The Clerk did not issue press-numbered duplicate receipts for cash collected, accurately record all transactions, remit moneys due to the Supervisor and other entities in a timely manner, or deposit cash receipts intact or in a timely manner. In addition, the Clerk inappropriately inter-mingled her personal financial activity with the Town's business. The Board also did not provide adequate oversight of the Clerk or document its annual audit of the Clerk's records and related results in the minutes of its proceedings. Due to these internal control weaknesses, cash receipts are not adequately safeguarded, and the risk of fraud is significant.

We found that that the Board did not develop budgets with realistic estimates of revenues. In recent years, the Board over-estimated the sales tax revenues and incorrectly estimated the amount of fund balance that would be available to finance operations. After the Board appropriated a portion of fund balance for 2012 operations, the general fund had a remaining deficit unreserved fund balance of approximately $748,000, and the highway fund had a deficit unreserved fund balance of approximately $837,000. Also, the Board did not employ long-term financial planning, which would have helped it identify historical budgeting trends.

The County entered into an improper contract for security services with Watkins Glen International (WGI), a private entity. Over the last two years, the County has paid 351 individuals $233,840 for providing law enforcement services to WGI in connection with events at the Watkins Glen racetrack. In these cases, the County improperly pays these individuals as if they were independent contractors by check based on completed vouchers and issues them an IRS 1099 form at the end of the year. As a result, no taxes are reported or withheld, and no information is reported to the State retirement systems. We also found errors with 231 of the 333 leave request forms that were available for review, 40 exceptions with the 395 overtime entries, and exceptions with eight of the nine employees' leave accruals reviewed. In addition, the Sheriff's Confidential Secretary (Secretary) is responsible for processing all civil fees and bail received and disbursed by the Department with little to no oversight. Finally, receipts are not issued in a consecutive manner, and the Secretary did not prepare monthly reports or perform an accountability analysis. We prepared an accountability analysis as of December 31, 2012, and determined that the civil fee and bail available cash was higher than known liabilities by $253.

The Town's non-payroll cash disbursements were not always properly authorized, adequately supported or in compliance with statutory requirements. The former Supervisor improperly paid 20 claims totaling $19,919 without the audit and approval of the Board. These disbursements included 10 payments totaling $1,819 that she made to herself for the reimbursement of expenses and nine payments totaling $18,100 that were made to vendors for publicity. The Town also made payments totaling $60,000 to the Chamber of Commerce and $6,087 to the Chamber's vendors without entering into written contracts stipulating what services or benefits the Town was to receive for the payments. The Town paid $45,000 to a law firm of which the Town Attorney is a shareholder. The Town Attorney may have a prohibited interest in the contact between the Town and his law firm. Finally, internal controls over fuel inventories also need to be improved. Our review of fuel records from June 2011 through December 2011 disclosed that about 4,500 gallons of fuel valued at about $14,600 were not accounted for.

The Council adopts realistic budgets, and along with the Mayor and City Controller, continually monitors the budgets throughout the year and will initiate and approve any necessary budget amendments. Although we do not consider the City to be in fiscal stress at this time, the low levels of unexpended surplus funds in the general fund and declining balances in the water and sewer funds make the City at risk of becoming susceptible to fiscal stress if the declining trends are allowed to continue. City officials are aware of the low level of fund balance in the general fund and the declining balances in the water and sewer funds. The budget is continually monitored throughout the year and budget amendments are made to address the changing needs of each fund. Officials are also working with a management company to ensure the City's Civic Center is an active venue that attracts visitors to the City.

We commend District officials for establishing and implementing strong internal controls over payroll. Officials implemented specific procedures to ensure that the individuals reported and paid through the payroll process were bona fide District employees, were paid only approved salaries and wages, and received only the benefits to which they were entitled.

We found significant control deficiencies with the Court's operations. The Justices did not ensure that all court fines, fees, and surcharges were properly accounted for. While our testing found that monthly reports were submitted to the Justice Court Fund in a timely manner, they were not always complete and accurate. We also found that bail and partial payments were not properly recorded. Further, the Justices did not ensure that cases were properly reported to the Department of Motor Vehicles.

The Board has not adopted policies and procedures for cash receipts and disbursements to ensure that cash is properly safeguarded. As a result, although press-numbered receipts are issued, the bookkeeper does not sufficiently detail deposit slips to identify each deposit's composition or record cash receipt numbers in the accounting records. In addition, 116 receipts totaling $47,443 were not deposited on a timely basis, 14 disbursements totaling $23,943 never appeared on a warrant for Board approval, and 151 disbursements totaling $532,322 cleared the bank prior to the Board's audit and approval for payment. In addition, there was a lack of segregation between those who use the credit cards and those who oversee compliance with the District's credit card policy, and we identified questionable credit card purchases totaling $5,446 including gift cards totaling $150.

We found that the Board did not ensure that it appropriately identified and evaluated available options before deciding to lease a building. The process used to select a firm to acquire and renovate a building on the Board's behalf was not transparent, and we question whether it was an arm's length transaction. The Board selected an unlikely firm, a nonprofit educational services corporation (Corporation) from the New York-New Jersey metropolitan area that did not have any apparent real estate experience. We also found that the terms and conditions of the lease agreement appear to benefit the Corporation more than the School. We estimate that the lease payments could exceed the Corporation's costs by more than $4.4 million.

The School did not have sufficient Board-approved policies and procedures over the procurement process. Such policies and procedures would provide guidance on when and how to solicit competition, documentation requirements to support purchasing decisions and payments.

From fiscal years 2007-08 through 2011-12, District officials have consistently over-estimated expenditures by a total of $7.1 million and increased the tax levy by 23 percent. These budgeting practices generated approximately $2.1 million in operating surpluses, which caused the unexpended surplus fund balance to exceed statutory limitations for the past five years. For example, at June 30, 2012, the unexpended surplus fund balance exceeded statutory limits by approximately $350,000. In addition, we question the District's need to maintain over $5.8 million in reserves. In addition, extra classroom activity moneys were not maintained in accordance with District policy and Regulations. We found significant weaknesses, including failure to appoint a faculty auditor, as required, and an unauthorized individual making adjustments and entries to student ledgers.

We found that the Board has not adopted appropriate policies and did not receive or review sufficient financial information to appropriately monitor water financial operations. Our examination of the billing and collection of customers within the Village did not disclose any material errors or irregularities. However, we found that the Village has not established formalized, agreed-upon regulations to define and allocate water plant costs for municipal customers. Additionally, the Village is inappropriately billing municipalities for unknown future capital costs, and is holding this money in a reserve that was not legally created.

The Mayor and Board did not properly manage the Village's financial condition because they did not consistently develop sound budget estimates. Further, they did not adequately monitor actual results against the budget. As a result, the unexpended surplus fund balances remained high while the Village's real property tax levy continued to increase slightly by 7 percent from 2007 to 2012. As of May 31, 2012, the general, water and sewer funds have accumulated significant unexpended surplus funds and have not established formal reserves for future repairs and capital needs.

The Board generally expended casino compact revenue during our audit period in accordance with the nature of the approved spending plans. However, expenditures totaling $38,322 were not adequately supported and a payment of $36,358 was not Board-authorized. Further, the records of moneys disbursed did not always distinguish expenditures by spending plan and intended uses.

We found that the County has a written plan for bridge maintenance and repairs. During our audit period, the County maintained average bridge ratings and a consistent level of funding for bridge maintenance, repairs, and replacements. However, we found the County does not track maintenance and repairs by bridge, which could make it more difficult to determine when it is more economical to replace rather than repair a bridge.

The County is fiscally stressed. While the Legislature and County management are aware of the County's financial position, and they have developed reasonable budgetary estimates for most major revenues and expenditures, the County's financial condition has declined over the last few years. For the years between 2007 and 2011, the County has spent $6.7 million more than they received; three of those five years have suffered operational deficits. Also, while the County does include a five-year capital plan in their adopted budget, they do not utilize a multiyear financial plan for estimating operating revenues and appropriations. In addition, the general fund balance is artificially inflated due to a $4.5 million Nursing Home receivable that is unlikely to be collected. Because of these shortfalls, County management has eliminated 188 positions over the last three years. These staff reductions could result in significant delays for necessary services and an increased workload for the remaining staff.

The Board is not able to routinely monitor actual revenues and expenditures against budgeted estimates throughout the year because the Supervisor does not maintain accounting records in a timely manner. As of December 2012, the Supervisor had not made postings to the accounting records since March 2012. Because the Supervisor did not maintain the accounting records in a timely manner, she could not prepare periodic financial reports necessary for the Board to compare actual revenues and expenditures to the budgeted amounts on a regular basis and make applicable budgetary amendments. As a result, the Town has realized negative fiscal trends in its general and highway funds over the past several years.

Although the County has not developed a written plan for bridge maintenance and repair, it has taken action in recent years to improve and maintain bridge ratings. We tested the flags issued during the last five years of our audit period to determine if the County complied with NYSDOT's response and action requirements. Of the 83 flags we tested, the County lacked sufficient documentation for nine flags. We could not determine if the County had responded to these nine flags in a timely manner. For the remaining 74 flags for which the County provided documentation, the County responded in a timely manner to 40 flags, and failed to respond in a timely manner to 34 flags. Of these 34 flags, four were red, which indicates that structural failure was a potential outcome before the next bridge inspection. The County's response to these four flags was an average of 37 days later (79 days) than NYSDOT's six-week response requirement.

We found the County does not track maintenance and repairs by bridge, which could make it more difficult to determine when it is more economical to replace rather than repair a bridge. Further, for the nine available and completed fiscal years from 2002 through 2011, the County had an average of 21. We examined all 89 flags issued during the period 2007 to 2011 to review for timely responses and/or actions on behalf of the County. Of the 89 flags reviewed, County officials could not produce sufficient response documentation for 72 flags. Therefore, we could not determine if the County had responded to these flags in a timely manner.

The District has inappropriately provided individual whole life insurance policies to its Commissioners and employees. The Board has adopted a personnel policy that includes a provision that any Commissioner or employee, except temporary and seasonal, will be provided with a life insurance policy that, after 10 years, will be transferred to them upon retirement.