During our audit period, the District paid claims totaling $24,547,479. District officials have established adequate controls over the claims processing function that ensure claims are audited in a timely manner and are properly supported. The claims auditor generally conducts a thorough and deliberate audit of each claim before the Board authorizes payment. Even though the claims auditor appeared to be properly auditing claims, the purchasing agent did not always formally approve all purchases prior to ordering goods and services. We selected and reviewed 25 claims totaling $145,637 to determine if purchase orders were issued prior to the ordering of the goods and services and if claims were for legitimate District purposes and audited prior to payment. Despite minor deficiencies that were discussed with District officials, the claims we tested did appear to be for a proper District purpose and audited prior to payment. However, purchase orders for six of the 25 claims totaling $33,539 were confirming purchase orders which were prepared after the invoice was received from the vendor.

Village officials need to improve internal controls over the Village's time and attendance procedures and leave accruals. We identified 79 errors in nine employees' accrual records. There were no timesheets or other records of the days or hours worked, such as calendars and logs, for four salaried employees, and timesheets for two part-time employees were not signed by their supervisors. In addition, internal controls over the Court's operations were not appropriately designed or operating effectively to allow for proper accounting and reporting of financial activities. Bank reconciliations were not documented for Justice Harrison's account, and monthly bank reconciliations of Justice Portin's account showed a recurring, unresolved surplus balance of $446 during the audit period. Finally, internal controls over the Treasurer's activities and the Board's oversight of the Treasurer's financial operations also need to be improved. The Treasurer did not properly reconcile all Village bank accounts or update the accounting records in a timely manner. Further, the Board did not ensure that adequate policies, procedures and agreements were established for online banking and did not provide sufficient oversight of electronic funds transactions.

The Board does not audit claims and has not designated a claims auditor to perform this function. Instead, the Executive Director audits the claims, including payments made for the reimbursement of his own travel costs. Our review of claims did not identify significant discrepancies.

The Board did not ensure that the District only paid for actual District expenses, necessarily incurred on official District business and did not establish appropriate policies and procedures to ensure that expenditures were properly supported. This resulted in the payment of $15,041 in questionable travel costs which do not appear to be for the District's benefit. In addition, claims totaling $23,847, some of which were for this questionable travel, were submitted and paid without adequate support. This included $2,813 in reimbursements to a Chief for expenditures that the District had already paid for on the District credit card. Finally, the Board has not established a maximum daily rate for meals and lodging to ensure that travel is cost-effective and reasonable. Had the Board implemented per diem rates established by GSA for meals and lodging and mandated that the most cost-effective and reasonable means of travel be used, they could have saved over $12,000 on the five out-of-state conferences in 2012.

For the 2011-12 fiscal year we compared billings totaling approximately $3.2 million for all five school districts of residence to revenues received and reported and did not identify any discrepancies. We also reviewed the relevant factors included in the calculation for all five final billings to the school districts and did not identify any discrepancies in the School’s calculation.

We determined that internal controls over the Town's purchasing process were properly designed and operating effectively. We found that Town officials obtained appropriate competition when soliciting purchases from 26 vendors who were paid more than $20,000 each and approximately $1.4 million in total. We also reviewed supporting documents to verify that procurements and subsequent payments were properly authorized, accurate and for legitimate purposes and, where applicable, if reimbursed expenses were appropriate and properly supported by paid bills or receipts. All transactions that we examined were for proper Town business purposes, and were supported by contracts, Board resolutions and appropriately itemized invoices.

The Board has not established an effective system of internal controls over payroll, to ensure that the Town has properly classified its Fair Labor Standards Act (FLSA) exempt employees, and enforced established requirements for leave requests, accrual records, and employee time records. The Board also did not properly authorize interfund advances or ensure that the Supervisor and accountant properly accounted for them and repaid them timely in accordance with law. Also, the Board has not developed long-term financial plans, policies, or procedures to govern budgeting practices and the level of unexpended surplus funds to maintain. As a result, the Board had consistently adopted budgets with inaccurate estimates for revenues and expenditures, and the amount of fund balance that would be available and used to balance the budget. These inaccurate budgets led to the accumulation of significant fund balances in the general and water funds and, conversely, dangerously low fund balance in the sewer district fund. Finally, the Board has not established policies and procedures related to breach notification or disaster recovery.

The Board did not provide adequate oversight of the Company's financial operations, properly supervise the Treasurer's activities, approve bills prior to payment, or ensure that an audit of the Company's finances was performed by an IPA, as required by law. This lack of oversight diminishes the Board's ability to ensure that taxpayer moneys are used in a responsible manner. As a result, Company resources were spent unnecessarily. We identified payments made totaling approximately $8,500 for services and equipment that were never used. In addition, the Treasurer inappropriately reimbursed himself $1,162 for fees associated with his personal credit card and for unsubstantiated restaurant purchases. Finally, we estimate that the Company will save approximately $10,000 annually if the number of cellular telephones is reduced from 18 to five.

The Board generally provides adequate oversight of District financial activities. It has adopted purchasing and investment policies and a code of ethics, as required by statute, and has ensured that procedures for financial recording and reporting were developed. Monthly financial reports are provided to the Board, the annual financial report is filed with OSC in a timely manner, and the Secretary-Treasurer's records are audited annually. Lastly, the Board audits all District claims. Although the Board passed a resolution to pay claims that are allowed to be paid prior to audit, it also passed a separate resolution to pay other bills prior to audit that are not allowed by Town Law. For example, the Board approved the payment of claims prior to audit for certain vendors that supply trash pickup, health insurance, office supplies, auto parts, payroll accounting services, and fire-related services.

The Board did not adopt a comprehensive IT security plan or a disaster recovery plan. In addition, the Board has not adopted a breach notification policy. Without a proper IT security plan and a disaster recovery plan in place there is an increased risk that Town data, hardware and software systems may be lost or damaged by unauthorized access and use, or disaster. Furthermore, by failing to adopt an information breach notification policy, in the event that private information is compromised, Town officials and employees may not understand or be prepared to fulfill their legal obligation to notify affected individuals.

We found that the Board and Village officials have not developed policies and procedures to govern budgeting practices and the level of unexpended surplus funds to maintain or developed long-term financial and capital plans. As a result, the Board has adopted budgets that were not based on sound and realistic estimates of expenditures, and the Village has excessive fund balance in the general fund. In addition, the Board has not adopted an investment policy, which is required by law, or any policies or procedures for finance-related operations. The Board has also not adopted any policies or procedures governing information technology (IT), including those related to acceptable use, data backup, online banking, disaster recovery, equipment disposal, and breach notification. Additionally, the Village's unaccounted-for water for 2011-12 was 30 percent which is significantly higher than the industry standard of 10 percent.

The Village's internal controls over water operations need to be improved. The water clerk's duties were inadequately segregated, interfund advances were not accurately accounted for, reconciled, or repaid as required and employee benefits costs were inaccurately allocated. As result of deficient internal controls, we detected errors in more than 17 percent of the water bills that we reviewed, and more than $1,100 of customer account adjustments were made without documented prior approval. In addition, as of May 2012, the water fund owed the general fund approximately $126,000. The water fund was also over-charged approximately $74,000 for employee benefit costs.

We found the District established adequate internal controls over payroll. District officials implemented specific procedures to ensure that individuals were paid at their approved salaries and wages and received only the benefits to which they were entitled. We also determined that the various control procedures that the District had established over the payroll process provided adequate supervision and oversight.

The Board does not routinely monitor financial operations, adopt reasonable budgets or take appropriate action to maintain financial stability. As a result, the highway town-wide fund has a deficit and the general and highway town-outside-village funds have unexpended surplus funds that are excessive.

County officials are not ensuring that various departmental operations and functions are operating at the lowest possible cost to taxpayers. The Sheriff's office is understaffed and incurring an average of more than $500,000 annually in overtime. The County could save from $44,000 to $177,000 a year depending on the number of additional officers hired in the jail and road patrol. The County is also not imposing certain allowable fees that the probation department could collect, ranging between $9,500 and $42,300 annually.

We found that the School accurately billed the school districts of residence. We also found that the School maintained adequate supporting documentation of the students' addresses and proof of their residence in each of the resident school districts for the 30 students reviewed. Furthermore, at the end of the fiscal year, the Director of Operations completes a reconciliation of amounts billed and collected. We reviewed his reconciliation for the 2011-12 school year and found it to be accurate.

We found that the Board has not adequately monitored the financial condition of the water and sewer funds. Adequate financial reports were not provided to the Board on a monthly basis. Therefore, the Board has not ensured that adequate cash balances are available to fund expenditures as they come due. Prior to May 31, 2008, the sewer fund borrowed a total of approximately $64,000 and the water fund borrowed a total of approximately $54,000 from other funds, principally from the general fund. The water and sewer funds do not presently have sufficient resources to repay the full amount of these interfund loans without affecting their operations.

The Board has not properly developed annual budgets. The 2009, 2010, and 2011 fiscal year budgets did not include provisions for the Board's accelerated retirement of District debt. From 2009 to 2011, the actual expenditures exceeded the budget estimates each year by an average of 22 percent because of unbudgeted debt service expenditures. For those three years, the Board chose to use available unexpended surplus funds to pay off the debt balances early, avoiding future interest payments. In addition, in 2009, the Board increased the real property tax levy by more than 24 percent to fund, along with the use of debt and unexpended surplus funds, the $399,000 purchase of capital equipment. During 2012, the real property tax levy remained at the same level as when the District made the capital equipment purchase, while the total expenditures returned to the levels before the purchase and debt repayment. As a result, the District generated a $57,000 operational surplus, and the Board opted to transfer $10,000 of the surplus to an existing reserve account. However, the District has not formally established reserve funds. As of the fiscal year ended 2012, the unexpended surplus fund balance was about 47 percent of the total ensuing year's expenditures and the reserve balance was over $175,000.

Library officials have established adequate controls over the claims processing function that allow claims to be audited in a timely manner and ensure the claims are properly supported. The account clerk and/or Director reviews invoices for department head approvals before printing checks and a schedule of claims to present to the Board, which then audits the claims before signing the checks. Finally, the claims auditor performs a post-audit of the claims paid.

The Board needs to improve its oversight of the District's financial operations. The Treasurer submits monthly financial reports to the Board that contain incomplete information, and the District's financial records have not been audited by an independent public accountant since the 2010 fiscal year. The Board also does not formally approve attendance at conferences and could have saved approximately $2,000 on two conferences had it adopted more reasonable meal and lodging per diem rates. The Board has also not distributed the code of ethics to all members as required by General Municipal Law, and one of the Commissioners has not completed the fiscal training required by Town Law. Although the District has hourly payroll expenditures that total approximately $81,000 per year, the District does not have procedures that provide reasonable assurance that employees report time worked accurately on their time cards. In addition, although the Board has adopted a policy to address computer and Internet use and password security, it has not distributed this policy to District members. In addition, the District has no disaster recovery plan. Although the District's third-party IT services provider is supposed to restart the District's IT operations from daily backup files the event of an emergency, this process has never been tested. Finally, District officials do not review audit logs.