The Board's purchasing policy, adopted in August 2014 and revised in January 2015, provides guidance for the procurement of goods and services and public works which require competitive bidding. In addition, although the Board adopted a policy in August 1995 and revised it in January 2015 describing its responsibilities and the need to develop further guidance for procuring goods and services not required to be competitively bid, the policy was deficient since the Board developed no further guidance. Therefore, officials do not have guidance for the procurement of professional services or purchases under the competitive bidding thresholds. During our audit period, District officials did not use competition when procuring five professional service contracts costing $605,947 including a $57,999 overpayment of one of these contracts. In addition, officials did not use competition or enter into a written agreement for two attorney service contracts totaling $203,866. The District made two purchases totaling $81,834 without using competitive bidding as required. Finally, officials did not seek competition for 15 purchases under the competitive bidding thresholds totaling $63,916.

The Board and District officials need to improve controls over the District's information technology (IT) assets. The Board did not establish adequate IT policies and procedures. We also found that the service level agreement with the District's IT vendor is inadequate as it does not define all necessary aspects of the services provided to the District. As a result, the Board does not have adequate assurance that the District's IT assets are secure.

Based on the results of our review, we found that the significant revenue and expenditure projections in the proposed budget appear reasonable. However, City officials should assess what is a reasonable amount of fund balance for each fund considering various factors such as the timing of receipts and disbursements and the volatility of revenues and expenditures. In addition, the Common Council should consider increasing the contingency appropriations in the adopted budget. The Common Council should also include a tax overlay in the adopted budget. Finally, the Common Council will have to adopt the proposed local law to override the tax levy limit in 2017.

Based on our limited procedures, the Town has not made sufficient progress implementing corrective action. Of the 10 audit recommendations, one recommendation was implemented, one recommendation was partially implemented and eight recommendations were not implemented. As a result, residents of the town, outside of the village, continue to bear an inequitable share of the cost of providing Town services.

We judgmentally selected and reviewed 10 purchases of various goods and services totaling $253,677 and paid in 2015 to assess if the District obtained multiple quotations or requests for proposal (RFPs). We reviewed five purchases contracts ($45,890), three public works contracts ($28,410) and two professional services contracts ($179,377). District officials could not provide evidence that they had obtained quotations or RFPs for eight purchases totaling $194,308. Of the remaining two purchases tested, one was for turnout gear (helmets, gloves, coats and pants costing $22,669) from a State contract vendor and the other purchase (20 pagers costing $6,700) included evidence that District officials obtained two written quotes. By not soliciting competition for goods and services, District officials do not have adequate assurance that they are obtaining services with the most favorable prices.

The Board and District officials overestimated appropriations in the adopted budgets and allowed unrestricted fund balance to exceed the statutory limit. As of June 30, 2015, unrestricted fund balance totaled $3.8 million and was 9 percent of 2015-16 budgeted appropriations, which exceeded the limit by 5 percentage points. This trend is projected to continue through 2016-17.

As of June 30, 2015, BOCES accumulated $5.6 million of surplus funds in its special aid fund primarily due to recurring operating surpluses realized in its special education summer school and adult education programs. However, BOCES officials did not provide timely refunds of the accumulated funds generated from the summer school program to participating school districts. BOCES also accumulated and retained operating surpluses from adult education programs in 2013-14 ($1.2 million) and 2014-15 ($1.4 million). BOCES officials did not provide us with any evidence to indicate that the established fees for the adult education services were reasonable or related to the cost of providing these services.

The District needs to improve its claims auditing process to help ensure that all claims are adequately documented, for appropriate District purposes and properly audited and approved before payment. The Board appointed a claims auditor to assume its powers and duties to examine and approve or disapprove claims. To facilitate the claims auditing process, the Board adopted a claims auditor policy outlining the claims auditor's responsibilities. The Board-appointed individual who served as claims auditor resigned effective November 18, 2015. District officials then contracted with BOCES through a cooperative service agreement to audit District claims, and a BOCES employee has audited all District claims including those for BOCES-provided services since then. The District is one of BOCES' component districts and made material and significant contract payments to BOCES. Therefore, this arrangement was inappropriate because the BOCES claims auditor approved claims submitted by her employer, which compromised the auditor's objectivity and independence.

District officials did not always adhere to the Board-adopted procurement policy with regard to requesting proposals. We reviewed procurements from 15 professional service vendors who were paid a total of approximately $1.3 million during our audit period. The District awarded eight professional service contracts totaling $548,111 after issuing requests for proposals or seeking quotes for special education services, internal audit services, hazardous waste removal services, Affordable Care Act consulting services, school physician services and installation of casework cabinets. However, District officials did not seek competition for seven professional services with payments totaling $760,484 (58 percent of the professional services that we reviewed). These payments were for special education services ($413,118), claims auditor services ($27,500) and attorney services ($319,866).

BOCES officials did not establish formal fixed asset policies and procedures that provide clear guidance for asset recording and disposal. As a result, BOCES staff did not properly record and account for fixed assets. Not all assets were recorded on the Fixed Assets list, and assets were not always in the locations indicated. We also found that not all assets were tagged and that some assets were disposed of without Board approval. As a result, BOCES officials do not have adequate assurance that all BOCES property is safeguarded.

District officials generally ensured that the cash receipts process for ECA funds was administered in accordance with District guidelines and the Regulations. However, the school store faculty advisor routinely retained a portion of cash collected for anticipated club expenditures and deposits submitted to the central treasurer typically lacked detailed documentation of money collected. During 2015-16 the school store deposits were not made in a timely manner, with the time between collection and deposit dates ranging from 15 to 91 days.

District officials need to improve the purchasing process to ensure that competitive methods are used when procuring goods and services. Although the Board adopted a purchasing policy that indicated it should set dollar limits for obtaining written and verbal quotes for purchases that fall below competitive bidding thresholds, the policy did not establish dollar limits, specify the number or type of quotes to be obtained or the required documentation to be maintained. As a result, we found no indication that District officials solicited competition for 20 purchases totaling approximately $257,100. Therefore, there is no assurance that these purchases were made in the most prudent and economical manner. While we did not find any prohibited conflicts of interest, District officials did not follow the Board's policy for soliciting and obtaining disclosures of interests from officers and employees to avoid any potential conflicts.

The Board does not have a policy on cash receipts. While District officials presented us with a copy of written procedures on handling cash receipts and deposits, the procedures do not address issuing triplicate receipts, recording the date and form of payment, or conducting an independent review of amounts collected and deposited. In addition, the written procedures have not been distributed to the finance clerks or athletic office secretary. As a result, they have developed their own procedures and each one accounts for the cash receipts differently. While the athletic office secretary did not issue receipts, cash from driver education fees was generally accurately recorded and deposited intact and in a timely manner. Although none of the finance clerks issue triplicate receipts, three finance clerks do issue receipts, but only for cash payments. Four of the finance clerks had no record of the date money was collected or the form of payment. As a result, District officials lack assurance that cash receipts were deposited intact and in a timely manner.

Based on the results of our review, we found the significant revenue and expenditure projections to be reasonable. However, the proposed budget provides only minimal funding for capital expenditures, and the City has not fully funded its 2017 capital plan. City officials should also be cognizant of the potential financial impact of the settlement of any of the City's six expired collective bargaining agreements in 2017. Furthermore, we found that the City's proposed real property tax levy is not in compliance with its tax levy limit and the Council has not adopted a local law to override the limit. Should the City not take action to adopt a tax cap override or make cuts to the budget, it will be left with an unbalanced 2017 budget that will not have sufficient revenues to fund operations. If this occurs, the City risks triggering a reimposition of the emergency period under the City of Troy Supervisory Board Act.

Based on the results of our review, we found that the significant revenue and expenditure projections in the preliminary budget are reasonable. The Town's proposed budget complies with the property tax levy limit.

During our audit period, the Authority had cash receipts of approximately $1,036,000. However, the Board and Authority officials have not adopted policies and procedures to ensure that cash receipt, cash disbursement and bank reconciliations duties are segregated. As a result, the administrative assistant bills, receives and records cash receipts and reconciles bank accounts. The assistant also prepares the monthly financial report to the Board. In addition, the Board has not established compensating controls such as reviews of the administrative assistant's work. We traced rent rolls to receipts for one month; compared three months of receipts to amounts recorded in the Authority's rent receipts software, deposit slips and bank statements; and reviewed bank reconciliations for three months. We found that billings, receipts and bank reconciliations were properly performed.

While the Board developed an adequate policy to ensure claims were accurate, valid, properly supported and for legitimate District purposes, it did not ensure the claims auditor received the necessary training to carry out the policy. Our review of 50 claims showed that 31 totaling $220,750 did not contain the required quotes, bids or contracts. Without this documentation, the claims auditor could not conduct a thorough audit of claims. Also, 41 of the claims totaling $277,418 had no receiving documents or packing slips attached to the voucher packages. Our review of 28 open purchase orders (OPOs) totaling $91,745 showed that 10 were overspent by $49,001. Although the claims auditor verified the vouchers or invoices against the purchase orders, the claims auditor did not verify that vouchers or invoices agreed with quotes, bids or contracts. The claims auditor also did not verify that receiving documents or packing slips were attached to the claim packages or that sufficient funds were available on the OPOs when approving claims. In addition, the facilities department does not maintain complete and accurate records of materials and supplies. The facilities department has consumable inventories on hand such as lumber, paint and electrical and plumbing supplies. Although District officials projected they would spend approximately $480,000 on materials and supplies for 2015-16, they have not adopted procedures that establish the duties, records and control procedures for safeguarding inventories and do not have a reconciliation process to verify what was purchased, used for work orders and on hand.

The Board did not adopt realistic, structurally balanced general fund budgets. The Board appropriated a total of $4.8 million of fund balance and reserve funds during the 2012-13 through 2014-15 fiscal years. However, the Board overestimated revenues by $3.3 million (5 percent), resulting in operating deficits that were larger than planned and declining general fund and reserve fund balances. General fund balance declined 84 percent, from $8.4 million at the beginning of fiscal year 2012-13 to $1.4 million at the end of fiscal year 2014-15. Combined reserve fund balances have declined by 58 percent, from $3.5 million to $1.5 million during the same period. The rapid deterioration of the District's fund balance and reserves has caused District officials to disburse $2 million from a Rensselaer City School District Corporation account to the District to fund operations. District officials also transferred $1.3 million from two reserve funds to the general fund without appropriate support. Furthermore, the Board does not receive adequate or sufficient information to effectively perform its fiscal oversight responsibilities. Finally, the Board has not developed comprehensive multiyear financial and capital plans to assist in addressing future needs.

The Board, Superintendent and Executive Director generally managed District finances properly. However, appropriations in the District's adopted budgets from 2012-13 through 2015-16 were overestimated by approximately $12.4 million (4 percent). While the Board and District officials generally maintained unrestricted fund balance levels in accordance with the statutory limit, we found that they appropriated fund balance in the adopted budget each year that was not actually used as budgeted because the District realized operating surpluses. District officials also charged expenditures to certain reserves but then used a portion of the surpluses to replenish these reserves rather than funding them through the budget, which diminished transparency to District residents. Finally, the employee benefit accrued liability reserve, the liability reserve and the unemployment insurance reserve, with balances totaling $5.5 million, are overfunded by as much as $2.7 million.

Facility officials achieved a net total of $211,000 in energy cost savings during the audit period. From 2013 through 2015, the Facility produced 119.6 million cubic feet of biogas. The Facility used 87 percent of this amount to generate 4.1 million kWh of electricity and 53,000 therms of heat energy instead of purchasing these resources from the local energy supplier. The Facility also flared 15.6 million cubic feet, or 13 percent of the biogas it produced, in a controlled manner when the production of biogas exceeded the Facility's demands or storage capacity. The current flaring system configuration requires a constant flare of biogas. Facility officials were aware of this inefficiency and plan to upgrade the flaring system.