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NYS Comptroller

THOMAS P. DiNAPOLI

Audits of Local Governments and School Districts

Big Flats Fire District #2 – Internal Controls Over Financial Operations (2012M-155)


Released: January 30, 2013 -- [read complete report - pdf]

Purpose of Audit

The purpose of our audit was to examine selected District financial operations for the period January 1, 2011 through June 21, 2012.

Background

The Big Flats Fire District No. 2 is located in Chemung County. The District’s general fund budget totaled $101,467 for the 2012 fiscal year. Included in the budget is $30,000 for rent of the Golden Glow Volunteer Fire Company, Inc. firehouses. The Board of Fire Commissioners consists of five elected members and is responsible for the District’s overall financial management.

Key Findings

  • The Board has not established written policies and procedures for cash receipts and disbursements, claims processing or information technology.
  • The Board has not adequately segregated the Treasurer’s duties or implemented mitigating controls.
  • The District entered into a new three-year lease with the Company effective January 1, 2011 to pay rent of $30,000 annually, which was double the $15,000 amount paid in 2010, for the two existing firehouses. When the new firehouse construction is complete, the two existing firehouses will be sold. However, the rent amount will remain at $30,000 per year. The Board did not perform a cost-benefit analysis of this transaction or determine if the rental price was at fair market value. Given that the payment for at least the first two years of the lease doubled the cost for the same space, it is questionable that the District has been paying fair market value. Instead, it appears that the increase was intended to subsidize the construction of the new firehouse that will be privately held. Furthermore, statutory budget constraints may limit the District’s ability to absorb any future increases in the lease payment.

Key Recommendations

  • Develop, adopt, and implement written policies and procedures for cash receipts and disbursements, claims processing and information technology to control and monitor District operations.
  • Segregate the duties performed by the Treasurer or take a more active role in oversight of the District’s financial records and activities. Perform a proper annual audit of the Treasurer’s records and reports to ensure that the records are complete and accurate.
  • Protect the taxpayers of the District by not agreeing to any further lease increases without detailed justifications for the amounts paid and a rigorous exploration of alternatives.

Local Government and School Accountability Contact Information:

Phone: (518) 474-4037; Email: localgov@osc.state.ny.us
Address: Office of the State Comptroller, Division of Local Government and School Accountability
110 State Street, 12th Floor; Albany, NY 12236