurance Law (Insurance Law) and relevant case law.
The bookkeeper miscalculated the allocation of FFI tax proceeds among the Gorham Fire District (District), Crystal Beach Volunteer Fire Department (Department) and the Rushville Hose Company (Company) that provides fire protection within the Town, because she mistakenly used an inaccurate pro rata allocation formula. The bookkeeper combined all FFI tax proceeds received by the Town and allocated the FFI tax proceeds based on the Town’s fire protection contract amounts paid to the Department and Company and on the District’s budgeted appropriations. However, the District should not have been included in the calculation for the FFI tax proceeds. Instead, in accordance with Insurance Law and relevant case law, the bookkeeper should have used a pro rata allocation formula to calculate the FFI tax proceeds disbursement based on the number of active members in the Department and Company.1 Moreover, neither the Supervisor nor the current Board reviewed the FFI tax proceeds allocation calculation made by the bookkeeper to help ensure the FFI tax proceeds were being accurately distributed to each of the recipients. As a result, the Department received $681 more than its pro rata share and the Company received $4,076 less than its pro rata share of the FFI tax proceeds sent to the Town for the fire protection district. The District also received a total of $3,395 of these funds, which it was not entitled to. The miscalculation was also due, in part, to the Town receiving FFI tax proceeds which we determined should have been distributed directly to the treasurer of the District.
The report includes five recommendations that, if implemented, could improve the Town’s FFI tax proceeds distribution. Town officials agreed with our findings 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.
1 See New York State Office of the State Comptroller legal opinion Number 89-53.