The Board did not ensure that disbursements were made in an economic manner and for authorized Library purposes. The Board did not audit any of the 767 non-payroll disbursements totaling $1,157,071 made during our audit period. The Board also did not approve 100 of these disbursements totaling $96,586, three of which were to Library employees. Thirteen of the disbursement did not have adequate documentation to determine if they were for legitimate Library purposes. We selected an additional nine Board-approved non-payroll check payments totaling $2,379 made to Library employees and found that three of these payments lacked either adequate documentation to show they were legitimate Library expenditures or were paid for a higher amount than what was actually owed. While none of the three instances resulted in material errors, our findings show that errors can go undetected and leave a potential for material error. In addition, two vendors had initiated a combined total of 137 electronic fund transfers totaling $494,817 out of the Library's general checking account during our audit period, which is not permitted by Law. Lastly, four disbursements totaling $89,000 were for a public works contract that was not competitively bid as required by the Law.

The Company by-laws did not clearly establish the responsibilities of the Board and membership. As a result, the Board and membership did not provide adequate oversight of Company financial activities. The Board did not adequately segregate the Treasurer's duties. The Treasurer submitted monthly and annual financial reports to the Board; however, reports were not accurate because the Treasurer did not reconcile the bank statements or include all disbursements. The Board also did not oversee fundraising activities, did not review all claims, and did not receive reconciled bank statements. Therefore, it did not ensure that all receipts and disbursements were properly recorded and reported. Furthermore, the President did not require the annual independent audit of the Treasurer's records, as required by the by-laws. In addition, the Company does not have a code of ethics as required by statute, and the Board is not certain of the Company's status as a not-for-profit organization as recognized by the Internal Revenue Service.

The Board and District officials believed they were effectively managing the District's fund balance. However, the adopted budgets continually included overestimated expenditures. The cumulative effect of these variances generated over $2.4 million in operating surpluses for the fiscal years ending in 2008 to 2012. To reduce the year-end fund balances to under the 4 percent limit, District officials had to transfer moneys to the District's reserves, which now total $4 million. Some of these reserve balances are questionable as to the amounts required for their stated purposes.

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

Village officials generally complied with General Municipal Law and sought competition for purchases and public works contracts subject to its competitive bidding requirements. However, the Board-adopted procurement policy did not specify the number of quotes or request for proposals (RFPs) to be obtained for purchases that were not subject to competitive bidding. As a result, Village personnel did not always seek competition for such purchases and paid approximately $84,000 to 13 vendors without obtaining the required quotes or RFPs. In addition, the Board adopted a comprehensive policy covering various aspects of the Village's IT system security, but it did not implement procedures ensuring that controls were instituted. For example, Village officials did not ensure that copies of back-up data were stored in a secure off-site location and the Board has not developed a disaster recovery plan. The Village also received various IT services from consultants without service level agreements.

We commend the Board for establishing adequate internal controls over the cash receipt process to ensure that all cash collections are properly recorded and accurately accounted for. Those controls included policies and procedures that provided guidance to Library staff involved in the cash collection process for cash register operations, performing daily cash counts, preparing deposit slips, and safeguarding cash. Board procedures also adequately segregated duties within the cash collection process to ensure that no individual controls all phases of a transaction. Specifically the duties of receiving, recording, maintaining custody, and depositing collections were segregated. Except for a few minor discrepancies which we discussed with Library officials, the cash receipts we reviewed were all properly recorded and deposited in a timely manner.

At the beginning of each fiscal year, the account clerk initiates an automated process to carry over each employee's accrued leave balances based on the information in the District's financial software. During this process, accrued leave balances are sometimes misclassified, requiring the account clerk to manually adjust the records. We selected 10 of the 236 District employees with the highest accumulated unused leave balances to determine if the employees' unused accrued leave balances were carried forward and appropriately reclassified in accordance with the applicable collective bargaining agreement. Except for minor discrepancies, the District properly accounted for employee leave accruals and made payments in accordance with collective bargaining agreements and employment contracts.

From the 2008-09 to 2012-13 fiscal years, District officials consistently over-estimated expenditures by a total of $5.5 million. These budgeting practices generated approximately $2.2 million in operating surpluses, which caused unexpended surplus funds to exceed statutory limits in each of the past five years. As of June 30, 2013, unexpended surplus funds exceeded statutory limits by $949,184. Although District officials appropriated on average $413,000 in each of the last five fiscal years to reduce the tax levy, the Board over-estimated expenditures by an average of $1.1 million annually, thus negating any benefit the appropriation of fund balance would have in reducing fund balance or the property tax levy. District officials also used some of the annual operating surpluses to fund six reserves that, as of June 30, 2013, totaled $2.1 million. Four of the six reserves appear to be over-funded.

We found no evidence that the Board had fulfilled its fiduciary responsibility to the School by ensuring that it fully evaluated the choice of its site selection for the elementary school or middle school.

The Board did not ensure that all contracts for goods and services were properly awarded. The School's Business Office was unable to provide procurement procedure documentation and inconsistencies were found in the purchasing practices/competitive bid process outlined in the School's charter agreement and the procurement policy. Both policy documents were silent on other key provisions such as when written contracts are required or whether professional services should be procured in a different manner. Furthermore, the documents did not clarify whether thresholds were for individual or aggregate purchases and if quotes should be written or verbal. In addition, even though the School is in its third year of operation with a Principal and a fully functioning Business Office, School officials continue to rely on certain service providers to obtain bids or quotes and select vendors for goods and services such as janitorial services, school uniforms and kitchen supplies.

District officials did not obtain quotes for goods and services purchased from three of 13 vendors, totaling $42,421. These three vendors were engaged to provide maintenance for the District’s vehicles, upgrade the security system, and service the air-conditioning and heating system.

We found that the School's purchasing policy does not provide appropriate guidance as to when written or verbal price quotes should be obtained and when items must be competitively bid. The policy also does not address threshold amounts under which approval can be made by management, versus large purchases that would require Board approval. Additionally, we found that although the policy requires the use of purchase orders, School officials are not routinely using them to initiate the acquisition of goods and/or services. We also found that School officials often did not properly document verbal or written price quotations when making purchase decisions. For example, School officials spent $11,346 on computers but did not have adequate documentation to demonstrate that the lowest price was obtained. We also reviewed 12 disbursements associated with three capital projects that totaled approximately $1.3 million. We found that one of the three project contracts was not properly approved by the Board and there is no evidence that change orders totaling approximately $63,000 were approved by the Board.

Internal controls over the Court's operations were not operating effectively to allow for proper accounting and reporting of activities. Justice Bartlett failed to account for all moneys received, resulting in a $2,295 shortage in the Justice's account. The Justice did not prepare monthly bank or accountability reconciliations, issue appropriate receipts for all money received, deposit money intact or in a timely manner, file accurate and timely financial reports, maintain an accurate listing of bail, properly report ticket dispositions to the DMV or close his bank account as required when he resigned.

District officials consistently over-estimated expenditures over the past five years, which resulted in operating surpluses totaling $7.1 million. Although the Board appropriated unexpended surplus funds each year (exceeding $14 million over a five-year period) to help finance the ensuing year's operations, District officials actually used less than $1 million for District operations. As a result, the District's unexpended surplus funds routinely exceeded the amount allowed by statute and District taxpayers paid more than necessary to sustain District operations.

The 2014 proposed budget contains significant financial risks that the City Council should consider when adopting the 2014 budget. The City continues to finance operating expenditures with debt when it should be funding such expenditures with operating revenues. The practice of supporting operating expenditures with unrealistic revenue estimates and one-shot revenues is not prudent. The City projects operating surpluses for the 2013 fiscal year for the general fund and the water fund. However, due to overstated revenue estimates, the golf and recreation fund is projecting a $93,308 operating deficit. The unassigned fund balances in these three funds are still expected to remain as deficits. The 2014 budget included estimated revenue of over $1 million from the sale of property that may not happen timely or as planned.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. The 2014 budget includes estimated revenues of $1.5 million in the general fund from the sale of Town property. Revenue from the sale of property is non-recurring (one-shot) revenue that will be received in one year, but will not necessarily recur in the following year. The Town's tentative budget complies with the tax levy limit.

Based on our limited procedures, it appears that the District has made substantial progress in addressing our recommendations. Of the 13 audit recommendations, seven recommendations were implemented, three recommendations were partially implemented and three recommendations were not implemented.

The District was identified as being susceptible to fiscal stress due to a general fund operating deficit during the 2010-11 fiscal year. Our audit determined the District is not currently in fiscal stress. District officials developed reasonable budgets and managed fund balance responsibly in accordance with statute. With the exception of the 2010-11fiscal year when the District incurred a planned operating deficit, fund balance has steadily grown during the period reviewed. During the 2011-12 fiscal year the District produced an operating surplus of approximately $2.8 million. The operating surplus was achieved through a decrease in salary and employee benefit costs due to staff reductions and lower energy costs. Additional cost savings were realized in pupil transportation costs due to declining enrollment and the combination of bus routes during the 2011-12 fiscal year.

Justice Tripp did not meet his required responsibilities when he resigned his position. Records were incomplete and, as a result, we could not determine if the amount he remitted to the Village was sufficient to meet Court liabilities.

We tested purchases made in 2012 from five vendors totaling $100,943 for compliance with the Town's procurement policy. The Town purchased $10,362 of unleaded gasoline and $33,068 of diesel fuel from a local vendor. These commodities were not competitively bid as required by the policy. We compared the price that the Town paid with the State contract price and noted that the Town could have saved approximately $1,167 in 2012 had the fuel been purchased from the State contract vendor. In addition, the Town purchased a tractor in April 2012 for $38,200 without publicly soliciting bids as required. Tires of various sizes were purchased from a local vendor six times during 2012, totaling $9,140. The Highway Superintendent only obtained quotes from vendors for one of the six purchases, costing $424, which was from the vendor who quoted the lowest price. In 2012, the Highway Superintendent purchased air, oil and hydraulic filters totaling $2,213 but did not obtain any quotes as required. We compared the costs of the filters purchased to the costs from other vendors in the area and noted that the Town paid reasonable prices for these items.