District officials have not implemented adequate IT access controls for safeguarding personal, private and sensitive information (PPSI) in the financial system (FS) and student information system (SIS). We found unnecessary FS and SIS user accounts, including a built-in FS account that was not removed and other accounts for former employees, former long-term substitutes and current employees who do not need access. We also found questionable FS access and suspicious access attempts that were not detected and investigated by officials. In addition, we found unnecessary FS permissions for creating employee records and viewing employees' PPSI and unnecessary SIS permissions for changing student grades, assuming SIS identities and viewing students' PPSI. Unnecessary accounts and permissions increase the risk of unauthorized access and potentially harmful modification, use or exposure of PPSI. While we found no evidence of abuse of these accounts and permissions, our ability to review FS and SIS activity is limited due to deficiencies in the systems' audit logging capabilities. However, officials did not effectively use all information available in the audit logs to properly monitor FS and SIS use. This essential control would help to safeguard PPSI from potential unauthorized activity that may not be detected and addressed in a timely manner.

The City's charter requires that the Commissioner audit all claims. However, we found that the Commissioner did not audit claims in accordance with charter requirements. Instead, claims were reviewed and verified by the purchasing and finance departments at different stages in the claim payment process. Because the claims processing function was decentralized, with each department maintaining its own documentation, a complete claim voucher packet was not kept in one central location. Except for minor discrepancies, which we discussed with City officials, we found that the claims we reviewed were for appropriate City purposes, properly itemized, supported and approved before payment. However, we did not find any evidence that the Commissioner audited these claims, as required by the charter.

The Board did not properly oversee and monitor ambulance billing and collection. Moreover, the Board allowed two third parties to collect Village money. We identified charges for ambulance services that were inaccurate, unbilled, uncollected, unenforced and unreconciled. As a result, approximately $13,900 in potential revenue to the Village was not billed ($6,295), underbilled ($5,782) or remained uncollected ($1,830). This occurred, in part, because the Board had not adopted written policies and procedures for ambulance service billing and collection.

The clerk properly billed, collected, recorded and deposited collections. However, we found that the Authority did not have written policies or procedures governing the application of billing adjustments and late fees and penalties added to customer accounts. As a result, the clerk made billing adjustments and adjusted late fees and penalties to customer accounts without the Board's authorization or adequate oversight and guidance.

Officials properly oversaw the water testing performed by the public water supplies (PWS) and generally performed surveys as required. They addressed water quality issues and properly reported water test results to the New York State Department of Health (DOH); however, we identified opportunities for improvement. Officials did not issue notices of violations to PWS in three of 13 instances when operators failed to comply with regulations. Furthermore, sanitarians did not consistently document that they performed analytical reviews of the operators' Monthly Operating Reports. In addition, violations identified in completed surveys were not always reported to DOH, officials did not provide documentation that all violations were corrected and one survey was not completed in a timely manner.

The County procured purchase and public works contracts that exceeded the competitive bidding thresholds in accordance with General Municipal Law and also procured purchase and public works contracts that did not exceed the competitive bidding thresholds in accordance with the County's purchasing policy. However, the County did not procure professional services in accordance with the County's purchasing policy. The County did not use a request for proposal to procure services that were provided to the County during our audit period from 11 service providers who were paid a total of $1,551,961 for these services. As a result, the County may have paid more than necessary when obtaining these services.

The Board and District officials did not properly manage reserve funds. Further, the Board and District officials did not follow the District's reserve policy and were unable to provide us with evidence that they documented the financial need or purpose for the unemployment insurance, retirement contribution, insurance and tax certiorari reserves (with balances totaling approximately $1.2 million), the conditions under which these reserves will be used or replenished and the rationale used to determine each of these reserve's appropriate funding level. In addition, District officials were unable to provide us with evidence showing that they periodically assessed the reasonableness of reserve balances. While the Board annually budgeted for the use of debt reserve funds, these funds were not used to finance related debt payments because of annual operating surpluses. Further, as a result of these surpluses, money retained in the unemployment insurance, retirement contribution, insurance and tax certiorari reserves was not used to finance related reserve expenditures. As a result, these reserves were overfunded.

The Board and District officials did not develop reasonable budgets or effectively manage the District's financial condition to ensure that the general fund's unrestricted fund balance was within the statutory limit. District officials overestimated operating expenditures in each of the last three fiscal years totaling about $5.5 million (5.3 percent) and appropriated nearly $5.6 million in fund balance, most of which was not needed to fund operations. Further, District officials were unable to demonstrate why $4.2 million in fund balance should be restricted in the debt service fund. As a result, the District's recalculated unrestricted fund balance annually averaged about 17.5 percent of the ensuing years' budgetary appropriations, which is 13.5 percentage points more than the statutory limit. Finally, the Board has not developed a formal policy for the reserves which resulted in the workers compensation, unemployment insurance, employee benefit accrued liability and tax certiorari reserves being overfunded by about $1.4 million.

The Board and District officials overestimated budgeted appropriations by 9 to 12 percent – ranging from $9.8 to $12.4 million – for three of the four years in our audit period (2012-13 through 2014-15). They also appropriated $14.9 million in fund balance during that time, which was not needed to finance operations because the District generated $22.8 million in operating surpluses during those three years. When adding back the unused appropriated fund balance, the District's recalculated fund balance exceeded the statutory limit by up to 4.7 percentage points. The District also retained an annual average of $1.1 million of unrestricted funds in the debt service fund without using these moneys for debt payments, and its retirement contribution reserve of $16.9 million is overfunded. District officials properly reduced the 2014-15 unrestricted fund balance to the statutory limit by transferring $16.3 million into the capital project fund the following year, thereby using all the fund balance that had been appropriated. In addition, they have not increased the tax levy in the past three years. To remain within the statutory limit and control operating surpluses, District officials must adopt budgets that align more closely with historical expenditures and discontinue appropriating fund balance that will not be used.

District officials did not comply with the Board's computer control policy. The Board has not annually designated a system administrator. Instead, the Board annually appoints a Network Systems Manager who performs these duties. As a result, there may be confusion as to who is responsible for financial software administration. Also, the District does not have procedures outlining how user access rights should be established or modified and permissions are not reviewed quarterly to ensure a proper segregation of duties. Further, change reports are not provided to the Assistant Superintendent for Business monthly and audit trails are not reviewed or provided to the Board. We looked at all 50 users of the District's financial software and found that three users, including the Assistant Superintendent for Business, were granted system administrator access even though it was not required to perform their job duties. Also, District officials provided leave record, vendor record, budget transfer and personal private and sensitive information access rights to 18 users that did not require it to perform their job duties. Finally, District officials do not review audit logs and change reports or provide audit trails to the Board on a quarterly basis.

The Board has not effectively managed fund balance. Town officials have adopted budgets that consistently overestimated expenditures and underestimated revenues. Expenditure variances have averaged 5 percent for the general fund and 9 percent for the highway fund over the last three fiscal years while revenue variances have averaged 16 percent and 10 percent, respectively. The consistency of these surpluses has driven fund balance amounts to significant levels of excess. Available fund balance in the general fund and the highway fund have consistently been near or over 100 percent of actual expenditures for the last three fiscal years and are projected to increase at the end of 2016. The total available fund balances are more than enough to fund operations for an entire year. Furthermore, included in the fund balance are two certificates of deposit, totaling approximately $437,000 at the end of 2015, held at a local bank for over 10 years that have not been needed for cash flow purposes.

The Board budgeted $678,000 of appropriated fund balance in each budget for fiscal years 2013-14 through 2015-16. However, actual operations resulted in 71 percent of the appropriated fund balance remaining unused because of overestimated expenditures. When adding back unused appropriated fund balance, the District's recalculated unrestricted fund balance was between 4.9 and 7.3 percent of the next year's budget in fiscal years 2012-13 through 2014-15, exceeding the statutory limit. Additionally, two of the District's reserves, totaling $900,000, may be overfunded and potentially unnecessary.

District officials have not effectively managed fund balance and have allowed unrestricted fund balance to exceed the statutory limit for the past three fiscal years by an average of $2.7 million. As of June 30, 2015, unrestricted fund balance totaled $3.8 million and was 17 percent of 2015-16 budgeted appropriations, exceeding the statutory limit by $2.9 million. Although District officials appropriated fund balance each year, none of it was needed because District officials overestimated appropriations each year by an average of $1.1 million or 5 percent. As a result, the District realized operating surpluses each year and unrestricted fund balance continued to increase. At the same time, District officials have allowed reserve balances to accumulate to excessive levels and have consistently levied taxes for expenditures that could have been paid for with reserve funds. District officials have accumulated more than $5.8 million in 10 general fund reserves and have allowed more than $700,000 to sit idle in the debt service fund. The Board has not developed a written reserve fund policy or documented its rationale for setting aside funds in reserves, optimal funding levels or conditions under which the reserves would be used.

District officials did not ensure cafeteria operations were financially self-sufficient. The District has incurred operating deficits that averaged approximately $10,000 annually from 2013-14 through 2015-16. Furthermore, District officials paid cafeteria employee benefits annually from the general fund for the same period. Had these expenditures, which averaged $169,000 annually, been paid from the school lunch fund, the average annual operating deficit would have increased to almost $179,000. Additionally, as of June 30, 2016, the school lunch fund owed the general fund $100,000 for interfund loans, which exceeded the school lunch fund's available cash and receivable balances. Therefore, these funds are unlikely to be paid back. Further, subsidies from the general fund were not budgeted, which reduced transparency. Finally, District officials did not perform a cost-per-meal analysis and the District's productivity level for meals per labor hour is below the industry average.

District officials have not effectively managed fund balance and have allowed unrestricted fund balance to exceed the statutory limit for three fiscal years by 12 to 17 percentage points. As of June 30, 2015, the District's unrestricted fund balance totaled more than $1.3 million and was 20 percent of the 2015-16 budgeted appropriations, exceeding the statutory limit by more than $1 million. Although District officials have appropriated approximately $420,000 of fund balance each year, these funds were not needed because District officials consistently overestimated appropriations by an average of $710,000 or 11 percent. When unused appropriated fund balance is added back, unrestricted fund balance exceeded the statutory limit by 18 to 23 percentage points. Furthermore, District officials overfunded one reserve by approximately $250,000. Based on the 2015-16 and 2016-17 budgets, these budgeting practices have continued. However, District officials have taken steps to reduce unrestricted fund balance. As of June 30, 2016, unrestricted fund balance was approximately $527,000 or 8 percent of the subsequent year's budget.

The Board has not established adequate written policies or procedures for procuring professional services. The School's written purchasing procedures require School officials to seek competition for the purchase of commodities, but specifically exempts the procurement of professional services from price competition requirements. As a result, School officials did not use competitive methods when procuring professional services. However, we reviewed the procurement of professional services obtained from eight vendors who received payments totaling $920,000 during our audit period and found that, although School officials did not seek competition, the Board entered into detailed written contracts with the service providers. The providers also submitted adequate documentation when requesting payment.

The three towns of Hadley, Day and Lake Luzerne did not enter into an agreement to govern the Commission and the Board did not establish policies and procedures to help ensure it provided adequate oversight of the Commission's financial operations. Further, the towns' governing boards did not establish policies or procedures over the Commission's operations outlining the Board's and the towns' roles and responsibilities. Payroll expenditures for 2015 totaled $61,667 and represented 70 percent of the Commission's annual budget. However, the Board did not adopt the annual budget or set and approve salaries, wages and wage increases. As a result, Board members did not have a clear understanding of the effect that payroll expenditures had on the Commission's finances and were unable to effectively govern Commission operations. Although the Town of Lake Luzerne's board audits Commission claims before payment, the Board did not approve any of the Commission's purchases or claims. The Director did not always maintain cash receipt records and the records that were maintained did not always contain accurate or sufficient information. According to the records available, we found that between $1,087 and $1,487 of collections were not remitted to the bookkeeper for deposit. As a result, the Board was unable to determine if all receipts collected were remitted to the bookkeeper, accurately recorded and deposited intact and in a timely manner, or whether the Commission collected all the money it should have for these trips.

District officials did not maintain fund balance in accordance with statutory requirements. The fund balance in the general fund increased about $1.4 million from the beginning of 2014-15 to the end of 2015-16. Unrestricted fund balance exceeded the statutory limit for each of the last four years and increased to 16.4 percent as of June 30, 2016, or nearly $979,000 over the legal limit. Although the Board appropriated $100,000 of fund balance to finance the 2014-15 budget and $62,817 to finance the 2015-16 budget, the District generated operating surpluses totaling $411,404 in 2014-15 and $1,020,764 in 2015-16. District officials told us they budget conservatively to protect the District from unforeseen events and attributed variances in instructional and special-education salaries and benefits primarily to teacher contract negotiations, staff resignations and retirements that were not known at the time of budget preparation. In addition, certain grant funding was not approved prior to budget preparation resulting in some salaries being budgeted in the general fund and expensed in the special aid fund.

The Board did not ensure that School officials and employees did not have a prohibited interest in the School's contracts. We found that certain provisions of the School's bylaws and code of ethics appear to be inconsistent with the School's charter and the provisions of General Municipal Law (GML) Article 18. We found that one Trustee could potentially have a prohibited interest pursuant to GML. The Trustee and the School entered into an agreement in the form of a promissory note in which the Trustee lent the School $40,000 to assist with the School's budget shortfalls. The note is to be repaid on or before March 1, 2017 and, the Trustee is to receive interest on the unpaid portion of the principal sum at the rate of 2 percent per year. However, the Trustee has not collected any of the interest owed on the promissory note. The Trustee has declined to accept the accrued interest from the date of inception, March 1, 2014 to June 30, 2015 due to the School's financial condition. If the Trustee decides to continue to decline the interest on the unpaid portion of the principal sum for the remainder of the promissory note term, the Trustee would not have a prohibited interest in the contract. The Board and School officials have not implemented appropriate IT policies and procedures for user accounts, acceptable use, breach notification and data backups. The Board also has not adopted a disaster recovery plan. As a result, IT assets are at risk for unauthorized, inappropriate and wasteful use, which could cause the School to have interruptions in IT services.

The financial activities of the Tax Collector's Office were generally well maintained. During the audit period, when taxpayers paid their tax bill, the Tax Collector recorded payments in the computerized accounting system as payments were received. We compared tax collections against the tax roll, warrant, various bank records and accounting records for 2015 and 2016. We determined that the Tax Collector accurately recorded tax payments and that, with minor exceptions that we discussed with the Tax Collector, deposits were made and collections remitted to the Supervisor and County Treasurer within the statutorily required time limits.