The District spent more than $50,000 on a contract with a certified public accountant (CPA) to provide services as the District's claims auditor and the CPA did not perform the services in accordance with the obligations set forth in the contract. Of the 50 claims we reviewed, 29 claims totaling $210,190 were approved without the necessary documentation to support the claim being audited. In addition, the District purchased services for web hosting, spam, and virus filtering totaling $8,205 from a company owned by a District employee. Although this did not result in a prohibited conflict of interest, the employee did not disclose his interest in the company in writing to the supervisor or the Board as required by law. Further, because the purchasing agent did not effectively monitor the District's purchasing process, District staff made purchases totaling $110,010 that did not comply with District policies and may not be the most economical use of taxpayer moneys. Finally, we found that users were granted access to functions of the financial software applications that they did not need in order to fulfill their day-to-day job responsibilities.

We reviewed the internal controls over Court operations and the Justices' records and reports and found that the duties were not segregated because the Justices performed all duties including handling of cash receipts. The lack of segregation of duties make the annual audit even more important, However, Town officials failed to provide sufficient evidence that annual audits of the Justices' books and records were conducted, and the Justices did not always enforce unpaid tickets or report transactions to DMV in a timely manner.

The Board did not adopt a policy or develop procedures to govern the level of fund balance maintained. Additionally, the Board had not developed accurate budget estimates or a formal, comprehensive multi-year financial and capital plan to adequately address the Town's long-term operational and capital needs. As a result, the general fund has retained excessive amounts of unexpended surplus fund balance.

The Supervisor did not maintain accurate computerized accounting records. Because the bookkeeper did not always enter all transactions in the computerized accounting system, adjusted bank balances were approximately $997,800 less than cash balances in the Town's computerized accounting records. In addition, the Justice did not properly oversee Court operations. Accountabilities were never performed and deposits were not always made timely. As a result, the Court's liabilities exceeded assets by $1,442 at June 29, 2012. We identified the cause for $560 of the shortage; however, the cause of the remaining $882 has not been identified.

City officials have severely mismanaged the CDBG program and have put significant public funds at risk. City officials have disbursed CDBG funds without the most basic of documentation to support the expenses and have used the funds at times to pay for a variety of miscellaneous expenses that have no connection to the CDBG program. Most disturbing is that some of these transactions have been recorded in a manner to apparently hide the true nature of the transactions.