The Justices did not accurately and completely collect, record, disburse, reconcile and report Court money in a timely manner. Further, because the Justices did not provide adequate oversight to ensure that Court staff maintained accurate records and reports, Court records were unreliable. As a result, the Justices could not provide an accurate monthly accountability to reconcile the Court's cash assets and outstanding liabilities for any of the Court's fine or bail accounts. Because bail reports were inadequate and unreliable, the Court's bail amounts were understated for the current Justices by approximately $60,000. The reports also indicated that the Court had more than 200 outstanding bails totaling over $54,000 that were more than six years old. Furthermore, because the Justices did not ensure that all tickets were properly disposed in a timely manner or that fines and fees were properly collected, the New York State Department of Motor Vehicles (DMV) pending ticket report and the Court's balance due report were inaccurate. As a result, the Court did not request the driver's license suspension for the majority of individuals who had outstanding ticket balances greater than 60 days. As of June 5, 2017, the Court reported uncollected amounts due totaling more than $600,000 and the DMV pending ticket report indicated that nearly 6,000 tickets dating as far back as 1985 appear to be pending and potentially unpaid. The Court did not refer approximately 4,000 (67 percent) of these tickets to the DMV Scofflaw Program.

The Board did not ensure that the Comptroller completed his duties in an effective manner. The Board did not receive or review budget-to-actual reports, balance sheets or any other financial reports to monitor the Town's financial condition. We also found multiple accounting errors and routine tasks that were not completed timely or accurately, which ultimately cost the Town $7,955. In addition, the Comptroller and the Confidential Secretary tracked their own leave accruals and usages and they inappropriately carried over a combined 183 hours of leave time, with a value of $4,321, they were not entitled to accrue. The Comptroller also performed most aspects of the cash receipts process including making deposits, recording receipts and preparing bank reconciliations without sufficient oversight. Finally, the Comptroller did not prepare bank reconciliations accurately or timely. The Town has 19 bank accounts that should be reconciled to the accounting records each month. More than half of the completed 2016 bank reconciliations (122 of 228) were not completed timely, and none of the 2017 bank reconciliations (114) were completed. Of the bank reconciliations that were completed, there were unreconciled variances that Town officials did not resolve. For 2016, unreconciled variances ranged from a negative amount of $63,300 to a positive amount of $5,150.

The Board did not adopt a fund balance and reserve policy to establish the levels of fund balance to be maintained and the reserves to be funded and used. In addition, the Board did not create comprehensive multiyear financial and capital plans that set long-term objectives and goals. From January 1, 2015 through December 31, 2017, total fund balance increased in the general fund by $94,855 (49 percent) and highway fund by $130,589 (58 percent). Each year during this period, the Board appropriated $32,000 of fund balance in the general fund and $31,000 of fund balance in the highway fund. However, the Town experienced operating surpluses each year, and the appropriated fund balance was not needed to finance operations. This occurred because of the Board's conservative budgeting practices. In addition, Town officials have not established any reserves to finance future financial or capital needs. Without formal long-term capital plans and reserves in place, the Board increases the risk that money will not be available when expenditures become necessary or that more taxes than necessary will be levied when adequate financial resources are already available.

The Board has not adopted IT policies to sufficiently protect its IT assets and did not ensure the adopted computer use and inventory policies were enforced or monitored. Town officials also did not adequately segregate online banking duties and did not dedicate a separate computer for online transactions to limit access to online bank accounts. We also found users were able to make changes, additions, deletions and adjustments without authorization or subsequent review and Town officials did not generate or review audit trail, exception and change reports. The Supervisor also did not sufficiently control the use of his electronic signature. In addition, the Board did not ensure that they had adequate written agreements with the IT service provider or banks used for online banking, and the Board did not adopt a disaster recovery plan. The Board has not adequately monitored the Town's finances. It has not reduced excessive fund balance; adopted a comprehensive multiyear financial or capital plan, or an adequate fund balance policy; or developed policies and procedures to govern budgeting practices. Our previous audit identified these issues and corrective action was insufficient. The Board adopted a procurement policy, but it does not require competition for professional services or the submission of documentation with claims to support competition was sought. In addition, the Board adopted a credit card policy, but has not adopted a policy related to the use of store purchase cards or lines of credit. We calculated that the Town could have saved approximately $29,780 by not purchasing an unnecessary product and purchasing from other vendors. Also, the Town's code of ethics does not include recommended provisions for purchasing activities or procedures for reporting or identifying outside business interests or private employment. As a result, the Town made 23 payments totaling $1,422 to a Board member's business without the interest being publicly disclosed.

We compared budgeted revenues and appropriations with actual operating results for fiscal years 2014-15 through 2016-17. While revenue estimates were generally reasonable, the Board overestimated appropriations by an average of $1 million annually, or a cumulative total of more than $3.1 million (13.5 percent). Because the Board overestimated appropriations, it appeared the District needed to use appropriated fund balance to close projected budget gaps. The Board annually appropriated an average of $557,000 of fund balance as a financing source in the 2014-15 through 2016-17 budgets. When fund balance is appropriated for the subsequent year's budget, the expectation is that there will be a planned operating deficit equal to the amount of fund balance that was appropriated. However, due to overestimated appropriations, operating surpluses, averaging approximately $500,000, occurred every year (totaling $1.5 million). The District used approximately $1.1 million of these operating surpluses to make unbudgeted transfers to the capital projects fund at fiscal year-end. By appropriating fund balance that was not needed and making unbudgeted transfers to the capital projects fund, the Board was able to reduce unrestricted fund balance levels to within the 4 percent limit allowed by Real Property Tax Law. However, when unused appropriated fund balance is added back to the reported unrestricted fund balance, recalculated amounts ranged from 10.6 to 11.0 percent. Finally, as of June 30, 2017, the District reported six general fund reserves totaling approximately $2.3 million and a debt reserve of approximately $385,400 in the debt service fund. We analyzed the reasonableness of balances in each of these reserves as of June 30, 2017 and found that all of the reserves, with the exception of the capital reserve, are overfunded and not being used.

Officials did not adequately segregate the Treasurer's wire transfer duties and mitigating controls were not implemented. The Treasurer made mistakes in filing the District's federal payroll reports and in timely submitting federal payroll payments which resulted in $93,569 of financial penalties. To address the penalties, the Treasurer overpaid amounts for regular payroll tax submissions via wire transfer on five occasions and made an extra wire transfer on one occasion. Officials only learned of the penalties and payments upon the resignation of the Treasurer at the start of our audit. Finally, because the Assistant Superintendent did not review or require someone to review the Treasurer's financial records and reports, errors went undetected.

The Board consistently adopted sewer fund budgets with estimated revenues that exceeded actual revenues and appropriations that were less than expenditures for the 2014-15 through 2016-17 fiscal years. The Board overestimated revenues by a total of $118,684 (7.8 percent) and underestimated appropriations by a total of $52,288 (3 percent) for the three-year period. The Board's consistent practice of overestimating revenues and underestimating appropriations resulted in the sewer fund realizing operating deficits in all three years and a significant decline in the sewer fund balance from $174,375 to a deficit of $36,539. The Board has started to address this with a more conservative budget for 2017-18 that will likely produce a surplus of about $10,000 if there are no unexpected events. In addition, although the Board adopted general and water fund budgets with realistic estimates for revenues and expenditures, both of these funds experienced cash flow issues during the years 2014-15 through 2016-17 because both funds advanced money to the sewer fund for its operating costs.

We found the Board routinely underestimated revenues in its various operating fund budgets, which generated operating surpluses. It used the surplus funds at year-end to fund reserves with $16 million over fiscal years 2014 through 2017. As of December 31, 2017, the Town had accumulated approximately $24 million in reserves ($22 million in 19 reserves across its various funds, and $2.1 million in a special recreation account). This amounted to 89 percent of the Town's 2018 budget appropriations, and a $12.3 million increase over the last four years. The Board had not developed a comprehensive multiyear financial and capital plan to substantiate the need to accumulate these funds and demonstrate its plans for expected future use of its growing reserves. In addition, the Town generally does not use its reserves. Although the Board included limited computer use policies in its employee handbook, it has not ensured the policies are enforced or monitored. The Board also did not include provisions or adopt other IT policies addressing key areas such as data backups, online banking, user accounts, access rights, passwords, remote access, personal, private and sensitive information (PPSI), mobile and personal computing and storage devices, or hardware and software inventories. The Board also did not adopt a disaster recovery plan. Town officials did not maintain a comprehensive software inventory and did not adequately monitor or manage active network accounts. Finally, Town employees had not received IT security training.

The Board has not adopted a reserve policy and did not include provisions in the annual budgets for funding its reserves. Instead, District officials transferred money to reserves from operating surpluses at the end of the fiscal year to stay within the 4 percent limit. As a result, general fund reserves increased by $2.5 million over the last five completed fiscal years. As of June 30, 2017, the District reported nine general fund reserves and a debt service reserve with balances totaling $13 million. District officials could not provide Board resolutions for the establishment of all but the capital and workers' compensation reserves. In addition, seven reserves with balances totaling $9.4 million (72 percent of total reserves) at June 30, 2017 are overfunded by $7.8 million and potentially unnecessary. By maintaining overfunded and/or unnecessary reserves, the Board and District officials levied more taxes than necessary, and may have compromised the transparency of District finances. These practices allowed the District to report year-end unrestricted fund balance at levels that appeared to comply with the statutory 4 percent fund balance limit. However, when adding back overfunded and unnecessary reserves, the District's recalculated unrestricted fund balance was 19 percent of the ensuing year's appropriations at June 30, 2017, almost five times the statutory limit.

The Supervisor neither maintained nor required the bookkeeper to maintain complete, accurate and up-to-date accounting records and reports. He also did not adequately oversee the bookkeeper's work during our audit period by verifying that all transactions were properly recorded and monthly bank statement balances were reconciled with cash balances recorded in the accounting system. As a result, the bookkeeper failed to properly maintain the Town's accounting records. Town officials were provided with monthly reports of operations (i.e., actual revenues and expenditures) compared to the budgetary estimates. However, because the accounting records were inaccurate and incomplete, the monthly reports contained inaccurate balances for cash, interfund transfers and interfund advance receivables and payables. Finally, the Town's annual update documents (AUDs) were not filed in a timely manner.

The Company's bylaws provide limited guidance on the Board's responsibilities and the Treasurer's duties. Because the bylaws did not provide adequate guidance and the Board did not provide oversight, none of the four Treasurers maintained complete, accurate and up-to-date records or performed monthly bank reconciliations. In addition, no written monthly reports were prepared during 2016 and the 2016 Form 990 filed with the IRS was inaccurate. Although the last Treasurer during our audit period prepared written monthly reports and presented them to the membership, the reports did not include details of receipts and disbursements. Instead, the reports provided the bank balances as of the monthly meeting date. Additionally, because the Company's bylaws are silent regarding fundraising activities, reports were not prepared for all activities and those that were prepared were inadequate. For example, there were no records indicating the starting and ending ticket numbers, the number and type of chicken dinners sold and the number of golf participants and sponsors as well as amounts received.

We compared budgeted revenues and appropriations with actual operating results for 2014-15 through 2016-17. While revenues estimated were generally reasonable, the Board overestimated appropriations by an average of nearly $2.8 million annually (15 percent). Because the Board overestimated appropriations, it created what appeared to be a projected budget gap, causing the District to both increase its tax levy and use appropriated fund balance to close projected budget gaps. From 2014-15 through 2016-17, the Board increased the real property tax levy by a total of approximately $248,000, or 2.4 percent. The Board also appropriated $7.2 million (a yearly average of $2.4 million) in fund balance in the 2014-15 through 2016-17 budgets. However, the District realized cumulative operating deficits totaling only approximately $1 million over this three-year period. Over the past three fiscal years, the District reported unrestricted fund balance that ranged from 3 percent to 5.1 percent of the subsequent year appropriations. This exceeded the 4 percent limit allowed by New York State Real Property Tax Law by 1.1 percent at the end of the 2015-16 fiscal year, but was within the allowable limit at the end of the 2014-15 and 2016-17 fiscal years. In 2014-15, the District did not use $2.1 million of the $2.6 million fund balance appropriated, did not use $2.42 million of the $2.46 million appropriated for 2015-16 and did not use $1.7 million of the $2.1 million appropriated for 2016-17. When unused appropriated fund balance is added back to the reported unrestricted fund balance, the District's recalculated unrestricted fund balance ranged from 11.8 to 16.6 percent of subsequent years' appropriations.

County officials did not ensure employees were accurately paid separation payments. We reviewed 30 separation payments totaling $512,693 made to former employees during the audit period to determine whether they were accurately calculated in accordance with the terms of each respective collective bargaining agreement. County employees did not accurately calculate separation payments made to seven former employees (23 percent of payments reviewed). As a result, one former employee was overpaid $10,000 and three former employees were overpaid a combined total of $89. In addition, one former employee was underpaid $334 and two former employees were underpaid by a combined total of $69. These errors occurred because the payroll clerk made a calculation error and the associates used inaccurate hourly rates and accrued unused sick leave balances when calculating the payment of employees' accrued unused sick leave. In addition, the associates provided the payroll clerk with inaccurate leave balances used to calculate payments.

School officials ensured the accuracy of compensation paid and benefits provided to employees. We found that payroll duties were adequately segregated and there was appropriate oversight of the payroll process. The Board authorizes new employee hiring, the administrative assistant prepares offer of employment letters, which list the salary to be paid, and the School Director and the Board President sign these letters. However, School officials did not update the salaries contained in the offer letters if changes were made after the letters were prepared. In addition, School officials did not have any written policies to address this issue. Further, the Board did not formally approve the health insurance opt-out program and the leave benefits for six maintenance employees.

District officials established adequate procedures to ensure that goods and services were procured in accordance with the District's policy. We reviewed 50 purchases totaling $334,676 made during our audit period and found that they were properly procured. We commend District officials for effectively designing and implementing its policy and procedures that ensure effective purchasing of goods and services.

The District did not have a comprehensive policy for identifying and recording fixed assets. In 2013, the Board established a policy setting a $5,000 threshold for determining which assets are to be depreciated in the District's accounting records. However, the Board has not established threshold values for tagging and inventorying assets for departmental inventory control purposes, such as computers, electronic devices, tools and lawn equipment. The Board has designated the Assistant Superintendent to be the person responsible for recording and tracking fixed assets and arranging for an annual inventory and appraisal of District property. However, the Assistant Superintendent told us there have been no annual physical inventories conducted and also acknowledged that asset records are not kept up to date. As a result, 18 fixed assets valued at $168,700 were either not recorded on the master inventory list or not properly tagged. Finally, the District's inventory records of technology assets were inconsistent.

We reviewed the District's procurement of services from 32 professional service providers paid $1.6 million. We found that District officials did not seek competition for 26 professional service providers paid almost $1.3 million. The District used these professional service providers for as many as 13 years without seeking competition. In addition, the District did not have written agreements with 10 of the providers who were paid a total of almost $395,000 during our audit period. Some of the providers have provided services to the District for over 12 years. Finally, officials did not always obtain quotes for goods and services, as required by the purchasing policy.

The Board did not establish compensating controls to help oversee the former Supervisor's work. Our tests of check disbursements totaling $1.4 million disclosed three payments totaling $36,380 that did not contain adequate support. In addition, one employee was overpaid $1,100 and detailed time records were not maintained to support $1,922 in hourly wages paid to another employee. The Board did not properly authorize health insurance benefits averaging $183,000 annually for elected officials in 2016 and 2017. In addition, to calculate health insurance contributions when preparing payroll, the former Supervisor deducted the individual premium cost before applying the 15 percent contribution rate to arrive at the contribution amount for any employee who received other than individual coverage. However, the policy does not specify that the individual coverage should be deducted before applying the 15 percent. As a result, we estimate the Town may have paid an annual average of $11,600 more than it should have in 2016 and 2017 (about $1,160 per employee each year) for the 10 full-time employees with insurance benefits other than individual coverage. Finally, because the Frankfort Consolidated Health District (FCHD) is no longer operating, the Board, in consultation with its legal counsel, Village and County officials, should consider dissolving the FCHD. If the FCHD is dissolved, the Supervisor should return the $43,200 of unexpended funds to the County so it can be used to reduce the County tax levy on properties within the Town and Village.

District officials have established adequate procedures over the payroll function to ensure that compensation paid and benefits provided to employees are accurate. We analyzed 35,236 checks totaling $124.3 million to ensure the accuracy of compensation paid and benefits provided to employees. Except for minor deficiencies discussed with District officials, compensation paid and benefits provided to employees were accurate. We commend the District for effectively designing and implementing policies and procedures that ensure the accuracy of compensation paid and benefits provided to District employees.

Real property taxes totaling nearly $2.2 million in 2016 and $1.3 million in 2017 were not always remitted to the Supervisor and County Treasurer (Treasurer) in a timely manner. For example, the Clerk collected tax payments totaling $774,127 during the first three weeks of January 2016 but remitted these collections to the Supervisor between four to six weeks later. In addition, clerk fees and real property taxes were not always deposited within the required timeframes. Clerk fees collected during five months of our audit period totaling $11,179 were deposited from between one to 33 days after receipt. In 2016, the Clerk deposited $37,036 in real property taxes from between one to 24 days after receipt. Finally, bank reconciliations were not always prepared or accurate.