The Clerk issued duplicate receipts for Clerk fees and recorded collections in the accounting system but did not record the form of collections in either record. The Clerk told us she was not aware that the payment form should be recorded. The Clerk also did not perform monthly bank reconciliations to verify the accuracy of Town records or accountability analyses comparing cash on hand and on deposit to known liabilities. In addition, we found deposits were not made intact. Furthermore, the Clerk did not maintain adequate records of tax collections and tax collections were not deposited timely. Budgetary estimates for certain town-wide accounts were not realistic. From 2014 through 2016, the town-wide (TW) general fund realized a total of $66,000 (7 percent) more revenue than estimated and expended $102,000 (11 percent) less than planned. During the same period, the Board adopted reasonable estimates for revenues (actual total revenues were 2 percent more than estimates) in the TW highway fund; however, actual expenditures were $318,000 (13 percent) less than estimated amounts. The combination of receiving more revenues than planned while spending less money than planned created operating surpluses for the TW general and highway funds. As a result of the operating surpluses in the TW general and highway funds, the fund balance of the TW general fund increased by $167,494 (24 percent) and the TW highway fund balance by $241,567 (89 percent) from the beginning of 2014 to the end of 2016. Furthermore, because the 2017 budget does not include realistic estimates of revenues and appropriations, it is likely these funds will realize operating surpluses in 2017, further increasing total fund balance. The Board did not establish a fund balance policy. The Board did not adopt a long-term financial or capital plan.

The Supervisor did not provide oversight of the accountants' duties related to maintaining the accounting records. Consequently, we found significant deficiencies with the Town's accounting records. From 2010 through 2016, the Town did not allocate sales tax revenue to its part-town funds to eliminate property tax levies in those funds before allocating any remaining sales tax revenue to its town-wide funds. As a result, $277,744 was improperly allocated to the town-wide general fund causing taxpayer inequities to occur. The Town lacked effective procedures to ensure water and sewer charges were accurately billed, collected and enforced. Finally, 26 of 50 claims reviewed (52 percent) totaling $59,113 were not audited and approved by the Board prior to payment.

Town officials did not establish adequate internal controls over recreation fees. The Board did not adopt adequate written policies or ensure that an annual audit of the Department was performed. The Director did not develop procedures to segregate cash receipt duties or provide adequate oversight of the cash receipt function. As a result, a single Department employee had almost complete control over the cash receipt function without adequate oversight. Although the Department's point-of-sale system maintained an adequate record of the recreation fees collected, Town officials did not review or use these records to ensure that cash receipts were properly accounted for, recorded accurately or deposited in a timely fashion. Despite the risk created by these poor internal controls, we found that recreation fees were generally recorded accurately and deposited in a timely fashion.

While Town officials effectively managed town-wide fund balances, they could improve their management of town-outside-village (TOV) fund balances. The Town has accumulated fund balance in the general and highway TOV funds without clear plans to use these moneys. More specifically, Town officials have not developed a fund balance policy, nor have they established any reserves or developed formal long-term capital or financial plans. As a result, the Board may have raised taxes unnecessarily in the TOV funds and may have missed opportunities to improve the level of service available to residents.

The former Justice did not ensure Court money was accurately and completely collected, recorded, deposited and reported in a timely manner. Of the 105 vehicle and traffic tickets issued during our scope period, the former Justice did not adjudicate 82 tickets, either because he did not hold court on a regular basis or did not pursue those defendants who failed to appear. Since the appointed (interim) Justice took over, 48 tickets have been adjudicated and closed, including 32 of the former Justice's 82 cases. However, there is $1,790 in the bank that has not been accounted for in the accounting software and Court records. The interim Justice told us he is working on determining which cases the money should be associated with and/or whether it is from bank credits from returned bank fees. Additionally, the computerized bail list (showing bail moneys held by the Court) has not been updated to reflect the bail returned to defendants and is overstated by $4,775. The former Justice stated in his resignation letter that he was unable to perform the many administrative tasks of the Court because he did not realize that 80 percent of these responsibilities were administrative rather than judicial. Although the Board engaged a CPA firm to perform an annual audit of the Court for 2015, the CPA firm was unable to complete the audit due to the Court's sporadic and inadequate records.

We found that, generally, disbursements were properly accounted for, audited and/or certified, where required, and were for legitimate Town expenditures. However, we found significant control weaknesses with regard to the Town Clerk (Clerk) and the Firm's accountant who were able to make disbursements without the Supervisor's knowledge. We examined disbursements and wire transfers totaling approximately $617,000 (92 claim vouchers – $128,000, 30 wire transfers – $43,000, 17 interfund transfers between Town bank accounts – $412,000 and three payrolls – $34,000) and found that the Supervisor did not control the custody of his signature stamp and allowed the Clerk to affix his signature to checks.

The Board has not adopted policies to sufficiently protect the Town's information technology (IT) assets and did not ensure that the adopted acceptable use policy was enforced or monitored. We found that users were able to make changes, additions, deletions and adjustments without authorization or subsequent review. Town officials did not effectively manage software and licenses. The Board did not ensure that the Town had adequate written agreements with the IT service provided or bank used for online banking. Further, Town officials did not adequately segregate online banking duties and did not dedicate a separate computer for online transactions to limit access to online bank accounts. In addition, we found that the Board did not adopt an IT disaster recovery plan. The Board has not adopted a comprehensive multiyear financial and capital plan or an adequate fund balance policy. While the Board adopted a fund balance policy that set the reasonable amount of fund balance in the town-wide (TW) and town-outside-village (TOV) general and highway funds at 15 to 20 percent of the ensuing year appropriations, the policy did not establish any guidelines for the other funds, such as the sewer and water funds. Further, the Board did not ensure that the fund balance policy was followed. As a result, the Town accumulated excessive fund balance in the TW, TOV, sewer and water funds. As of December 31, 2016, the TW, TOV, sewer and water funds had unrestricted fund balances that were 55, 57, 107 and 153 percent of ensuing year appropriations.

The Board did not develop realistic budgets for its four major operating funds. This resulted in operating surpluses which contributed to a steady increase in fund balance levels over the last three years. Furthermore, Town officials have not developed a formal plan to use the accumulated balances or adopted a policy for the acceptable levels of fund balance to maintain. As a result, Town officials may have compromised the transparency of their financial operations and may have unnecessarily raised real property taxes.

Internal controls over the Clerk's office operations need to be improved. The Clerk did not have guidance that required her to issue duplicate receipts when receiving moneys or to perform monthly bank reconciliations. The Clerk did not issue press-numbered duplicate receipts for all transactions and did not perform monthly bank reconciliations. Furthermore, the Clerk did not submit a monthly report of all moneys received and disbursed to the Supervisor and did not make disbursements to the Supervisor and State agencies in a timely manner. The Board did not provide adequate oversight of the Clerk's financial activities and did not provide for an annual audit of her records. Finally, Town officials have not implemented policies and procedures for the sale of Town garbage bags and the Clerk does not maintain an inventory record of them; therefore, there is no assurance that all garbage bags are properly accounted for.

Driving range fees were not remitted to the Town Comptroller’s office in a timely fashion, and no one independent of the Director of the Department of Parks and Recreation reconciled the daily sales logs to his annual report of driving range fees.

The Board has not established adequate procedures for online banking or the security of electronic information. The Clerk conducts all online banking transactions and manages the Town's electronic information at his private accounting firm. However, the Town does not have an online banking policy or a written agreement with his accounting firm or any third party used for IT services to outline the Town's needs and expectations and level of service required. Further, the Board has not developed computer security and disaster recovery plans.

The Town annually operates a community pool and skating rink for seasonal periods. Although skating rink deposits were made timely in 2015 and 2016 and pool deposits were made timely in 2015, pool deposits were not made timely in 2016. Additionally, collection records were not adequate because they did not include the form of payment (i.e. cash or check). As a result, we were unable to determine if deposits were made intact. Furthermore, we found total deposits exceeded the amounts recorded as collected for the pool in 2015 and 2016. We also found that amounts included in individual deposits for 2015 skating rink collections did not agree with the associated collection records. Also, the Board did not properly allocate sales tax revenues. If a town contains a village and the village receives sales tax directly, the town must allocate all sales tax revenues to the part-town (PT) funds to eliminate the tax levy prior to allocating the revenues to the town-wide funds. During the period 2014 through 2016 the Board improperly allocated sales tax revenues totaling $130,615 to the town-wide funds without eliminating the tax levy in the PT funds, creating a taxpayer inequity.

The Town did not accurately maintain employees' leave accrual records. The maintenance of leave accrual records during the 2015 fiscal year was decentralized. Multiple employees were responsible for manually accounting for employees' leave accruals with no oversight. The Secretary to the Supervisor maintained leave accrual records for the landfill attendant and for herself; the highway foreman maintained them for the Highway Department employees; and the Assessor and landfill supervisor maintained their own. In addition, the bookkeeper, who was responsible for processing payroll, was not provided with the leave accrual records maintained by these employees. As a result, the bookkeeper could not know whether employees had sufficient leave time available prior to being paid for it. Additionally, Town officials were not aware that the leave accrual records maintained by the landfill supervisor for himself were inadequate. The records did not include any information for sick and personal leave, but only for vacation leave; and the vacation leave records – while including the leave time that was earned and the total amount used each year – did not include starting leave accrual balances or the dates that leave was used. In total, as of September 30, 2016, six employees' leave accrual balances were overstated by 712.75 hours valued at $12,207 and understated by 14.75 hours valued at $231.

Town officials have not established a multiyear financial or capital plan or fund balance or reserve policy. The Board has adopted budgets that focus on the immediate needs of general governance and highway services. As a result, the Town operates with minimal unassigned fund balances. As of December 31, 2016, the general fund's unassigned fund balance declined to $28,606 (11 percent of 2017 appropriations) and the highway fund's unassigned fund balance has declined to $74,941 (7 percent of 2017 appropriations). The combined unassigned fund balance of approximately $103,500 may prove insufficient as a buffer for unexpected expenditures, revenue shortfalls or future highway equipment and capital needs. Further, the Town has not established any reserves for identified future expenditures.

Town officials have not identified and corrected all IT deficiencies. Town officials have sufficiently addressed some areas such as IT service contracts, anti-virus protection, patch management, online banking, wireless networks and physical controls. However, we found improvement opportunities in areas such as IT policies, security awareness training, computer hardware inventories and contingency planning. Implementing these improvements will reduce the risk that data, hardware and software systems may be lost or damaged or that Town operations will be interrupted.

The Town did not seek competition to procure goods and services totaling approximately $268,000 and did not have a current contract with the IT consultant. When purchases are made without a competitive purchasing process, there is the risk that goods and services were not purchased at the best prices and were not obtained prudently. Further, without adequate written contracts, neither party has a clear means of determining the basis for compensation. Although Town officials contracted with a consultant for IT services, they did not develop a disaster recovery plan, or establish controls to prevent employees from installing games or visiting social networking websites. We tested seven of the Town's 27 computers and found that multiple game programs had been downloaded onto them. These games can potentially possess spyware and may cause a denial of service through an application crash. In addition, we identified questionable Internet use by Town employees including visiting websites for online banking and investment, shopping, travel, sports, social networking and entertainment. Employees also performed other Internet research and browsing of a personal nature using the Town's computers. One computer had numerous instances of inappropriate website access, including personals (dating), solicitation of various sexual acts and pornography. As a result, the computer system and data are at risk of loss and damage. Employees' inappropriate use of Town computers also results in lost productivity.

Town officials have ensured that the Town properly bills, collects, records and deposits water fees. In November 2015, the Board adopted revisions to a local law regulating the Town's water supply systems. The local law includes regulations, property owner responsibilities, violations, fees, charges and penalties. The revisions increased the billing rates for water consumption effective January 1, 2016 and the residential and commercial billing categories from four to 14. The Town Comptroller (Comptroller) maintains the water billing software program and prepares the bills for all customers. She had to update the data for all 450 customer accounts to ensure the billing system would properly calculate water fees under the new rate structure. We commend Town officials for ensuring that Town employees properly bill, collect, record and deposit water fees.

Both Justices ensured that fines and surcharges collected were accurately reported to the Justice Court Fund (JCF) and the correct amount was turned over to the Supervisor each month. However, neither of the Justices ensured that monthly accountabilities were accurately completed because they did not ensure that all bank accounts were reconciled each month. In addition, although the Town's Budget Officer performed an annual audit of the Court records and reported the results to the Board, the Board did not communicate the audit results to the Justices. The clerks collect and record all financial activity using a transaction register. Each month they trace daily deposit totals from the transaction register to the bank statement. The clerks and Justices ensure that the total reported to the JCF matches the total collected and turned over to the Supervisor. Both clerks also perform a similar review for bail money received and disbursed. While this review helps ensure transactions are recorded, deposited and fines remitted to the Supervisor, this is not a complete accountability analysis. By comparing only current month activities, the clerks (and Justices) do not know whether or not their cash on hand is sufficient to cover outstanding liabilities, such as pending bail.

The Board and Supervisor should improve their management of the Town's fund balances. The Town has accumulated fund balance totaling $358,706 in the general fund and $515,112 in the highway fund without clear plans for the use of these accumulated funds. Town officials have identified potential uses for the funds including needed repairs at the highway garage or road improvements, but have not developed financial plans to address these needs. In addition, Town officials have not planned for the Town's established reserves to fund these needs.

Town officials did not establish policies and procedures over the use of the Town's credit cards. The Town had a total of 24 credit cards during our audit period with total credit limits exceeding $101,000. The credit limits on the individual cards ranged from $1,000 to $20,000. Four of these credit cards had credit limits of $10,000 or more. These large credit limits increase the risk of significant invalid purchases being made and going undetected. Even though Town officials review the credit card statements on a monthly basis, a non-Town purchase would have already occurred.