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.

The Justices provided oversight of Court activity; however, they could improve their oversight to further safeguard Court money. We sampled 42 various Court transactions and determined that they were properly accounted for because these transactions were recorded as the Justices adjudicated and the associated Court money was deposited and reported to the Justice Court Fund. We also tested 13 disbursements and found that, although they were properly disbursed to appropriate parties, the Justices allow the Clerk Manager to sign all disbursement checks. One Justice explained his time constraints would make it difficult to sign all the checks in a timely manner given the large volume of returned bail each month. However, if the Justices signed the checks it could serve as a preventative control and further improve their current oversight of disbursements.

The Board adopted unrealistic budgets for the general fund and highway fund during the 2013 through 2015 fiscal years. The Board overestimated appropriations by more than $925,000 (33 percent) for the general fund and $820,000 (33 percent) for the highway fund, and appropriated unneeded fund balance. The Board's budgeting practices made it appear that the Town needed to both raise taxes and use fund balance to close projected budget gaps. However, the general fund realized operating surpluses in each of the last three fiscal years, totaling $456,597. Therefore, none of the appropriated fund balance was used and the general fund's unrestricted fund balance increased for the period. In addition, the highway fund realized a $42,801 operating surplus during the 2013 fiscal year and operating deficits of $14,291 in 2014 and $8,354 in 2015, which were smaller than planned. As a result, the Town used less than 3 percent of the appropriated fund balance during those three years and the highway fund's unrestricted fund balance increased. While we found that the 2016 budgeted appropriations for the general and highway funds were more realistic than in recent years, we still project that the Board has overestimated appropriations, which will likely result in the Town not using the entire appropriated fund balance.

Town officials did not effectively manage the Town's financial condition. The Board has not established goals for the level of unrestricted fund balance to be maintained, which contributed to the appropriation of imprudent amounts of fund balance. From 2013 through 2015, officials used one-time financing sources to fund recurring expenditures, adopting budgets that were not structurally balanced by appropriating fund balance totaling $567,500. As a result, the Town's four major operating funds (town-wide general, part-town general, town-wide highway and part-town highway) have experienced combined operating deficits in each of the past three years, totaling more than $310,000. These operating deficits caused the combined unrestricted fund balance for the four major operating funds to decline by $141,067, from $228,376 as of December 31, 2013 to $87,309 as of December 31, 2015. The combined restricted fund balance (reserves) for these funds declined by $40,493 during the same period.

The Justice should improve controls to ensure Court money is adequately safeguarded. Because the Court uses electronic case files in lieu of paper files, the original tickets issued by police officers, correspondence and supporting documentation are scanned into the electronic case files. The Court's actions on the tickets are documented by directly importing data from the Court's accounting software into the case files that are stored on the Court's computers. The Justice and the clerk access the case files by entering their own respective passwords on the Court's computers. The Justice's adjudication is documented in the case files through the use of comment boxes. However, both the Justice and the clerk have the ability to modify or delete these comments without the original data being documented in the case file.

The Board did not provide sufficient oversight of the Town's financial operations. As of December 31, 2016, the unrestricted fund balance in the general town-wide fund was about $1.2 million, or 273 percent of the ensuing year's budget. This was caused partly by the lack of a policy for the level of fund balance to be maintained. In addition, the Board did not adopt multiyear financial or capital plans to address long-term priorities. Further, the Board hired an accounting firm to perform bookkeeping and payroll duties without a written contract or proper oversight from the Supervisor and the Board did not perform annual audits of the books and records of officers or employees who received or disbursed money. Because the accounting firm kept the records off site, the Town's financial records were not available for public inspection during reasonable times as required by law. In addition, the Board did not receive necessary information such as detailed statements of money received and disbursed and the firm performed payroll duties without oversight. As a result of the lack of financial oversight, the Board levied higher property taxes than necessary and its ability to effectively manage the Town's finances was severely diminished.

The Justices did not accurately and completely collect, record, deposit, disburse or report Court money in a timely manner. Neither Justice properly pursued collections for those cases where defendants failed to appear in Court. Over 230 Vehicle and Traffic Law (VTL) cases from 2011 through June 2016 remained outstanding. Based on the Town's average dismissal rate and average fines for adjudicated VTL cases, we estimate these outstanding tickets equate to approximately $33,000 in unearned revenues for the Town. In addition, although the current Justice properly updated and closed cases previously entered into the accounting software by the former Justice, she did not record new cases in the accounting software. The current Justice did not deposit money in a timely manner. The current Justice filed six of the seven monthly reports to the Justice Court Fund (JCF) late, by an average of 62 days. Furthermore, neither Justice properly reported closed cases to the Department of Motor Vehicles (DMV). During our audit period, 55 cases were reported to JCF as closed, while five were reported to DMV as disposed.

We found that, as of May 31, 2015, a total of $5,681 in documented collections received during the audit period had not been deposited into a Court bank account. Further, the Court did not report collections totaling $5,999 to the Justice Court Fund, and some collections were deposited up to 14 days beyond the required 72 hours. Additionally, as of May 31, 2015, Justice Smith's fine and fee account had a cash shortage of $3,250 and his bail account had an unidentified balance of $152, and Justice Durant's fine and fee account had a cash shortage of $3,060 and his bail account had an additional cash shortage of $250. These discrepancies occurred because the Justices did not ensure that bail records were accurate and complete, and bank reconciliations and accountability analyses were not performed for the Court bank accounts. Further, the Justices did not establish policies and procedures for enforcing unresolved traffic tickets, and did not compare pending-ticket reports from the DMV to their caseload activity. The Board also did not audit the Justices' records as required, which could have helped identify the missing funds and other deficiencies found during our examination.

The Justice did not deposit, record and account for Court moneys accurately and in a timely manner. In addition, the Board did not audit the Court's financial records and reports or ensure sufficient controls were in place to prevent or detect fraud or abuse. As a result, based on the records available to us, we found a cash shortage of at least $6,073 occurred during our audit test period, which was the final three years of the Justice's six-year tenure. We also found that the Supervisor's financial records were not complete and not sufficiently monitored. The Supervisor did not create or provide the Board with budget-to-actual reports or statements of cash flows to enable the Board to sufficiently monitor the Town's financial position. Furthermore, the annual report was not filed timely and the Board did not audit the Supervisor's books and records as required. As a result, the Board does not have the financial information it needs to effectively monitor the Town's operations which increases the risk that errors or irregularities could occur and not be detected or corrected in a timely manner.

The Board could improve its fund balance management. Over the past 20 years, the Board accumulated money in the general fund in anticipation of an appeal of pending tax assessment cases. During this time, the general fund balance grew to more than $2 million at the end of 2008 in anticipation of having to pay significant sums for successful appeals. However, the appeals were settled in the Town's favor and the general fund accumulated fund balance totaled almost 4,600 percent of the 2008 tax levy of $45,391, (the equivalent of 46 annual tax levies). The Board has taken some steps to reduce its significant fund balance over the last 10 years. For example, a significant portion of the general fund balance (approximately $1.2 million) was used for infrastructure improvements. The Board authorized and constructed a new Town hall complex and a new highway garage in 2009 and 2010 using fund balance as the financing source and reduced the tax levy by nearly 95 percent from 2005 through 2009. Since then, the Board has adopted general fund budgets that included planned use of fund balance. However, the Board increased real property taxes to finance operations and its conservative budgeting practices nullified the Board's plan to spend fund balance as intended. As a result, general fund balance totaled $623,000 at the end of 2016, more than 950 percent of the tax levy and approximately three times actual expenditures that year. From 2014 through 2016, Town officials appropriated an average of $79,000 in general fund balance each year and spent a total of $25,800. This resulted in a 4 percent decrease in overall general fund balance over these years.

The Town lacked effective procedures to ensure water and sewer charges were accurately billed, collected and enforced. Town officials did not implement adequate compensating controls to reduce the risk involved in concentrating key water and sewer district financial responsibilities with the secretary. Although the Board generally adopted water and sewer rates, no one reviewed or approved the quarterly billing registers to ensure all water and sewer customers were properly billed. As a result, customers were not billed in accordance with the Board-established rates, resulting in customers being underbilled by $1,703. Delinquent customer accounts did not always include late payment penalties in accordance with Board policy.