The Board needs to improve internal controls to effectively protect the District's computer system and data. The Board has developed an acceptable use policy and an email policy. However, the acceptable use policy does not address computer users who do not use the District's computers for instructional purposes or the inappropriate use of IT equipment. In addition, the email policy allows for the use of personal email through external mail servers. Further, District staff are able to access websites such as online shopping, social networking sites, travel and automobile sites that are unrelated to their District duties and violate the acceptable use policy because the District's web filtering software is not configured to block access. We also found that one District computer had no virus protection software installed. As a result, users could expose the District to malicious attacks that could compromise systems and data. Further, time spent by employees using District resources for personal reasons represents lost District resources.

The Board and District officials did not adequately manage the District's financial condition. We found that the Board and District officials regularly prepared and adopted unrealistic budgets. The last four fiscal years' budgets were comprised of overestimated appropriations and underestimated revenues, resulting in aggregate operating surpluses totaling $719,000. Therefore, $2.06 million in appropriated fund balance was not used to financial operations. In addition, the District ended 2015-16 with another operating surplus totaling $268,000 further adding to their total fund balance. Overall, District officials improved their budgeting practices with the adoption of the 2016-17 budget, by budgeting based on historical trends. District officials also established reserve funds to prepare for future contingencies. However, they did not always include the funding of reserves in the budgets voted on by taxpayers. Instead, the Board allocated amounts to reserves at the end of each fiscal year to reduce unrestricted fund balance to the statutory limit. Four of the District's seven general fund reserves, which have balances totaling $8 million as of June 30, 2016, are overfunded and potentially unnecessary. When adding back the unused appropriated fund balance and overfunded reserves, the District's recalculated unrestricted fund balance ranged from 21 to 24 percent of the ensuing year's appropriations. As a result, the District's tax levy was higher than necessary to fund District operations. Finally, District officials have not implemented adequate internal controls over the claims and accounts payable processes, as incompatible duties are not adequately segregated and mitigating controls have not been implemented.

Over the five-year period 2011-12 through 2015-16, the District's reported unrestricted fund balance ranged from 12 to 17 percent of the ensuing year's budget. Although the Board appropriated fund balance annually to fund operations, it was not used because annual budgets resulted in operating surpluses. In addition, the District's tax certiorari reserve was overfunded by $793,000 and the workers' compensation reserve was not used to fund expenditures totaling approximately $1.5 million. When overfunded reserve amounts were added back into unrestricted fund balance, the recalculated unrestricted fund balance exceeded the statutory limit by 13.9 to 24.6 percentage points over the five-year period.

The purpose of our audit was to determine whether housing authorities were adequately controlling and monitoring administrative costs for the period January 1, 2012 through November 25, 2015.

Based on the results of our review, we found that the proposed budget does not include provisions for paying down the County's outstanding projected $10 million deficit. The budget also does not include any provisions for the potential financial impact of the settlement of 10 collective bargaining agreements. The County's proposed budget complies with the property tax levy limit.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable, except for anticipated one-time revenue from the sale of real property, contingency appropriations and an allowance for uncollectible taxes. The City's proposed budget complies with the property tax levy limit.

The Board did not adequately oversee the Town's financial operations. The Supervisor did not provide the Board with adequate monthly financial reports. In addition, the Board did not have adequate procedures for auditing claims. Consequently, the Board did not audit and approve claims in accordance with Town Law for 20 of the 100 check disbursements totaling $9,625 that we reviewed. The Board also did not ensure that Town officials filed the required information with the New York State Office of General Services to receive State contract pricing for diesel and heating fuel purchases. We notified Town officials of this, who contacted the fuel vendor. The vendor subsequently agreed to reimburse the Town for the amounts paid in excess of State contract pricing. Otherwise, the Town would have incurred $11,132 more than necessary in expenditures for fuel purchases. Furthermore, the Board did not annually audit or cause an audit of the records and reports of any Town officers or employees who received or disbursed moneys on the Town's behalf.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The Town's proposed budget complies with the property tax levy limit.

Generally, Authority officials and staff are effectively managing the Housing Choice Voucher (HCV) programs. They appropriately established policies and informal procedures over the HCV and Family Self-Sufficiency (FSS) programs. Authority officials and staff ensured applicants were selected fairly and consistently and were initially and continually eligible for the program. Furthermore, Authority officials have hired an independent consultant to perform the necessary housing inspections to ensure participants are living in decent, safe and sanitary housing. Additionally, Authority staff generally ensured that disbursements to owners were supported, accurate and appropriate and that FSS program participants were generally meeting program requirements.

While the Board has not adopted written policies and District officials have not developed written procedures over the payroll function, we found no significant exceptions with the accuracy of the payment of salaries, wages or separation payments. Our testing did not identify exceptions. However, opportunities exist for the Board and District officials to improve internal controls over the payroll process. This would provide assurance that errors and irregularities do not occur and remain undetected and uncorrected.

We found that BOCES did not enter into intermunicipal cooperation agreement with its component districts for the operation of its adult education programs. The program experienced an operating deficit in 2013-14 totaling $66,762 and an operating surplus in 2014-15 totaling $145,539. We project that the program will experience an operating deficit in 2015-16 of approximately $210,000. However, fund balance has remained at more than $2.5 million for the three years in our audit period. The portion of the special aid fund attributable to adult education had a fund balance of more than $2.7 million as of June 30, 2015, which was likely attributable to prior years' financial activity. In addition, BOCES officials have established a comprehensive purchasing policy and procedures that provide thresholds for purchases that must be competitively bid and when proposals or quotes should be obtained for purchases under the threshold for competitive bid. However, officials did not always comply with the purchasing policy and procedures when procuring professional services and insurance. We reviewed the procurement of 18 professional service contracts totaling approximately $706,000 during the audit period. District officials did not seek competition for eight professional services and insurance totaling approximately $419,000.

District officials could minimize risk by better managing network user accounts and security settings. They should monitor network user accounts to ensure that unnecessary accounts are disabled or removed in a timely manner. In addition, the District should configure a logon banner to inform users of the potential consequences of unauthorized access.

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. Over the last 5 years, District officials underestimated revenues by $74.2 million and overestimated expenditures by $22.3 million. The District appropriated over $81 million in fund balance, but only needed about $4.7 million to finance operations. Further, officials increased the tax levy by almost $250,000 (or 8.2 percent) over the last four years. Overall, these budgeting practices generated approximately $15.2 million in operating surpluses. District officials also improperly reported about $862,000 of unrestricted fund balance in the debt service fund. As a result, the District's recalculated year-end unrestricted fund balance exceeded the 4 percent statutory limit by up to 27 percentage points. Finally, the District's long-range financial plan does not show detailed projections and its effect on fund balance levels.

The Board's purchasing policy, adopted in August 2014 and revised in January 2015, provides guidance for the procurement of goods and services and public works which require competitive bidding. In addition, although the Board adopted a policy in August 1995 and revised it in January 2015 describing its responsibilities and the need to develop further guidance for procuring goods and services not required to be competitively bid, the policy was deficient since the Board developed no further guidance. Therefore, officials do not have guidance for the procurement of professional services or purchases under the competitive bidding thresholds. During our audit period, District officials did not use competition when procuring five professional service contracts costing $605,947 including a $57,999 overpayment of one of these contracts. In addition, officials did not use competition or enter into a written agreement for two attorney service contracts totaling $203,866. The District made two purchases totaling $81,834 without using competitive bidding as required. Finally, officials did not seek competition for 15 purchases under the competitive bidding thresholds totaling $63,916.

The Board and District officials need to improve controls over the District's information technology (IT) assets. The Board did not establish adequate IT policies and procedures. We also found that the service level agreement with the District's IT vendor is inadequate as it does not define all necessary aspects of the services provided to the District. As a result, the Board does not have adequate assurance that the District's IT assets are secure.

The District needs to improve its claims auditing process to help ensure that all claims are adequately documented, for appropriate District purposes and properly audited and approved before payment. The Board appointed a claims auditor to assume its powers and duties to examine and approve or disapprove claims. To facilitate the claims auditing process, the Board adopted a claims auditor policy outlining the claims auditor's responsibilities. The Board-appointed individual who served as claims auditor resigned effective November 18, 2015. District officials then contracted with BOCES through a cooperative service agreement to audit District claims, and a BOCES employee has audited all District claims including those for BOCES-provided services since then. The District is one of BOCES' component districts and made material and significant contract payments to BOCES. Therefore, this arrangement was inappropriate because the BOCES claims auditor approved claims submitted by her employer, which compromised the auditor's objectivity and independence.

District officials did not always adhere to the Board-adopted procurement policy with regard to requesting proposals. We reviewed procurements from 15 professional service vendors who were paid a total of approximately $1.3 million during our audit period. The District awarded eight professional service contracts totaling $548,111 after issuing requests for proposals or seeking quotes for special education services, internal audit services, hazardous waste removal services, Affordable Care Act consulting services, school physician services and installation of casework cabinets. However, District officials did not seek competition for seven professional services with payments totaling $760,484 (58 percent of the professional services that we reviewed). These payments were for special education services ($413,118), claims auditor services ($27,500) and attorney services ($319,866).

BOCES officials did not establish formal fixed asset policies and procedures that provide clear guidance for asset recording and disposal. As a result, BOCES staff did not properly record and account for fixed assets. Not all assets were recorded on the Fixed Assets list, and assets were not always in the locations indicated. We also found that not all assets were tagged and that some assets were disposed of without Board approval. As a result, BOCES officials do not have adequate assurance that all BOCES property is safeguarded.

District officials generally ensured that the cash receipts process for ECA funds was administered in accordance with District guidelines and the Regulations. However, the school store faculty advisor routinely retained a portion of cash collected for anticipated club expenditures and deposits submitted to the central treasurer typically lacked detailed documentation of money collected. During 2015-16 the school store deposits were not made in a timely manner, with the time between collection and deposit dates ranging from 15 to 91 days.

District officials need to improve the purchasing process to ensure that competitive methods are used when procuring goods and services. Although the Board adopted a purchasing policy that indicated it should set dollar limits for obtaining written and verbal quotes for purchases that fall below competitive bidding thresholds, the policy did not establish dollar limits, specify the number or type of quotes to be obtained or the required documentation to be maintained. As a result, we found no indication that District officials solicited competition for 20 purchases totaling approximately $257,100. Therefore, there is no assurance that these purchases were made in the most prudent and economical manner. While we did not find any prohibited conflicts of interest, District officials did not follow the Board's policy for soliciting and obtaining disclosures of interests from officers and employees to avoid any potential conflicts.