BOCES did not properly oversee the Managed Technical Support cooperative service agreement (COSER), which resulted in errors in reporting aidable expenditures to the New York State Education Department (SED). Specifically, BOCES assigned staff who were not shared by two or more districts. As a result, BOCES reported aidable expenditures to SED for 62.7 full-time equivalent (FTE) district-based staff who were not eligible for aid reimbursement. Consequently, BOCES claimed $2.5 million in additional aid (on behalf of the districts) to which it was not entitled. In addition, BOCES did not charge all districts for services using the approved FTE method.

The Board and District officials have not developed adequate written policies and procedures governing the claims processing function. In addition, the Board did not develop a comprehensive job description that outlines the claims auditor's expectations and requirements. The claims auditor compares invoices against only the purchase orders, which does not always provide adequate documentation about the vendors' prices. The claims auditor does not compare invoices against quotes, bids or government contracts, and there is no policy that requires that these documents be attached to the claims. We found no indication that the claims auditor documented any exceptions or concerns she may have found.

The Board delegated its responsibility to a claims auditor who generally ensured claims were adequately supported, properly audited before payment and in compliance with District policies. The claims auditor verified that claims were supported by original documentation such as detailed invoices or receipts and that each claim had been properly authorized. Additionally, the claims auditor ensured there was evidence within the claims packets indicating that the District actually received the goods or services described in each claim. We commend the claims auditor and encourage the Board and District officials to continue with their efforts in ensuring that the claims audit process is working as intended.

The Department did not maintain an adequate recordkeeping system for the LOSAP attendance records and has not established procedures to ensure the information is organized and accurately recorded. Several types of attendance forms are used to track participation in LOSAP activities, including incident reports, call logs and activity sign-in sheets. We compared LOSAP attendance records with the participant activity reports for 22 volunteers. We found that volunteers' points were inaccurately recorded. Twelve volunteers were awarded 129 fewer points than they were entitled to and 10 volunteers were awarded a total of 87 more points than they were entitled to.

The Board should improve its oversight of financial activities. Although the Board has adopted a code of ethics and purchasing and investment policies as required by statute, they do not have any policies or procedures for credit card usage. Additionally, prior to the current Chairman’s election, they did not have policies or procedures for hall rental receipts. Furthermore, the Treasurer is responsible for performing virtually all of the District’s financial duties. While Board members did review some monthly reconciliations, they did not have adequate records to perform a comprehensive review.

The Board did not implement sufficient controls to safeguard Department money. Although the Treasurer maintained financial records, she did not keep adequate documentation to support all financial activity or prepare monthly bank reconciliations. Furthermore, the Treasurer performed all aspects of the cash receipt process with no oversight and did not maintain supporting documentation for cash receipts collected from fundraising activities. Because Department officials did not adhere to the bylaws and provided insufficient oversight of the Treasurer’s financial duties, officials cannot be sure that all money collected was deposited or that Department funds were appropriately spent.

The Board and District officials did not effectively manage the District's financial condition by ensuring budget estimates were reasonable and adopting realistic budgets based on historical costs and trends. Because the District overestimated expenditures by a total of $36.5 million (8 percent) from July 1, 2012 through June 30, 2015, an average of more than $12.1 million per fiscal year, the appropriated fund balance (an average of about $8.7 million each year) was not used. Additionally, the District reported year-end unrestricted fund balance at levels that did not comply with the 4 percent statutory limit for the past three fiscal years. When adding back unused appropriated fund balance, the District's recalculated unrestricted funds were about 11 percent of the appropriations in the 2015-16 budget. The District also maintained five reserve funds with balances totaling $35.6 million as of June 30, 2015, four of which were overfunded. District officials appropriated reserves totaling $10.3 million to fund budgeted expenditures without disclosing to residents which reserves would be used and how much was appropriated from each reserve. Furthermore, the District did not have Board resolutions establishing two of the five reserve funds.

District officials need to improve their monitoring of custodial employee overtime to ensure that the District is incurring only necessary overtime costs. The District does not have a comprehensive payroll policy or written overtime procedures. The Assistant Superintendent for Business told us that overtime is preapproved either verbally or by email. During our audit period, the District paid $166,271 for overtime. Of this amount, $152,140 (92 percent) was paid to custodial unit employees. We examined records relating to 346 overtime hours ($14,871) worked by the 10 custodial unit employees that worked 100 overtime hours or more in the fiscal year ending June 30, 2016. We found no documentation that 314.5 overtime hours, totaling $13,321 had been preapproved by a supervisor. For example, one cleaner worked 44 overtime hours and received overtime payments totaling $1,535 for 13 days of summer cleaning at the middle school without documented supervisory preapproval. Had overtime preapproval been required and documented, District officials may have been able to rearrange work shifts to incorporate summer cleaning into employees' regular workdays.

Although the treasurer properly accounted for receipts and disbursements for most of the clubs we reviewed, we found one club, the Middle School Student Association, with significant deficiencies. For example, no evidence was found that proceeds from at least five events were deposited. We estimate the proceeds should have been approximately $7,600, based on typical revenue collected at these events. For these same events, faculty advisors paid at least $3,300 to various event vendors without going through the proper disbursements process and approximately $4,300 remains unaccounted for. This occurred because the Board did not establish adequate policies and procedures to ensure receipts from all events are deposited, and the treasurer did not ensure the faculty advisors followed the established, informal procedures.

The District has not established written policies or procedures for the cash receipts process at the District's Business Office or for the Food Service Department, which collects cash at the school cafeterias. We found that the key duties of cash handling, recordkeeping and reconciliation are concentrated with one position. In addition, there was no process in place for someone independent from the recordkeeping function to verify that funds were deposited into a District bank account. Generally, we found that cash receipts were accurately recorded and deposited timely and intact. District officials have implemented compensating controls to help reduce risks, such as oversight of the cash receipts process, review of prepared bank deposits and bank reconciliations by the Treasurer. However, District officials' implementation of these control procedures could be improved by assigning tasks to an individual independent from the Business Office to perform the review and requiring review of the audit trail reports generated from the financial system.

District officials properly performed criminal history background checks, which helped ensure the safety of their students. The Board adopted a policy entitled Fingerprinting and Criminal History Record, which states that the District “shall not employ or utilize a prospective school employee unless that person has been granted a clearance for employment by the New York State Education Department (SED) or an emergency conditional appointment has been made in a manner consistent with this policy and applicable regulations of the Commissioner.” We commend District officials for properly obtaining fingerprint-supported criminal history background checks of prospective employees and requesting the clearance for prospective employees already fingerprinted from SED.

The Board and District officials did not always effectively manage the District's financial condition by ensuring budget estimates were reasonable and adopting realistic budgets based on historical costs and trends. As a result, the District overestimated expenditures by a total of $12 million (4 percent) from July 1, 2012 through June 30, 2016. Additionally, to stay within the year-end statutory limit for unrestricted fund balance, District officials appropriated a total of $9.4 million of fund balance. However, this appropriated fund balance was not needed to finance operations because the District had a total of $2.9 million in operating surpluses in three of the four fiscal years. When adding back unused appropriated fund balance, the District's recalculated unrestricted fund balance exceeded the statutory limit.

BOCES officials did not adequately use multiyear planning, which includes ensuring that reserves are appropriately established, maintained and supported. They did not develop formal, written multiyear financial plans, including a reserve plan that indicates their intentions for funding, using and accumulating reserve funds. BOCES officials also did not prepare a formal analysis of certain reserve funds to ensure amounts were appropriate for BOCES' needs or include reserve funding in the annual budgets. We also found that BOCES can manage its software more effectively and efficiently. The Board's acceptable use policies were inadequate because they do not include enforcement practices and specific penalties for noncompliance. The IT staff did not maintain a comprehensive inventory list of all software that BOCES currently owned and for which it purchased licenses. In addition, BOCES officials and IT staff did not regularly monitor or review computers to ensure that all software installed was appropriate and legally obtained. As a result, we found that eight of 86 computers had improper software applications that included noneducational gaming software, a coupon application and an Internet browser rewards bar. We also found that BOCES did not have sufficient documentation to provide evidence that it purchased licenses for six of 177 software programs that required licensing.

The Board did not adopt realistic budgets or ensure that reserves were reasonably funded. District officials consistently overestimated expenditures during the last five fiscal years (2010-11 through 2014-15). These budgeting practices generated more than $3.5 million in operating surpluses. The District also appropriated an average of approximately $995,000 in fund balance annually, which was not needed to fund operations due to the operating surpluses. This practice allowed the District to appear that it was within the 4 percent statutory limit imposed on the level of unrestricted fund balance. However, when adding back unused appropriated fund balance, the District's recalculated, unrestricted fund balance ranged between 6 and 9 percent of the ensuing year's appropriations, exceeding the limit for all five years. In addition, from 2010-11 to 2015-16, District officials increased the tax levy by 12 percent. District officials also used approximately $8.4 of fund balance to fund six reserves that, as of June 30, 2015, totaled approximately $8.3 million. The retirement contribution reserve is overfunded, and the employee benefit accrued liability reserve is fully funded but not used. As a result of these practices, the District's tax levy may have been higher than necessary.

Although reconciliations were performed, the bank statements and reconciliations were not provided to the Commissioners to enable a proper review of financial transactions. The former Joint Youth Director collected money from participants and used those funds to pay for activities in cash rather than turn them over to the Treasurer. Additionally, the collections that were remitted to the Treasurer for deposit were not adequately supported with duplicate receipts or other documentation. However, the Treasurer did ensure that all collections received were safeguarded by securing them in a locked safe until deposit.

Although the significant revenue and expenditure projections in the preliminary budget are reasonable, we identified several concerns with the preliminary budget that City officials should address. First, the proposed tax levy of $5,674,602 is projected to exhaust approximately 88.5 percent of the City's constitutional tax limit. Also, the budget provides for a limited contingency equal to only 0.21 percent of general fund appropriations, and does not provide for a tax overlay. In addition, the general fund budget relies on a significant amount of interfund revenues from both the water and sewer funds. With limited ability to levy additional property taxes, and the need to increase contingency amounts and provide for a tax overlay in the budget, City officials may need to reduce expenditures or find additional recurring revenues to ensure that the City has available funding for unexpected events and that the necessary amount of property taxes will be collected in the coming year.

We identified a cash shortage of $1,401 in the Clerk's office. Had the Board conducted the required annual audit of the Clerk's records, it may have been able to detect this shortage. Our audit determined that certain Clerk fees were not recorded in the Clerk's cash receipts journal. We identified numerous transcripts and licenses that were issued and not recorded in the cash receipts journal nor included on the Clerk's monthly report. The Clerk did not issue press-numbered duplicate receipts for all cash collected, accurately record all transactions or deposit cash receipts intact.

The Board should improve its oversight of the Department's fiscal activities and the safeguarding of its resources. The bylaws do not adequately segregate the Treasurer's duties. They require the Treasurer to receive all Department moneys, pay all bills and report the Department's financial status at regular Department meetings; however, they do not provide for mitigating controls such as someone other than the Treasurer reviewing and reconciling the bank accounts. The bylaws also require the President to call for an annual audit of the Department's books and financial records by the Village Clerk/Treasurer or authorized alternate. The annual audit was ineffective since it consisted of a comparison of the bank statement balance to the check register and did not include other items such as disbursements or canceled checks. In addition, the Board has not adopted any written policies or procedures addressing cash receipts and disbursements, procurement or claims processing. As a result, the Treasurer did not issue duplicate receipts for donations; made all deposits and disbursed cash without the Board's prior approval; and performed all recordkeeping functions. Although the Treasurer provided a monthly report that listed paid disbursements and deposits for the Board's review, the report did not include a reconciled bank statement for the Board's review and verification.

The Board and District officials did not prepare accurate budgets for the 2012-13 through the 2015-16 fiscal years. While they appropriated $21.7 million of unrestricted fund balance to help finance operations, it was not needed because the District's budgeting practices produced operating surpluses totaling $33.4 million. When unused appropriated fund balance was added back, the District's recalculated unrestricted fund balance exceeded the statutory limit by up to 3 percentage points. We also found that the District's reserves, totaling approximately $52 million as of June 30, 2015, were properly established and, with the exception of the insurance reserve, properly expended. However, the Board and District officials did not take appropriate action to address the reasonableness of reserves as the reserve fund policy did not adequately address how reserves would be funded and used. Furthermore, while the Board and District officials appropriated reserves in the budget and then recorded the use of reserves at the end of the fiscal year, District officials also replenished or increased the reserve balances at fiscal year-end.

The Board and District officials retained excessive levels of fund balance above the statutory limit. From 2012-13 through 2014-15, unrestricted fund balance at fiscal year-end exceeded the statutory limit by 12 to 13 percentage points. The District's external auditors recommended each year that the District reduce the fund balance levels to comply with the statutory limit, yet the District did not take corrective action. From 2013-14 through 2015-16, the District appropriated $1.4 million in fund balance as a financing source in the annual budgets. This appropriation of fund balance reduced the level of reported unrestricted fund balance at the end of each fiscal year. However, the District only spent approximately $309,000 of the appropriated fund balance to finance operations during 2013-14 and 2014-15. We estimate that the District will realize an operating surplus of approximately $337,000 for 2015-16 and will not use any of the $188,750 of fund balance it appropriated for the 2015-16 budget. Therefore, the District will only use approximately 21 percent of the total appropriated fund balance during these years. When the unused appropriated fund balance is added back to unrestricted fund balance in the year in which it was appropriated, the recalculated unrestricted fund balance exceeded the statutory limit by 15 to 17 percentage points.