We audited certain moneys collected by four of the seven departments within the City responsible for collecting and/or depositing City moneys; the Finance Office, Public Transportation Office, Water Department, and the City Clerk's Office. Except for minor discrepancies, which we discussed with City officials, we determined that cash receipts collected by the Finance and City Clerk's Offices were adequately accounted for. However, unless City officials improve their recordkeeping practices, the risk will remain increased that all moneys due to the City will not be received, recorded and deposited properly.

The Board and Town officials did not adequately monitor the Town's financial operations and take timely action to maintain the Town's financial stability. The fund balances in the Town's major operating funds fluctuated significantly over the last four years primarily because the Board over-appropriated fund balance in the budget and allowed the budget to be overspent. In addition, duties relating to the Town's financial operations are not adequately segregated. The Supervisor is responsible for preparing and disbursing checks, preparing monthly bank reconciliations, recording cash disbursement entries into the accounting records, and preparing monthly reports to the Board, without the Board providing for an independent review and verification of her work. The Board also has not instituted controls to compensate for this lack of segregation of duties, such as reviewing bank statements, cancelled checks, and reconciliations.

Based on the results of our review, we found that the significant revenue and expenditure projections in the tentative budget for the general, electric, library, and parking funds are reasonable. The water and sewer funds' tentative budgets are not balanced and include a deficit of more than $203,000 and $220,000, respectively, or approximately 7 percent in each fund. Village officials told us they recognized the deficits and planned to raise water and sewer rates to make up the difference. The Village's tentative budget complies with the property tax levy limit.

Based on the results of our review, except for certain matters, we found that the significant revenue and expenditure projections in the tentative budget are reasonable. However, the Village has very limited fund balance and has proposed a limited contingency account. The Village should consider increasing the contingency appropriation in its adopted 2013-14 budget. A contingency account of 5 percent of appropriations ($94,000) would give the Village some flexibility in dealing with unexpected events. Any amounts not needed during the year would help to rebuild the general fund balance. The Village's tentative budget complies with the property tax levy limit.

The Executive Director did not ensure that disbursements were for proper DIBID purposes. He did not ensure that claims for payments had sufficient supporting documentation that would provide proof that they were for valid DIBID expenditures. We found that six of the 20 checks we tested, totaling $3,316, did not have sufficient documentation. Although DIA officials provided explanations for these expenditures, which appeared to be reasonable DIBID expenditures, without proper supporting documentation such as receipts, invoices, or bills attached to the claims, taxpayers do not have any assurance that these monies were used for valid DIBID purposes.

The Town does not reconcile the amount of money collected with the amount of trash disposed at the transfer station. We found that over a three-month period in 2012, the weight of the solid waste the Town paid to dispose of at the Franklin County landfill exceeded the amount of trash accounted for as being received at the Town's transfer station, resulting in approximately $10,000 in missing revenues. We also found weak internal controls over cash receipts and poor monitoring of solid waste received at the transfer station. One individual is responsible for weighing the solid waste to determine the amount owed from the customers, collecting fees, issuing receipts, and recording the collections. Additionally, duplicate receipts were not prepared for moneys received at the transfer station and no weigh slips were retained. The absence of the weigh slips and cash receipt records makes it impossible to determine if the proper amount of disposal fees were charged to customers and that all moneys collected were subsequently turned over to the bookkeeper in the Supervisor's office.

The Supervisor does not maintain timely or accurate accounting records for the Town. Therefore, the accounting records do not support the AUDs filed by the Supervisor for 2010 and 2011. Also, since the majority of the Town's funds are co-mingled into one checking account, bank reconciliations are prepared by the bookkeeper to balance with the Town's cumulative cash balance versus the cash attributable to each individual fund. Furthermore, the Board does not receive all the financial information it needs to monitor the Town's financial operations.

This is a follow-up on an audit released in 2010. Based on our limited procedures, it appears that the Village has made limited progress in implementing our recommendations. Of the eight audit recommendations in the original report, two recommendations were implemented, four recommendations were partially implemented and two recommendations were not implemented.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable. The District's proposed budget currently includes a tax levy that is over the statutory limit by $58,246.

Towns can improve their monitoring of asphalt road surfacing projects to better ensure that asphalt products vendors provide meet bid specifications. Our review of a total of 26 asphalt projects in the 10 towns did not identify any material price or quantity exceptions.

The Board needs to improve its oversight of the Village's financial operations. The Board did not develop policies and procedures for the Clerk-Treasurer to follow when performing cash receipts and disbursement duties and did not audit, or cause to be audited, the Clerk-Treasurer's financial records and reports on an annual basis. The Board did not ensure bank reconciliations were properly performed and did not ensure the Village payroll was certified, as required by law. In addition, the Board did not provide mitigating controls to compensate for the lack of segregation of financial duties.

The Board adopted claims processing policies which require all claims to be audited prior to payment except for certain allowed exceptions. District policy requires the claims auditor to ensure that all claims are properly authorized, itemized, supported and that goods and services have been received in the amount and price as ordered prior to payment. We randomly selected 45 claims from all funds totaling $60,051 during our audit period and tested them to see if they were properly supported and audited in a timely manner. All of the 45 claims tested were audited timely and properly supported. However, the District reimbursed its dental insurance provider via automated clearing house (ACH) debits for payments made on behalf of District employees, totaling $554,458, during our audit period. District officials stated these claims were not audited prior to payment.

The Board did not adopt budgets for the sewer fund that provided sufficient revenues to finance expenditures, because revenues were consistently overestimated. As a result, the sewer fund balance has declined dramatically from approximately $20,000 as of May 31, 2008 to a fund deficit of approximately ($54,000) as of May 31, 2012. To compensate for the lack of sufficient revenues, the sewer fund borrowed $40,000 from other funds, which has not been repaid and improperly used $30,000 from a repair reserve. We also found that the Clerk-Treasurer did not maintain the Village's accounting records in a complete and accurate manner. Specifically, we found that cash, accounts receivable and accounts payable were misstated, which resulted in the operating funds' fiscal health appearing to be more favorable. In addition, the Treasurer does not provide, and the Board does not request, monthly reports that would provide essential financial information. Finally, the Board did not ensure that the annual report was filed with our Office within 60 days of fiscal year end, as required.

The Board has not adopted policies establishing responsibilities and duties for the Treasurer for handling cash and maintaining accounting records. As a result, the Treasurer filed the Village's annual financial report an average of 221 days past the due date for the fiscal years ending in 2008 through 2011. In addition, the Board has not implemented compensating controls to address the lack of segregation of duties performed by the Treasurer. Further, Village officials do not review payroll in a timely manner, and there is no certification of payroll prior to printing checks. In addition, there was no evidence that the Board conducted an audit of claims. Although fuel consumption records were kept for specific vehicles, there were no perpetual inventory records or physical inventories completed. Three employees have access to all financial software functions enabling them to record and change information, and prepare and print checks. Finally, the Board has not developed a formal disaster recovery plan.

The Village has informal procedures over the collection of cash receipts for water and sewer rents and property taxes. Village officials have attempted to mitigate the inherent internal control weaknesses of a small office by having a part-time Deputy Clerk-Treasurer (Deputy) collect receipts. However, weaknesses still exist because the Deputy prepares manual receipts and gives the Clerk-Treasurer all the receipts at the end of each day. The Clerk-Treasurer, who prepares the billings, also enters receipts into the accounting system, reconciles customer accounts, prepares bank deposits and reconciles bank statements without any additional verification or assistance by her Deputy. With these incompatible duties, the Clerk-Treasurer has the ability to misappropriate cash receipts without detection. The Village has not utilized the Deputy in a manner that would create some segregation of duties over the cash receipts process and the Board does not provide additional oversight to mitigate this control weakness.

We found deficiencies in the Village's internal controls over cash disbursements. The Clerk and Treasurer both independently perform incompatible cash disbursement duties and compensating controls have not been established to mitigate this weakness. Furthermore, the Board did not require claims to be adequately documented or appropriately audit and approve all claims. In addition, internal controls were not adequate to ensure real property taxes and water rents were properly accounted for. Incompatible duties were not segregated and the Clerk did not maintain appropriate, complete and accurate records to detail real property tax and water rent billings and collections. Furthermore, deposits were not made timely in compliance with Real Property Tax Law and Village policy and appropriate amounts of interest and penalties were not collected. As a result, the Clerk did not collect all interest and penalties due on overdue real property tax and water rent payments or properly record and report to the County unpaid water rents for re-levy.

The Board did not oversee purchasing, audit claims, obtain written monthly financial reports from either Treasurer, require reconciliations of the bank statements with Company records, or obtain an independent audit of the Treasurer's financial records. The Treasurer made purchases, paid bills, wrote checks, and made ATM cash withdrawals for personal purposes with no oversight. As a result, the Treasurer and Fire Chief were able to initiate non-Company transactions without detection by making purchases with the Company's bank debit card and on the Company's credit with vendors. The Treasurer also issued Company checks to herself, her husband (the Fire Chief), her father-in-law, and their related businesses, and made ATM cash withdrawals of Company funds. Additionally, the Fire Chief used the Company's accounts to make sales tax-exempt purchases for his contracting business – some of which he paid with the Company's debit card – and used Company funds to help purchase a personal vehicle. These personal purchases, payments, and cash withdrawals totaled $113,098. We also identified another $26,386 in questionable payments and purchases that appeared to be personal in nature.

The Department did not establish adequate controls to ensure collections were properly accounted for and remitted to Finance for deposit. Procedures were not sufficient to ensure incompatible duties were properly segregated and collections were adequately accounted for and remitted to Finance in a timely manner.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget are reasonable.