Audit Objective
Did the Town of Washington (Town) Town Board (Board) and officials properly manage the Town’s fund balances?
Audit Period
January 1, 2024 – December 31, 2024
We extended the audit period back to January 1, 2020, to analyze trends.
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. Fund balance should be managed effectively to ensure financial stability and maintain essential services, and its management should be transparent with residents and taxpayers. Effective fund balance management helps protect a town from unforeseen financial risks, maintain a favorable credit rating, and enable long-term financial planning. 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 Town’s three main operating funds are the general fund town-wide (TW), general fund town-outside-village (TOV), and highway fund TOV. The Town’s 2024 budgeted appropriations and unrestricted fund balance, respectively, were as follows:
- General fund TW: $1,901,968; $1,034,251
- General fund TOV: $531,688; $823,958
- Highway fund TOV: $1,423,343; $288,962
Audit Summary
The Board and officials did not effectively manage the Town’s fund balances. As a result, officials maintained unrestricted fund balance in the main operating funds that exceeded the Town’s 25-percent fund balance policy limit and adopted unrealistic budgets that generated operating surpluses and accumulated excess fund balances. Inadequate budgeting practices, including appropriating fund balance that was not needed to fund operations, may have resulted in taxpayers paying more in real property taxes than necessary. In addition, while officials stated that excess fund balance was set aside for future capital plans and maintenance, they did not develop a multiyear financial plan or a capital plan to identify, prioritize and fund those needs and guide budget development and decisions. Specifically, the Board:
- Maintained more unrestricted fund balance than allowed by the Town’s policy in most of the Town’s main operating funds. The Town’s policy limits unrestricted fund balance to 25 percent of the next year’s budget to ensure taxpayers are not unnecessarily taxed and that excess funds are appropriately planned for and used. As of December 31, 2024, the Town had approximately $2.4 million in unrestricted fund balance, including amounts equal to 56 percent of the ensuring year’s budget in the general fund TW and 148 percent in the general fund TOV which are well above the Town’s 25 percent policy limit.
- Adopted unrealistic budgets and underestimated revenues in the three main operating funds during fiscal years 2020 through 2024 by a combined total of $3.4 million.
- Made $735,611 in unbudgeted transfers during fiscal years 2020 through 2024, which resulted in the appropriations being underestimated. However, when transfers were added back, appropriations were overestimated in the general fund TW and TOV funds, resulting in operating surpluses.
- Annually appropriated an average of $317,888 in combined fund balance between the three main operating funds from 2020 through 2024. However, these funds generated operating surpluses totaling $1.5 million during the audit period, resulting in $70,366 (4 percent) of the appropriated fund balance being used.
- Did not adopt a written multiyear financial plan or a comprehensive capital plan, limiting its ability to assess long-term financial needs, risks, and the affordability of future services or capital investments.
The report includes six recommendations that, if implemented, will improve the Town’s fund balance management, budgeting practices and long-term finical and capital planning. Town officials generally agreed with our recommendations and indicated they have initiated or plan to initiate corrective action. Appendix C includes our comment on an issue that was raised in the Town’s response letter.
This audit was conducted pursuant to Article V, Section 1 of the State Constitution and the Office of the New York State Comptroller’s (OSC’s) authority as set forth in Article 3 of the New York State General Municipal Law (GML). The audit’s methodology and standards are included in Appendix D.
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 OSC within 90 days, pursuant to Section 35 of GML. For more information on preparing and filing the CAP, please refer to the OSC brochure, Responding to an OSC Audit Report, which was provided with the draft audit report. The Board is encouraged to make the CAP available for public review in the Town Clerk’s office.