To determine if the District's controls over its cash receipts were designed and working effectively, we examined cash receipts totaling approximately $151,000. While we found the District adequately segregated the cash receipt duties, certain controls could be strengthened to ensure that cash collected by the District is protected from misappropriation, loss or theft and is deposited timely. The District did not establish formal, written cash receipt policies and procedures. We found that cash receipts are kept in an unlocked and unattended cabinet. The cabinet used to store the District's cash receipts is not locked during business hours. Because the cabinet is located in a corridor outside the Treasurer's and clerks' offices, neither party has a direct line of sight to the cabinet and, therefore, cannot monitor the cabinet. In addition, the clerks do not always log cash receipts into the cash receipts log when it is received. Twelve cash receipts totaling $7,975 were deposited before a clerk recorded receiving the cash in the District's cash receipts log.

The Board needs to improve its procedures for the special programs to ensure that all cash collected for the playground and driver's education programs is properly collected, accurately recorded and deposited in a timely manner. The Board did not adopt a cash receipts policy and District officials did not adequately segregate the Director's duties or implement compensating controls such as providing supervisory reviews of the Director's activities. In addition, the Director did not maintain logs of all cash received or issue triplicate pre-numbered receipts for playground cash received. Furthermore, District officials did not ensure that pre-numbered receipts were issued for funds received for the driver's education program or that the funds were collected by District officials or employees and deposited in a timely manner. As a result, there is an increased risk that money collected for special programs may be lost or misused.

The Board and District officials did not adopt reasonable budgets or ensure that fund balance and reserves were managed in accordance with statutes. From fiscal years 2012-13 through 2014-15, the District overestimated appropriations in the adopted budget by approximately 12 percent each year. The District has also appropriated approximately $1.5 million of fund balance and reserves annually as a financing source in the annual budget, which was not fully used. This practice allowed the District to circumvent the 4 percent statutory limit imposed on the level of unrestricted fund balance. However, when adding back the unused appropriated fund balance, recalculated unrestricted fund balance for each year ranged from $1.4 million (9 percent of the ensuing year's appropriations) to $1.6 million (10 percent of the ensuing year's appropriations), exceeding the allowable limit. Although recalculated fund balance levels consistently exceeded the limit through June 30, 2015 and are projected to continue to do so through June 30, 2016, District officials continued to raise the tax levy every year totaling more than $360,000, or 8 percent, over the last four years.

District officials did not ensure that time, attendance and leave accrual records were accurate, complete and properly approved. The Board did not establish policies and formal written procedures over payroll timekeeping to ensure that employees' leave and work time was accurately accounted for. As a result, time sheets were incomplete and employees were credited with incorrect leave accruals. In addition, District officials did not segregate duties in the time and attendance software, and there were no compensating controls in place. Because of the lack of segregation of duties or compensating controls, there is an increased risk that unauthorized changes to the time and attendance records, software security settings and user authorization privileges could occur and go undetected.

District officials did not always obtain competitive quotes and adhere to bidding requirements when procuring goods and services. We selected a sample of 30 vendors who were paid approximately $2.2 million between July 1, 2014 and December 31, 2015. District officials did not have bid documentation to support payments totaling $757,700 made to two vendors for transportation, and they did not have documentation to support sole source payments totaling $53,000 to two vendors for textbooks. While the Board adopted policies and procedures that provided guidance for purchases that do not require competitive bidding, District officials did not follow the policy and use competitive quotes to procure goods and services from 14 vendors paid a total of $116,626.

The Board developed an adequate process to ensure that special education claims were accurate, valid, properly supported and for legitimate District purposes. However, District officials have not formally documented their procedures in writing, which can lead to a lack of guidance and inconsistencies in how the procedures are carried out. During our audit period, the District processed 107 special education claims from eight vendors, totaling $570,289. We examined 12 special education claims containing 115 invoices and totaling $198,788 to determine whether rates charged and services rendered agreed with applicable contracts, invoices were adequately itemized and properly supported showing the level of service provided for each date, and claims contained the claims auditor's and other approvals required by the District's procedures. We found only minor discrepancies, which we discussed with District officials. However, the lack of written procedures increases the chance that claims will not be processed properly or that procedures will not be properly communicated when there are staffing changes.

We found that Library officials controlled expenditures. They developed budgets in four-year increments and then determined real property tax levies based on these budgets. Library officials also reviewed budget-to-actual reports monthly to ensure that expenditures were within budgeted amounts. They have also implemented cost-saving measures, such as obtaining grants and reducing health insurance costs. As a result, the Library's total operating expenditures decreased by approximately $60,000 from 2011-12 to 2014-15. We commend the Director and Library officials for effectively managing Library expenditures.

The Board did not provide proper oversight of the administration of its capital fund program (CFP) or investments. As a result, CFP funds were not always properly used. We identified payments totaling over $44,000 for activities that were not on the Plan and/or Contracts, were not properly supported or were modifications to the original Plan that lacked evidence of written Board approval. Further, the Authority reported investments totaling more than $1 million that may not be properly secured and are not sufficiently monitored by the Board. There was no written agreement for services between the Authority and the firm administering these investments. Additionally, the Authority could not identify the original source of the more than $1 million invested.

The Justices properly collected, recorded and reported Court money in a timely manner, the records were current and accurate, and reports to the Justice Court Fund were timely and complete. However, the Justices did not ensure that Court money was always deposited in a timely manner. We reviewed eight months of financial activity during our audit period and found that the Justices and the clerk accurately accounted for money collected. However, our review of 147 cash receipts totaling $24,135 collected during these months disclosed that 24 receipts totaling $3,258 were not deposited in a timely manner. We also reviewed the Justices' bank reconciliations and accountabilities and found that accountabilities were not always prepared, which increases the risk that money may not be properly accounted for and differences between the liabilities and cash on hand may not be identified.

The Board and District officials did not effectively manage fund balance. While the Board appropriated fund balance in the annual budgets to help finance operations, these amounts were not needed because the District's budgeting practices produced operating surpluses each year. District officials also appropriated reserves as a funding source in the annual budgets that were not expended as budgeted. District officials appropriated $3 million in reserves from the 2012-13 through 2014-15 fiscal years but charged expenditures totaling only $138,000 to the related reserves during these years. The District's unrestricted fund balance was in excess of the statutory limit, ranging from 6 percent to 7 percent of the ensuing year's appropriations during two of these years (2012-13 and 2013-14). However, when unused fund balance is added back, the District's recalculated unrestricted fund balance was in excess of the statutory limit for all three years, ranging from 5 to 9 percent of the ensuing years budget. We also found that three general fund reserves, totaling approximately $4.2 million, were overfunded, and the District improperly accumulated $1 million of surplus cash in the debt service fund.

The Board and District officials did not properly manage fund balance or ensure reserve balances and budget estimates were reasonable. For the 2012-13 through 2014-15 fiscal years, the District's unrestricted fund balance exceeded the statutory limit ranging from 5.5 to 7.6 percent of the ensuing year's budget appropriations. During this same period, the Board significantly overestimated District expenditures by a combined total of approximately $7.2 million, which resulted in annual operating surpluses totaling approximately $2.1 million. In addition, the Board appropriated approximately $1.1 million of fund balance during these years to finance operations but none of the amounts appropriated were used. Furthermore, despite experiencing operating surpluses, District officials increased the real property tax levy by an average of approximately $397,000 each year. Finally, the District's retirement contribution reserve had a balance of more than $1.6 million. Based on the District's average annual retirement contribution of about $579,000, its current balance is sufficient to pay these costs for almost 3 years.

The Board and District officials could improve their management of the school lunch fund's financial condition. Over the last three fiscal years, fund balance decreased over $61,000 as a result of operational deficits averaging approximately $20,000 per year. At the end of 2014-15, the school lunch fund owed the general fund $131,000 and the District has reported negative total fund balance since 2012-13.

District officials developed multiyear financial plans that include revenue and expenditure projections as well as the anticipated use of reserve funds to aid in future budget preparations. The District has also developed a separate reserve plan which includes details regarding the anticipated use of reserve funds for a five-year period. However, this plan does not include information related to funding and maintaining the individual reserve funds. District officials also have not prepared a formal analysis of reserve funds based on the District's projected needs, as required by the reserve policy. As of June 30, 2015, the District's reserve funds totaled $6 million, or approximately 17 percent of the total budgeted appropriations for the 2015-16 fiscal year. Two of the reserves – unemployment insurance and liability – have balances that are excessive or unnecessary based on the District's needs. In addition, District officials have not developed a formal, documented multiyear capital plan. District officials informed us that they plan to develop a formal, multiyear capital plan once the building condition survey is received, which is expected by the end of the 2015-16 fiscal year.

District officials need to improve the procedures established to govern the issuance and use of District credit cards. During our audit period, the District had two credit card accounts and 29 credit cards. One account was for general purpose purchases with two credit cards and the other account was for fuel purchases with 27 fuel credit cards. While the credit card policy is extensive, it did not require employees to acknowledge receiving the policy or address cash advances available with the general purpose cards. We reviewed 15 credit card payments totaling $32,906 for purchases made using these credit cards to determine whether the purchases were for a legitimate District purpose and complied with the District's policy and procedures and whether the cards were adequately safeguarded and used only by authorized personnel. The purchases we reviewed were generally for legitimate District purposes. However, District officials did not always follow the District's credit card policy and procedures. The Superintendent did not identify the job titles of all employees that had custody of District issued credit cards, Business office personnel did not submit a list of authorized card users to the Board annually and the Board did not approve a list of employees who used fuel cards.

Although the Board adopted an administrative regulation outlining the requirements for obtaining requests for proposals (RFPs) for professional services, the regulation did not provide sufficient detailed requirements or guidance for seeking competition when procuring professional services. We reviewed the District's process for procuring services. Seven professional service providers were paid a total of $239,689 during our audit period. District officials properly sought competition using RFPs for contracts of three service providers (architect, attorney and external auditor) totaling $120,493. However, the District did not properly seek competition for contracts with the other four professional service providers totaling $119,196.

Although the Board has developed a purchasing policy and BOCES officials have developed corresponding regulations, they do not require competition when procuring professional services. Therefore, the policy and regulations do not indicate when or at what monetary threshold it is appropriate to use written requests for proposals or written or verbal quotes. Instead, the regulations state that these are not required, but may be used at the business office's discretion. Additionally, although the policy and regulations require adequate documentation be maintained, they do not outline the specific documentation requirements to be used during the solicitation process, including documentation for the decisions made. BOCES officials also told us that they do not have informal guidelines to ensure competition is sought for professional services.

The District has not adequately restricted user access and transaction rights on the computerized payroll system based on job responsibilities, which compromises the segregation of duties and could permit improper payroll changes. Six individuals had access to functions in the payroll system that were not required to fulfill their assigned job duties. Three of these individuals were in the Human Resources Department and three were in the Business Office. We also found that an elementary school secretary had more rights to the payroll system than needed for her job. Additionally, District officials are not adequately monitoring the payroll for improper or erroneous transactions. Procedures should require that payrolls are adequately certified. Without effective controls, there is an increased risk that someone could initiate and conceal inappropriate payroll transactions or that mistakes could be made and not detected in a timely manner.

Although the District complied with competitive bidding requirements and adopted a purchasing policy, the policy did not include guidance for procuring professional services. As a result, District officials did not use competitive methods when procuring services from five professionals costing $363,815. In addition, although the policy did require District officials to obtain written quotes for purchases under the competitive bidding thresholds, they did not obtain the required quotes for 11 purchases costing $49,250. District officials also did not enter into a written agreement with an attorney for services costing $44,586. As a result, there was no assurance that certain goods and services were procured in the most economical way and in the best interests of residents, or that there was agreement as to the attorney's services and compensation.

The Board and District officials did not prepare accurate budgets for the 2011-12 through the 2014-15 fiscal years. While the District appropriated fund balance and reserves to help finance operations, it was not needed because the District's budgeting practices produced operating surpluses in three of the four fiscal years we reviewed. The District only used $296,578 (9.6 percent) of the $3.1 million of fund balance it appropriated during this time to finance operations. When unused appropriated fund balance was added back, the District's recalculated unrestricted fund balance exceeded the statutory limit by up to 5 percentage points. Furthermore, the balance in the retirement contribution reserve was $1.7 million as of June 30, 2015, which was more than five times the District's annual average contribution. Consequently, we question the reasonableness of the amount in this reserve. Finally, the debt reserve, with a balance of $241,000 as of June 30, 2015, has not been used over the last four years. District officials were unsure of the source of the cash in this reserve.

The District procured goods and services in accordance with its policy and the statutory requirements. Specifically, the District made 174 purchases totaling approximately $1 million that were subject to bidding requirements. We determined that all of these purchases were either competitively bid or allowable exemptions from bidding. One hundred forty-eight purchases totaling approximately $229,000 required quotes or RFPs. With minor exceptions, District staff obtained the necessary quotes or RFPs for these purchases. District employees were aware of and adhered to the District's purchasing policy requirements. We commend District officials for designing a purchasing process that enables competitive methods for the procurement of goods and services.