We found the City's procurement policy was not reviewed by the Council annually, as required by law, or consistently followed by City officials. The Board of Public Utilities (BPU) did not seek bids for purchases from six vendors who were paid $387,763 and the City did not seek bids for purchases from one vendor who was paid $65,864. In addition, BPU officials did not seek competition, such as using requests for proposals (RFPs), when procuring $596,763 in professional services from five vendors, and could not provide written agreements with two of those vendors. We also found that purchases totaling approximately $83,569 were made without requesting quotes, as required by the City and BPU purchasing policies. The City has also failed to segregate duties or provide adequate oversight of the cash receipt process. Users of the six electronic collection systems can collect, record, prepare deposits and make adjustments in the system with minimal or no oversight. In addition, City and BPU officials could not provide a reasonable explanation for 47 missing receipts. Utility customer accounts and payments were adjusted and parking fines were dismissed without supervisory approval and had no supporting documentation. Finally, we found that cash collections were substituted with personal checks.

Town officials did not always properly plan and finance the acquisition of capital assets and projects. The Board did not have a formal multiyear capital plan or a long-term financing plan in place. Instead, Town officials relied on annual requests from department heads seeking to fulfill their immediate capital needs and primarily issued debt to finance the capital expenditures they approved. As a result, over a ten-year period the Town's outstanding debt more than doubled, from $9 million in 2002 to over $18 million in 2012. Without a formal comprehensive plan to guide the Board's decision-making process, there is limited assurance that the purchase, maintenance, or replacement of capital assets is in the best interest of the Town.

The Treasurer does not perform monthly bank reconciliations, or present bank statements or cancelled checks to the Board. This resulted in a bank balance that was about $34,100 higher than reported on the Department’s books.

Village officials have not made a substantive effort to use available resources to gain a better understanding of wastewater treatment processes and costs and do not adequately review invoices, analyze lab reports, repair identified sewer main breaks, or adequately document property inspections for improper connections. The Town bills the Village for its share of all wastewater processing costs. Retirees from the Town's Wastewater Department comprise 4.5 percent of total Town retirees for the five-year period 2008 through 2012, rather than the 8.2 and 8.4 percent that the Town applied for 2011 and 2012. Therefore, the Village's overall share of wastewater processing costs would be reduced by $27,800 in 2011 and $30,000 in 2012, or a two-year savings of $57,800. We also found that the Superintendent of DPW does not review wastewater lab reports and neither he nor the Clerk-Treasurer adequately review the wastewater invoices from the Town for accuracy. Further, our review of the sewer camera log maintained by the Village DPW from July 5, 2011 through November 13, 2012 documented 20 sanitary sewer main breaks. However, the corresponding log of sewer line repairs for the same period did not include any repairs. Finally, the Board has not established policies and procedures for remote access to the Village's network to ensure that computerized data is properly safeguarded. The IT vendor can access the Village's computers at any time, without restriction or monitoring, which increases the risk of inappropriate transactions.

We found the District established adequate internal controls over payroll. District officials implemented specific procedures to ensure that individuals reported and paid on the payrolls were paid at their approved salaries and wages, and they received only the benefits to which they were entitled.

County officials are spending more money to operate their current jail than if they were to build a new jail with a more efficient design and a larger capacity. The cost of a new jail would be fully offset by payroll, inmate boarding and facility cost savings within 33 years, with projected savings over the 50-year life of the new jail of $108 million.

Although the Board and District management believed they were effectively managing the District's financial condition, the adopted budgets continually included overestimated revenues and appropriations. While recognizing that the actual results of the District's operations were reasonably close to the estimates each year, the cumulative effect of these variances resulted in a 52 percent increase in the District's fund balance. The Board continued to adopt budgets that included annual real property tax levy increases even though the District had funding surpluses for four of the last five completed fiscal years.

The highway fund's financial condition has diminished in recent years because of revenue shortfalls, and the Board allowed budgets to be over-expended. Specifically, the highway fund experienced unplanned operating deficits in 2011 and 2012 of $49,263 and $71,979, respectively. Consequently, the highway fund balance declined from $83,179 at January 1, 2011 to a deficit of $38,059 at December 31, 2012. The general fund currently had a positive fund balance of $33,550 as of December 31, 2012. However, because the general fund is directly impacted by borrowings from the highway fund, it is even more important that the Board properly oversees fiscal operations to ensure the Town's financial stability.

The Supervisor did not maintain adequate accounting records or provide the Board with accurate financial reports. Examples include balance sheets for operating funds that did not balance, with differences totaling $339,000 and $487,000 as of September 2012. In addition, cash on the Supervisor's monthly reports did not agree with bank balances or accounting records for any of the 17 months we reviewed, with differences ranging up to $300,000 during 2011. The Supervisor's AUDs did not agree with bank records, resulting in, for example, general fund cash being over-reported by $98,438 in 2011. Finally, the Board members did not audit the books and records of the Supervisor, which could have made them aware of differences between cash accounts and bank accounts and the numerous mispostings to the accounting system made by the former bookkeeper. The lack of adequate records, reports and annual audits makes it difficult for the Board to evaluate the Town's financial activities and can obscure the Town's true financial condition.

Generally, the Board conducts a thorough and deliberate audit of claims before payments are authorized in order to ensure that Village funds are being spent efficiently. Our examination revealed only minor deficiencies, which we discussed with Village officials.

The Board needs to improve its oversight of District financial activities. The Board did not ensure that the Secretary-Treasurer maintained complete and accurate financial information in order to provide the financial information necessary to develop accurate budgets and to properly monitor the District's operations. The Board has not adopted a code of ethics or an investment policy. Finally, the Board did not properly audit claims and ensure that payroll procedures and payments were appropriate. As a result, District resources were at risk of misuse without being detected or corrected.

We performed certain tests to ensure that 35 non-payroll disbursements totaling $66,400 were properly approved and legitimate Town expenditures and found 17 discrepancies totaling $8,450. Specifically, 10 checks totaling approximately $6,900 were never approved by the Board. We also tested 21 payroll disbursements totaling a gross amount of $13,600 to ensure that they were made for proper purposes and identified four employees − who received gross pay totaling $886 − that did not have an approved timesheet on file to verify that they were paid for hours actually worked. Additionally, we found no evidence that the Board approved the pay rates of the three transfer station employees, who were paid a gross amount of $17,370 during our audit period. Moreover, we found that the Highway Superintendent was underpaid by a total of more than $2,300 for his health insurance buy-out in the 2011 and 2012 fiscal years. These discrepancies occurred because the Board did not provide adequate oversight of disbursements and did not provide for a detailed audit of the Supervisor's records for the 2011 fiscal year.

We found that from 2007-08 to 2011-12 the Village had unforeseen expenditures of $89,500 for increased water costs and major flood damage. Because the Village has a very small tax base, and the Board did not include contingency appropriations in its budgets, the Board had no mechanism to react to unforeseen expenditures of this magnitude other than to hope that it might get some revenue source, like Federal or State aid, if there was an emergency. The Village was able to avoid fiscal instability because it received unanticipated revenues in four of those five years totaling approximately $120,500, of which $50,064 was Federal and State aid for the reimbursement of emergency disaster work due to the flooding.

Internal controls over cash receipts and disbursements were not appropriately designed or operating effectively. The bookkeeper's cash receipt and disbursement duties were not adequately segregated and Town officials have not established compensating controls such as a periodic review of accounting records or bank statements. In addition, 13 deposits totaling $2.33 million were not recorded until five or more days after deposit and one as long as 33 days after deposit, and duplicate receipts or daily receipt logs were not used. Furthermore, because the abstracts presented to the Board did not include manually processed checks, 21 percent of the claims paid by the Town totaling $846,560 were not audited prior to payment, and 18 claims totaling $293,160 that were paid lacked sufficient documentation such as written contracts or rate schedules. Town officials have not ensured that accounting records are accurate, complete and up-to-date. The former Supervisor paid $173,000 to the Library as settlement for the balance of the 2011 real property taxes, capital fund balance and the unexpended library fund balances from prior years without documentation to support this payment. The Board also has not entered into an agreement or established a policy regarding electronic transfers of Town funds and has not audited the financial records of the Clerk or Supervisor for 2010 or 2011. Finally, the Town has partnered with a not-for-profit organization (NFP) to purchase land for open space. However, the Town solicited donations totaling $75,000, despite no express authority for the Town to do so, and the payment of $50,000 to the NPF toward the NPF's purchase of open space was done without a contract. In the absence of a contract, such a payment constitutes a gift and Town officials have no assurance that the funds will be expended as intended.

The Board authorized, and paid a total of $125,000 toward two loans to a private, not-for-profit ambulance company from a Town “Revolving Loan Fund” which we understand was established using Federal grant moneys from one or more federal HUD programs. We have been informed by the United States Department of Housing and Urban Development (HUD) that program income held in certain Revolving Loan Funds continue to be subject to Federal HUD requirements under HUD programs. The Board believed that loaning money to the private not-for-profit ambulance corporation was within the allowable purposes of their loan program. In particular, the Board recognized the need for ambulance protection for their citizenry and had previously loaned money from that fund for other ambulance-related purposes. If the Town was not permitted under Federal law to make loans to the private ambulance company, the Town would have improperly expended moneys from the Revolving Loan Fund. Because the propriety of the use of these funds is governed by Federal, not State law, we are referring this issue to HUD for its consideration.

The Board and Supervisor cannot be sure that all money collected was properly accounted for and that disbursements were only made for proper Town purposes. The Supervisor allows the bookkeeper to perform most aspects of the functions relating to the receipt and disbursement of moneys without providing sufficient oversight of her duties.

We found that the City has had a pattern of structural budget deficits, meaning recurring revenues were not sufficient to fund recurring expenditures. During our audit period (2009 through 2013 budgets) the general fund's budget gap averaged $12.4 million. City officials balanced the budgets using fund balance and an estimate for casino revenue that averaged $5.3 million annually. One cause of this structural deficit was that although casino moneys have not been received since 2008, the City continued to budget for these revenues. Although City management has implemented information technology policies and procedures, including a computer use policy, they have not implemented adequate controls and restrictions over user access to the financial system. Further, City management has not developed adequate procedures for data backup and storage, or a comprehensive disaster recovery plan.

The District paid over $1 million in claims in 2012. Each Commissioner is assigned to separate committees, which include areas such as equipment, radios and trucks. When an invoice is received, it is provided to the Commissioner assigned to that area. It is that Commissioner's responsibility to review the claim and determine if it is a proper District expenditure. Because of this procedure, the entire Board does not audit all claims. At monthly meetings, they simply receive a warrant of claims for approval. In addition, the Board passed a resolution which allows the Treasurer to pay specific bills prior to audit. However, instead of including only those specific exceptions allowed by Town Law, the resolution also allows credit card bills to be paid in advance of the Board's audit.

The Board has not adopted written policies for cash receipts, segregated critical duties so that one individual does not control all phases of a transaction, or designed procedures so that someone is reconciling and reviewing the daily cash list to properly safeguard Village assets. In addition, the recreation center has one cash register that is used by eight employees without using a unique code to identify who is using the register. The Village also needs to improve internal controls over information technology. We found that copies of back-up data are not stored in a secure off-site location, and the Board has not developed a disaster recovery plan.

Over the past three years, District officials have tried to maintain the same level of programs and services while keeping the tax levy as low as possible. However, they were able to do so only by continually appropriating fund balance, resulting in the drastic depletion of the year-end unexpended surplus fund balance from $1.7 million in 2009-10 to just over $64,000 (or 0.2 percent of District expenditures) in 2011-12. Further, over the same three-year period the District received $2.4 million less in revenues than budgeted. Most of this shortfall was from State aid and interest earnings. Luckily, the effects of the revenue over-estimates were offset by the over-estimated expenditures that amounted to about $9 million over the three-year period. The vast majority of this over-estimation, $7.4 million, was in salaries and benefits, which should be budgeted on established salary schedules and therefore should not have significant variances.