Both Justices ensured that fines and surcharges collected were accurately reported to the Justice Court Fund (JCF) and the correct amount was turned over to the Supervisor each month. However, neither of the Justices ensured that monthly accountabilities were accurately completed because they did not ensure that all bank accounts were reconciled each month. In addition, although the Town's Budget Officer performed an annual audit of the Court records and reported the results to the Board, the Board did not communicate the audit results to the Justices. The clerks collect and record all financial activity using a transaction register. Each month they trace daily deposit totals from the transaction register to the bank statement. The clerks and Justices ensure that the total reported to the JCF matches the total collected and turned over to the Supervisor. Both clerks also perform a similar review for bail money received and disbursed. While this review helps ensure transactions are recorded, deposited and fines remitted to the Supervisor, this is not a complete accountability analysis. By comparing only current month activities, the clerks (and Justices) do not know whether or not their cash on hand is sufficient to cover outstanding liabilities, such as pending bail.

The Board and Supervisor should improve their management of the Town's fund balances. The Town has accumulated fund balance totaling $358,706 in the general fund and $515,112 in the highway fund without clear plans for the use of these accumulated funds. Town officials have identified potential uses for the funds including needed repairs at the highway garage or road improvements, but have not developed financial plans to address these needs. In addition, Town officials have not planned for the Town's established reserves to fund these needs.

Town officials did not establish policies and procedures over the use of the Town's credit cards. The Town had a total of 24 credit cards during our audit period with total credit limits exceeding $101,000. The credit limits on the individual cards ranged from $1,000 to $20,000. Four of these credit cards had credit limits of $10,000 or more. These large credit limits increase the risk of significant invalid purchases being made and going undetected. Even though Town officials review the credit card statements on a monthly basis, a non-Town purchase would have already occurred.

The Justices provided oversight of Court activity; however, they could improve their oversight to further safeguard Court money. We sampled 42 various Court transactions and determined that they were properly accounted for because these transactions were recorded as the Justices adjudicated and the associated Court money was deposited and reported to the Justice Court Fund. We also tested 13 disbursements and found that, although they were properly disbursed to appropriate parties, the Justices allow the Clerk Manager to sign all disbursement checks. One Justice explained his time constraints would make it difficult to sign all the checks in a timely manner given the large volume of returned bail each month. However, if the Justices signed the checks it could serve as a preventative control and further improve their current oversight of disbursements.

The Board adopted unrealistic budgets for the general fund and highway fund during the 2013 through 2015 fiscal years. The Board overestimated appropriations by more than $925,000 (33 percent) for the general fund and $820,000 (33 percent) for the highway fund, and appropriated unneeded fund balance. The Board's budgeting practices made it appear that the Town needed to both raise taxes and use fund balance to close projected budget gaps. However, the general fund realized operating surpluses in each of the last three fiscal years, totaling $456,597. Therefore, none of the appropriated fund balance was used and the general fund's unrestricted fund balance increased for the period. In addition, the highway fund realized a $42,801 operating surplus during the 2013 fiscal year and operating deficits of $14,291 in 2014 and $8,354 in 2015, which were smaller than planned. As a result, the Town used less than 3 percent of the appropriated fund balance during those three years and the highway fund's unrestricted fund balance increased. While we found that the 2016 budgeted appropriations for the general and highway funds were more realistic than in recent years, we still project that the Board has overestimated appropriations, which will likely result in the Town not using the entire appropriated fund balance.

Town officials did not effectively manage the Town's financial condition. The Board has not established goals for the level of unrestricted fund balance to be maintained, which contributed to the appropriation of imprudent amounts of fund balance. From 2013 through 2015, officials used one-time financing sources to fund recurring expenditures, adopting budgets that were not structurally balanced by appropriating fund balance totaling $567,500. As a result, the Town's four major operating funds (town-wide general, part-town general, town-wide highway and part-town highway) have experienced combined operating deficits in each of the past three years, totaling more than $310,000. These operating deficits caused the combined unrestricted fund balance for the four major operating funds to decline by $141,067, from $228,376 as of December 31, 2013 to $87,309 as of December 31, 2015. The combined restricted fund balance (reserves) for these funds declined by $40,493 during the same period.

The Justice should improve controls to ensure Court money is adequately safeguarded. Because the Court uses electronic case files in lieu of paper files, the original tickets issued by police officers, correspondence and supporting documentation are scanned into the electronic case files. The Court's actions on the tickets are documented by directly importing data from the Court's accounting software into the case files that are stored on the Court's computers. The Justice and the clerk access the case files by entering their own respective passwords on the Court's computers. The Justice's adjudication is documented in the case files through the use of comment boxes. However, both the Justice and the clerk have the ability to modify or delete these comments without the original data being documented in the case file.

The Board did not provide sufficient oversight of the Town's financial operations. As of December 31, 2016, the unrestricted fund balance in the general town-wide fund was about $1.2 million, or 273 percent of the ensuing year's budget. This was caused partly by the lack of a policy for the level of fund balance to be maintained. In addition, the Board did not adopt multiyear financial or capital plans to address long-term priorities. Further, the Board hired an accounting firm to perform bookkeeping and payroll duties without a written contract or proper oversight from the Supervisor and the Board did not perform annual audits of the books and records of officers or employees who received or disbursed money. Because the accounting firm kept the records off site, the Town's financial records were not available for public inspection during reasonable times as required by law. In addition, the Board did not receive necessary information such as detailed statements of money received and disbursed and the firm performed payroll duties without oversight. As a result of the lack of financial oversight, the Board levied higher property taxes than necessary and its ability to effectively manage the Town's finances was severely diminished.

The Justices did not accurately and completely collect, record, deposit, disburse or report Court money in a timely manner. Neither Justice properly pursued collections for those cases where defendants failed to appear in Court. Over 230 Vehicle and Traffic Law (VTL) cases from 2011 through June 2016 remained outstanding. Based on the Town's average dismissal rate and average fines for adjudicated VTL cases, we estimate these outstanding tickets equate to approximately $33,000 in unearned revenues for the Town. In addition, although the current Justice properly updated and closed cases previously entered into the accounting software by the former Justice, she did not record new cases in the accounting software. The current Justice did not deposit money in a timely manner. The current Justice filed six of the seven monthly reports to the Justice Court Fund (JCF) late, by an average of 62 days. Furthermore, neither Justice properly reported closed cases to the Department of Motor Vehicles (DMV). During our audit period, 55 cases were reported to JCF as closed, while five were reported to DMV as disposed.

We found that, as of May 31, 2015, a total of $5,681 in documented collections received during the audit period had not been deposited into a Court bank account. Further, the Court did not report collections totaling $5,999 to the Justice Court Fund, and some collections were deposited up to 14 days beyond the required 72 hours. Additionally, as of May 31, 2015, Justice Smith's fine and fee account had a cash shortage of $3,250 and his bail account had an unidentified balance of $152, and Justice Durant's fine and fee account had a cash shortage of $3,060 and his bail account had an additional cash shortage of $250. These discrepancies occurred because the Justices did not ensure that bail records were accurate and complete, and bank reconciliations and accountability analyses were not performed for the Court bank accounts. Further, the Justices did not establish policies and procedures for enforcing unresolved traffic tickets, and did not compare pending-ticket reports from the DMV to their caseload activity. The Board also did not audit the Justices' records as required, which could have helped identify the missing funds and other deficiencies found during our examination.

The Justice did not deposit, record and account for Court moneys accurately and in a timely manner. In addition, the Board did not audit the Court's financial records and reports or ensure sufficient controls were in place to prevent or detect fraud or abuse. As a result, based on the records available to us, we found a cash shortage of at least $6,073 occurred during our audit test period, which was the final three years of the Justice's six-year tenure. We also found that the Supervisor's financial records were not complete and not sufficiently monitored. The Supervisor did not create or provide the Board with budget-to-actual reports or statements of cash flows to enable the Board to sufficiently monitor the Town's financial position. Furthermore, the annual report was not filed timely and the Board did not audit the Supervisor's books and records as required. As a result, the Board does not have the financial information it needs to effectively monitor the Town's operations which increases the risk that errors or irregularities could occur and not be detected or corrected in a timely manner.

The Board could improve its fund balance management. Over the past 20 years, the Board accumulated money in the general fund in anticipation of an appeal of pending tax assessment cases. During this time, the general fund balance grew to more than $2 million at the end of 2008 in anticipation of having to pay significant sums for successful appeals. However, the appeals were settled in the Town's favor and the general fund accumulated fund balance totaled almost 4,600 percent of the 2008 tax levy of $45,391, (the equivalent of 46 annual tax levies). The Board has taken some steps to reduce its significant fund balance over the last 10 years. For example, a significant portion of the general fund balance (approximately $1.2 million) was used for infrastructure improvements. The Board authorized and constructed a new Town hall complex and a new highway garage in 2009 and 2010 using fund balance as the financing source and reduced the tax levy by nearly 95 percent from 2005 through 2009. Since then, the Board has adopted general fund budgets that included planned use of fund balance. However, the Board increased real property taxes to finance operations and its conservative budgeting practices nullified the Board's plan to spend fund balance as intended. As a result, general fund balance totaled $623,000 at the end of 2016, more than 950 percent of the tax levy and approximately three times actual expenditures that year. From 2014 through 2016, Town officials appropriated an average of $79,000 in general fund balance each year and spent a total of $25,800. This resulted in a 4 percent decrease in overall general fund balance over these years.

The Town lacked effective procedures to ensure water and sewer charges were accurately billed, collected and enforced. Town officials did not implement adequate compensating controls to reduce the risk involved in concentrating key water and sewer district financial responsibilities with the secretary. Although the Board generally adopted water and sewer rates, no one reviewed or approved the quarterly billing registers to ensure all water and sewer customers were properly billed. As a result, customers were not billed in accordance with the Board-established rates, resulting in customers being underbilled by $1,703. Delinquent customer accounts did not always include late payment penalties in accordance with Board policy.

As of October 2016, the Director Administration and Finance (Director) had issued credit cards to 57 employees. The cards had credit limits ranging from $500 to $90,000 with a combined total credit limit of $730,000, and eight individuals had credit limits in excess of statutory bidding thresholds and could make purchases without obtaining competition as required. Although the Director established credit limits for each card, he did not establish dollar limits for individual purchases, set daily limits or block certain types of vendors as required by the policy. As a result, cardholders can make purchases of any amount within their overall established credit limit from any vendor they choose, and the Town has little control over the volume and type of credit card purchases being made by employees. The Director and numerous department heads told us that employees are encouraged to use credit cards for virtually all purchases. Credit card purchases averaged $184,000 per month and totaled more than $3.8 million during the period January 2015 through September 2016. We reviewed credit card statements and supporting documentation for 1,135 credit card purchases totaling more than $607,000 made by five Town departments for a three-month period. We found discrepancies with 536 purchases (47 percent) totaling approximately $113,900 (19 percent).

We found that the Board could improve its oversight of the District's financial operations by updating District policies and procedures and then monitoring financial activities more closely to ensure that District personnel are adhering to its policies and procedures. The Board appointed a purchasing agent who presents them with purchasing recommendations. However, he does not provide the Board with the required quotes. When we asked the purchasing agent for this information, he stated that he does not retain the documentation. The District should have obtained multiple quotes in accordance with the purchasing policy for 11 purchases costing between $3,000 and $20,000, totaling $67,365. The District's procurement policy incorrectly exempts the District from seeking competition for professional services, with the exception of its statutorily-required annual audit – for which the policy appropriately requires a competitive request for proposal (RFP) at least every five years. We also found that the Board had not established a credit card policy that specifies authorized users, credit limits, types of purchases allowed, any required prior approval and documentation required to support each purchase. The District has not established written information technology (IT) policies or procedures for granting user access rights, has not developed formal back-up procedures or adopted an information breach notification policy. Finally, the Board had not adopted written procedures or proper internal controls over hall rentals.

We found that the Board did not provide adequate oversight to safeguard Department assets. The bylaws do not adequately segregate financial duties and instead assign them all to the Treasurer. They also do not provide for mitigating controls such as requiring someone other than the Treasurer to review and reconcile the bank account statements to the accounting records. Additionally, we found the financial provisions in the bylaws confusing and contradictory. For example, one section states that all purchases must be approved by an elected Department officer, then says approval is required for purchases over $25. Other sections set different approvers and differing amounts. Additionally, Department officials did not follow the purchasing requirements outlined in the bylaws. The bylaws are limited, and the Board has not developed any additional policies and procedures over financial operations to provide guidance in areas such as cash receipts and disbursements, purchasing and prior approvals, credit or debit card use or sufficient accounting records, reconciliations and reviews. Finally, the Board does not conduct an annual audit of the Department's records, as required by the bylaws. As a result of the Board's inadequate oversight, various control weaknesses put the Department's assets at greater risk of loss or theft.

The Treasurer, also serving as the purchasing agent, has the ability to submit requisitions, creating a situation where purchases could be requested, approved and received by the same individual. Although the Deputy reviews purchase orders (POs) for appropriateness, the reviews are subsequent to the purchase. Therefore, we reviewed 100 POs issued during our audit period, totaling $7.4 million, to determine whether they were independently authorized and for appropriate purposes. Except for minor discrepancies which we discussed with District officials, POs were independently authorized and purchases were for appropriate District purposes. However, the review of the Treasurer's purchases should occur prior to the purchase and by an individual in a higher position of authority that does not report to the Treasurer.

The Clerk-Treasurer did not accurately and completely account for, record and report all financial transactions in a timely manner. The inaccuracies prevented the Board from making informed financial decisions. Consequently, the Board was unaware of the Village's true financial position and adopted unrealistic budgets. In addition, the lack of accurate accounting records also increases the risk of loss or unauthorized use of Village funds. Because the Board did not perform an annual audit of the Clerk-Treasurer's books and records, these errors and deficiencies went unidentified and uncorrected.

The City's significant revenue and expenditure projections in the proposed budget are reasonable. The City faces potential increased salary costs when one of its expired collective bargaining agreements is settled. The City continues to budget minimal amounts for contingencies, which provides limited flexibility to address revenue shortfalls or unforeseen expenditures. The City's proposed budget complies with the property tax levy limit.

The Town of Deerpark, located in Orange County, issued debt totaling $868,000 to liquidate the accumulated deficit in the Town's general fund as of December 31, 2008. New York State Local Finance Law requires all municipalities that have been authorized to issue obligations to fund operating deficits to submit their preliminary budgets for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding. Based on the results of our review, we found that revenue and expenditure projections in the proposed budget are reasonable. The Town's general fund balance has continued to increase for the past five years, from $898,669 to $1,459,107 (62 percent). This is a result of overestimating expenditures and underestimating revenues. The Town's preliminary budget complies with the property tax levy limit.