Audit Objective
Did the Board of Trustees (Board) of the Village of Fredonia (Village) routinely monitor financial operations and take appropriate actions to maintain the Village’s fiscal stability?
Audit Period
June 1, 2019 – August 21, 2025
Understanding the Audit Area
A village board should actively monitor financial operations to ensure that the village remains fiscally stable, complies with legal requirements, protects public funds and maintains transparency and public trust. The village board also should take appropriate action such as reducing expenditures, reviewing revenues for sufficiency and adopting financial policies, including fund balance and multiyear policies, when necessary. Oversight of financial activity is one of the Board’s fundamental responsibilities, because the Board is ultimately accountable to taxpayers and residents for how it manages public funds.
For the 2024-25 fiscal year, the Village’s budgeted appropriations totaled $11.6 million, which included general fund appropriations totaling $7.4 million, water fund appropriations totaling $2.2 million and sewer fund appropriations totaling $2 million.
Audit Summary
Although the Board told us that they routinely monitored financial operations – by reviewing monthly reports and conducting budget work sessions each year – the Trustees did not fully understand the Village’s financial condition and relied heavily on the Village Treasurer (Treasurer) for guidance. The Board did not take appropriate actions to maintain the Village’s fiscal stability, such as adopting structurally balanced budgets and written multiyear capital and financial plans and ensuring that the Treasurer filed annual statements and AFRs when required. As a result, the Village’s financial condition deteriorated over a six-year period from the 2019-20 through 2024-25 fiscal years.
Board members told us that they continually relied on appropriating fund balance (which represents the difference between revenues and expenditures accumulated over time) to finance general fund operations, avoid increasing real property taxes, or reduce operating expenditures. From the 2019-20 through 2024-25 fiscal years, the Board adopted budgets for the general, water and sewer funds with planned operating deficits that totaled $3 million over the past six years.
The Board’s budgeting practices caused unrestricted fund balance in the general, water and sewer funds to decline by more than $2.8 million from the 2019-20 through 2024-25 fiscal years. As of May 31, 2024, all three operating funds had unrestricted fund balance deficits, as follows:
- General fund, approximately $249,000
- Water fund, approximately $678,000
- Sewer fund, approximately $554,000
As a result, the Village did not have sufficient resources to fund 2024-25 operating expenditures and had to issue an $825,000 revenue anticipation note (RAN). When the RAN matured the following year, officials had to increase the Village’s real property tax levy by $1.7 million (55 percent tax increase) in the 2025-26 fiscal year to repay the RAN and to balance recurring revenues with recurring expenditures.
The Board also did not develop or adopt written comprehensive multi-year financial and capital plans to address the Village’s long-term operational and capital needs. In addition, the Board did not ensure that the Treasurer filed an annual statement with the Village Clerk (Clerk), or properly filed the AFR with the New York State (NYS) Comptroller’s Office (OSC) over the past five fiscal years.
The report includes eight recommendations that, if implemented, will help improve the Village’s financial operations including taking actions to maintain the Village’s fiscal stability. Village officials agreed with our recommendations and have initiated or indicated they planned to initiate corrective action.
We conducted this audit pursuant to Article V, Section 1 of the State Constitution and OSC’s authority as set forth in Article 3 of the NYS General Municipal Law (GML). 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 GML Section 35. 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 Clerk’s office.