The Board-adopted procurement policy does not require the solicitation of competition before awarding professional service contracts. As a result, Village officials did not seek competition for nine of 10 professional service providers paid $733,497. Village officials also did not always obtain the number of quotes required by the Village’s policy when procuring purchase and public works contracts. In addition, the Board did not audit claims or create the office of Village claims auditor. Instead, two Board members audit Village claims individually prior to the monthly meeting of the Board. A warrant is present and approved by the Board during its monthly meeting. However, no claims along with supporting documentation are presented to the Board as a whole. Finally, the Mayor does not maintain custody of his signature stamps.

Four employees are authorized to collect water and sewer payments; however, there is only one cash drawer, which limits the ability to identify who made the collections. In addition, one of these employees has incompatible duties including generating bills and preparing and recording deposits. Also, Authority officials did not reconcile their property information to information from the County or municipalities for billing purposes, which resulted in the incorrect billing of 82 properties and a potential loss of $10,200 in annual revenue. Further, officials did not periodically verify water meter readings for wholesale customers for billings totaling $855,000. In the event of a shortage, there may be no way to hold a particular employee accountable. In addition, there is an increased risk that customer usage will not be properly billed and that money received will not be properly collected, recorded and deposited.

The Board and District officials did not ensure that budget estimates were reasonable. The Board adopted budgets for fiscal years 2013-14 through 2015-16 that resulted in overestimated appropriations totaling $24.9 million. The Board appropriated fund balance totaling $3.1 million from the 2012-13 to the 2014-15 fiscal years to finance the subsequent year's budget. However, because the District experienced operating surpluses totaling $20.5 million between 2013-14 and 2015-16, the appropriated fund balance was not used. Also, the Board routinely funded reserves with operating surpluses at year end, instead of funding the reserve through the annual budget process, which would have been more transparent to District residents. Additionally, District officials inappropriately used legally restricted reserve funds for operating cash flow.

The Board adopted budgets with estimated appropriations that exceeded actual expenditures by a total of $23.7 million, or an average of $4.7 million (4 percent), during fiscal years 2012-13 through 2016-17, which resulted in appropriated fund balance not being used. Because the Board overestimated appropriations, it appeared that the District needed to both increase its tax levy and use appropriated fund balance to close projected budget gaps. The Board increased the real property tax levy by approximately $9.6 million (11 percent) from 2012-13 through 2016-17 and appropriated $11.1 million (a yearly average of $2.2 million) in fund balance from the 2012-13 through 2016-17 budgets. Over the last five years, the District reported unrestricted fund balance that ranged from 4.0 percent to 7.4 percent of the ensuing year's appropriations. These amounts were above the 4 percent statutory limit in three years reviewed. During the same period, the Board also appropriated an average of $2.2 million of fund balance annually to finance District operations in the ensuing year, but did not use it. This allowed the District to circumvent the statutory limit on unrestricted fund balance in all years. After adding back the appropriated fund balance that was not used, the recalculated amount of unrestricted fund balance at year end ranged from 5.4 to 9.0 percent of the ensuing year's appropriations.

District officials have established adequate procedures to ensure that claims are sufficiently documented and supported, are for legitimate District purposes, and are audited and approved before payment. We reviewed 118 claims totaling $213,873 to determine whether they were properly supported, audited and approved before payment. We noted minor deficiencies, which we discussed with District officials. We commend District officials for establishing effective procedures for processing District claims.

Three employees were overpaid by $1,433 during the audit period. This occurred because the Board did not establish the terms and conditions of employment or authorize specific salaries for several years for the three employees. In addition, the Treasurer functioned as the payroll clerk and was responsible for processing payroll and entering the annual salary information, including pay increases, into the payroll system. Specifically, the Treasurer's salary was overpaid by $1,089. In addition, for 2015-16, the Treasurer overpaid the Superintendent's secretary by $198 and the attendance clerk by $146. These overpayments, as well as the overpayments that the Treasurer received, were all a result of the Treasurer inaccurately inputting annual raises into the payroll system as 2.4 percent instead of 2 percent. Finally, the Treasurer received, used and was paid for leave time she was not entitled to valued at $4,070. This occurred because the Board did not provide clear and specific guidance concerning the terms and conditions of employment for all employees, including salary and benefits. In addition, District officials did not review the leave accrual balances paid to the Treasurer on her departure for accuracy.

The significant revenue and expenditure projections in the proposed budget are reasonable. City officials are projecting an operating surplus of $3.26 million in the general fund, a $38,615 surplus in the water fund and a $36,751 surplus in the golf and recreation fund. These three funds are projected to have a combined unassigned fund surplus of $448,951 by 2017 year end, a significant improvement from the previous year. The City has budgeted $1.96 million for building permit revenues, an increase of $53,000 over the 2017 estimate. City officials estimate $675,000 in termination payments, including $625,127 for employees retiring from the Police Department, and intend to use appropriated general fund balance to cover these costs. For 2017, the City projects an operating surplus of $38,615 in the water fund that will decrease the unassigned fund balance deficit to $141,641. For 2017, the City projects an operating surplus of $36,751 in the golf and recreation fund that will decrease the unassigned fund balance deficit to $369,649. City officials did not fully implement the recommendations in our prior budget review. The City's proposed budget complies with the tax levy limit.

The President did not enforce the bylaws and the bylaws did not adequately segregate the Treasurer's duties. In addition, the Department officials have not adopted written financial policies or procedures addressing cash receipts, disbursements, claims processing or fundraising accountability. As a result, Department officials did not provide adequate oversight of the Department's financial activities. Revenues were collected by various Department officials and were not adequately documented to indicate the amount and source of the money received. Duplicate receipts were not issued for any collections or remittances. The Treasurer's duties were not segregated as he made all deposits, performed all recordkeeping functions and prepared bank reconciliations without independent oversight. The Treasurer did not file an annual report of revenue and expenses with the Secretary as required. The Treasurer provided monthly oral, rather than written, reports to the membership of revenues, bills to be paid and cash balances, but individual claims were not reviewed prior to the payment approval. The Board did not perform an audit of the Treasurer's records even though an audit is required every six months. The Department does not have a code of ethics as required by statute. Finally, the Department did not obtain required licensing for its games of chance, purchase dispensing machines and bell jar tickets from licensed vendors, maintain records and report the results to the NYS Racing and Wagering Board as required.

The District needs to improve its budgeting practices to ensure that budgets are accurate and take action to address the reasonableness of fund balance, including reserves. The Board and District officials consistently overestimated appropriations by an average of $3.7 million, or 9 percent, leading to average annual surpluses of $1.2 million. District officials appropriated an average of $3.2 million in fund balance each year which was not needed to finance operations. When unused appropriated fund balance was added back, the District's recalculated unrestricted fund balance exceeded the statutory limit by 7 to 9 percentage points. In addition, the District maintains seven reserves totaling $15.6 million as of June 30, 2016, three of which, totaling $14.8 million, appear to be overfunded.

District officials established effective controls over non-payroll cash disbursements by segregating duties and providing management oversight, so that no individual controls all phases of a transaction. District officials have also adequately segregated wire transfer duties. The Treasurer initiates wire transfers through on-line banking software and the Deputy Treasurer or Business Administrator approves the wire transfers. However, District officials allow all three third party administrators (TPAs) to electronically withdraw funds for benefit claims from a District bank account. District officials allow TPAs who process health, dental and prescription claims on the District's behalf to electronically withdraw funds from a District bank account. GML does not provide authority for the District to allow the TPA to directly access District bank accounts, irrespective of whether the Treasurer authorizes the withdrawal.

The Village paid approximately $3 million for overtime wages, with $2.2 million or 72 percent paid to the police department. Because the police department's management monitored overtime, we were able to determine that over 50 percent of the police department's overtime was due to staff shortages. Based on the overtime hours that resulted from the shortages and the cost of a new officer, we estimate that the Department could hire five new officers without increasing overall costs. With a decrease in overtime, sick time may also decrease. Although the collective bargaining agreements (CBAs) elaborate on leave time accrual records, there are no written policies or procedures governing how leave time accrual records are maintained or who is responsible for monitoring the balances. As a result, 27 out of 50 employees we reviewed (54 percent) carried over vacation leave from year to year even though it was not permitted by their CBAs.

The Board has not adopted comprehensive written policies or adequately segregated financial duties to properly monitor banking activities. Although our review did not indicate any inappropriate banking activity, we found payments were made without Board approval. Further, the Board did not provide sufficient oversight over the assistant whose duties were inadequately segregated. As a result, there is an increased risk that cash payments or electronic transfers may be made for inappropriate purposes and not detected in a timely manner.

The Treasurer did not maintain adequate accounting records to report the summer recreation program's (Program's) financial activity. The Treasurer did not maintain records to track the types of revenues received (e.g., registration fees, field trip fees and concession sales) and disbursements (e.g., payroll, supplies, field trip costs and candy) made by the Program. The Treasurer also did not prepare and provide monthly trial balances, budget-to-actual reports or a statement of cash balances to the Commission Board. Additionally, the Treasurer has not filed an annual update document with OSC since 2004. In addition, the Board cannot ensure that all Program collections were deposited. The Youth Director was not able to provide us with documentation to support the 30 deposits he made into the two checking accounts totaling $83,171 for registration fees, field trip fees and concession sales. The Youth Director stated that he disposes of all Program documentation upon completion of the Program each year. He did not issue duplicate press-numbered receipts when collecting fees for participants or retain any documentation to support any of the collections he received and deposited. The Board did not establish pay rates for Program employees. All Program employees were paid in accordance with salary schedules prepared by the Youth Director. Although Program employees were paid in accordance with the salary schedules, by allowing the Youth Director to set salaries, there is a risk employees will not be paid at rates in accordance with the Board's expectation. While it is acceptable for the Director to propose a salary schedule, it should be reviewed and approved by the Commission. Furthermore, the Board should not allow the Director to establish his own salary.

The Board needs to better manage fund balance, improve its budgeting practices and address the reasonableness of reserves. For the 2013-14, 2014-15 and 2015-16 fiscal years the Board overestimated appropriations by $4.4 million (9.2 percent). District officials also appropriated $1.5 million of fund balance that was not needed to finance operations because the District's budgeting practices produced operating surpluses totaling $2.2 million. When unused appropriated fund balance is added back, the District's recalculated unrestricted fund balance exceeds the statutory limit. As a result the District's tax levy was higher than necessary. Further, while the Board has adopted a reserve fund plan that discusses reserve funding levels, the plan does not include any specifics regarding the use of the reserves. In addition, the District is improperly retaining $1 million in the trust and agency fund for Other Post-Employment Benefits (OPEB). School districts do not have authority to reserve or set aside money for this purpose. The District is also inappropriately holding cash in the debt service fund, rather than using it to help pay the related outstanding debt or reduce the tax levy. Finally, three reserves may be overfunded.

The Board needs to continue improving its management of fund balance to ensure financial stability. From 2011-12 through 2014-15, total fund balance decreased by $18.9 million (77 percent), from $24.4 million as of June 30, 2012 to $5.5 million as of June 30, 2015. Although fund balance has since improved, the Board should adopt a fund balance policy, adopt and monitor sound budgets and monitor and update its multi-year plan. From 2011-12 through 2014-15, unassigned fund balance decreased to $16,577, or 0.01 percent of the ensuing year's budget. In 2015-16, the Board adopted a budget that enabled the unassigned fund balance to recover to $9.9 million, or 3.2 percent of the 2016-17 budget.

We identified a total of $32,179 in questionable and inappropriate payroll payments and unaccounted for cash receipts. Because the Board has not established proper controls over payroll, the clerk to the Supervisor (clerk) overpaid herself $13,940 for unauthorized direct deposits and inappropriate withholdings for retirement and health insurance. In addition, the clerk was paid for 482 hours of leave valued at $8,235 that she had not earned and was not entitled to. The Board's failure to establish comprehensive written policies and procedures for processing payroll and maintaining leave time accruals resulted in a lack of segregation of duties and sufficient compensating controls. This allowed the clerk to control all aspects of the payroll process and to overpay herself without detection. The Board and Supervisor also allowed the clerk to control most aspects of the cash receipts process and did not provide adequate oversight of her work. As a result, the clerk did not deposit a total of $10,004 in collections; Town officials cannot account for this shortage. The Board and Supervisor's failure to provide proper oversight of the clerk's financial activities resulted in the apparent misappropriation of Town money. There were likely additional cash receipts that were never recorded and deposited that would be almost impossible to find because of the Town's inadequate controls and records. Subsequent to our fieldwork completion in September 2015, we referred this matter to the Essex County District Attorney. As a result, the clerk was arrested and pled guilty, on August 10, 2017, to grand larceny, official misconduct and tampering with public records.

The Board's adopted budgets overestimated appropriations in the 2012-13 through 2015-16 fiscal years. As a result, the District had significant operating surpluses which caused the fund balance to exceed the statutory maximum of 4 percent of the ensuing year's budget. The Board appropriated fund balance that was not needed to fund the budget and reduced fund balance levels to within the statutory limit. By routinely using these practices, the Board and District officials have, in effect, circumvented the 4 percent fund balance limit; may have levied more real property taxes than necessary; and retained large amounts of funds without full disclosure and transparency. District officials also created unnecessary budget encumbrances. Finally, the District's tax certiorari reserve, which totaled approximately $1.2 million at the end of the 2015-16 fiscal year, is undeterminable. Most of the reserve is based on old claims, going as far back as 2005 with no evidence of continued proceedings and appear to have been abandoned. Because no information was available for 2015 and 2016 claims, we concluded that an adequate amount of the tax certiorari reserve cannot be determined. Therefore, some of the moneys in this reserve should actually be included in unrestricted fund balance.

The Board has not effectively managed Town finances. The Board did not develop a long-term financial or capital plan, including a plan for reserves, or require a cash flow analysis. As of the end of 2016, the general fund's unrestricted fund balance totaled more than $3.3 million, or 11 times its real property tax levy and 101 percent of the ensuing year's appropriations. Although the Board reduced general fund appropriation estimates by $387,239 (11 percent), it also reduced revenue estimates by $222,821 (8 percent) even though prior year revenues had been underestimated. In addition, the Board increased appropriated fund balance by $60,582 (11 percent). As a result, fund balance will likely increase again in the ensuing year. The Board has not provided sufficient fiscal oversight of the Town's water operations. As a result, there are no procedures for the accounting records to be maintained for each water district or extension to ensure that costs are equitably and appropriately distributed. Town officials are not performing reconciliations to determine whether all properties in each district or extension are paying the appropriate amounts, such as comparing properties on tax rolls to properties billed for water, comparing district boundaries to properties assessed charges for each district, and comparing properties receiving water to those metered and paying for usage. The Board has not adopted IT policies to sufficiently protect its IT assets and did not ensure the adopted computer use policy was enforced or monitored. In addition, the Board did not ensure that adequate written agreements had been executed with the IT service provider or banks used for online banking. Town officials also did not adequately segregate online banking duties and did not dedicate a separate computer for online transactions to limit access to online bank accounts. Town officials did not generate or review the audit trail, exception and change reports, and the Board did not adopt a disaster recovery plan.

The Board needs to improve controls over the Library's cash disbursement process. Although the Board approved warrants that were prepared by the senior clerk, it did not audit and approve claims before they were paid. In addition, the Board adopted a policy granting check signing authority to seven Library staff members and officials, thereby curtailing the Treasurer's duties and diminishing an important segregation of functions designed to help ensure that Library funds are disbursed appropriately. Furthermore, while a petty cash fund is generally used for small, infrequent purchases, the Board established a petty cash fund at $25,000 rather than at the lowest amount practical. As a result, Library officials disbursed $146,877 from the petty cash checking fund for routine operating expenses during the audit period without adequate oversight. Finally, the Board did not monitor and amend its budget, which allowed budget line items to be routinely overexpended and purchases to be made without available appropriations.

Library officials need to improve controls to ensure that Library IT assets are adequately safeguarded. The Board did not adopt any policies to protect its IT assets, establish written guidelines defining the roles and responsibilities of the Town's IT department and Library staff for the Library's IT environment or develop a disaster recovery plan. Additionally, Library officials did not have a comprehensive hardware inventory and can more effectively and efficiently manage software. As a result of these deficiencies, there is an increased risk that the Library's IT data and components may be lost or misused and that Library officials will be unable to resume operations in the event of a system failure.