State comptroller's audit of village of Cape Vincent

Division of LocaL Government & schooL accountabiLity

o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r

report of ExaminationPeriod Covered:

June 1, 2013 — December 31, 2014

2015M-131

Village of Cape Vincent

Payroll and Claims Auditing

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

EXECUTIVE SUMMARY 2

INTRODUCTION 4 Background 4 Objectives 4 Scope and Methodology 4 CommentsofLocalOfficialsandCorrectiveAction 4

PAYROLL 6 Payroll Processing 6 Separation Payments 9 Leave Records 10 Recommendations 11 CLAIMS AUDITING 13 Recommendations 14

APPENDIX A ResponseFromLocalOfficials 16 APPENDIX B AuditMethodologyandStandards 18APPENDIX C HowtoObtainAdditionalCopiesoftheReport 20APPENDIX D LocalRegionalOfficeListing 21

Table of Contents

11Division of LocaL Government anD schooL accountabiLity

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability August2015

DearVillageOfficials:

A toppriorityof theOfficeof theStateComptroller is tohelp localgovernmentofficialsmanagegovernment resources efficiently and effectively and, by so doing, provide accountability for taxdollarsspenttosupportgovernmentoperations.TheComptrolleroverseesthefiscalaffairsoflocalgovernmentsstatewide,aswellascompliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversightisaccomplished,inpart,throughouraudits,whichidentifyopportunitiesforimprovingoperationsandVillagegovernance.Auditsalsocanidentifystrategiestoreducecostsand to strengthen controls intended to safeguard local government assets.

FollowingisareportofourauditoftheVillageofCapeVincent,entitledPayrollandClaimsAuditing.This auditwas conducted pursuant toArticleV, Section 1 of theStateConstitution and theStateComptroller’sauthorityassetforthinArticle3oftheNewYorkStateGeneralMunicipalLaw.

This audit’s results and recommendations are resources for local government officials to use ineffectivelymanagingoperationsand inmeeting theexpectationsof their constituents. Ifyouhavequestionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedat the end of this report.

Respectfullysubmitted,

Office of the State ComptrollerDivision of Local Governmentand School Accountability

State of New YorkOffice of the State Comptroller

2 Office Of the New YOrk State cOmptrOller2

Office of the State ComptrollerState of New York

EXECUTIVE SUMMARY

The Village of Cape Vincent (Village) is located in Jefferson County and has a population of approximately 700 residents. The Village is governed by an elected Board of Trustees (Board),consisting of four Trustees and an elected Mayor. The Board is responsible for the general management andcontroloftheVillage’sfinances.TheMayorservesaschiefexecutiveofficerandanappointedClerk-Treasurerservesaschieffiscalofficer.

TheVillageprovidesvariousservicestoitsresidentsincludingstreetmaintenanceandimprovements,water,sewerandgeneralgovernmentsupport.TheVillage’sbudgetedappropriationsforfiscalyear2014-15wereapproximately$1.8millionforthegeneral,waterandsewerfunds,fundedprimarilybyrealpropertytaxes,salestaxandusercharges.

Scope and Objectives

The objectives of our audit were to review the Village’s internal controls over payroll and the claims auditprocessfortheperiodJune1,2013throughDecember31,2014.WeextendedourscopebacktocalculatetheformerClerk-Treasurer’ssalaryforthe2012-13fiscalyear.Ourauditaddressedthefollowingrelatedquestions:

• Did the Board establish adequate internal controls over payroll to ensure that salaries and benefitswerepaid in accordancewithBoardauthorizationand that adequate leave recordswere maintained?

• Did the Board properly audit claims to ensure that they were adequately supported and for proper Village purposes?

Audit Results

TheBoard needs to improve controls over payroll to ensure that salaries and benefits are paid inaccordancewithBoardauthorizationandthatadequateleaverecordsaremaintained.Payrolldutiesarenotadequatelysegregatedandthereisnoperiodicmanagementreviewoftransactions,certificationofpayrollsorreviewofleaverecords.TheBoardalsodidnotclearlydocumentitsauthorizationofcompensationforallVillageemployees.VillageofficialscouldnotprovidedocumentationshowingBoardauthorizationof$9,500oftheClerk-Treasurer’s$32,000salarypaidforthe2013-14fiscalyearand$5,809ofher$19,569salarypaidforJunethroughDecember2014.TheformerClerk-Treasurer1

wasoverpaid$10,638foraseparationpaymentreceivedinJune2013.Inaddition,sevenemployees

1 RetiredonMay31,2013


receivedpaymentsthatwerenotauthorizedbytheBoardtotaling$5,091.TheClerk-TreasurerdidnotmaintainadequateleaverecordsforherselfandfiveemployeesreceivedlesssicktimethantheBoardauthorizedforfiscalyear2013-14.TheDepartmentofPublicWorksSuperintendentalsopreparedandapprovedhisownleave-timeslipswithnooversight.Asaresultoftheseinternalcontrolweaknesses,thereisanincreasedriskthatemployeescouldreceivewages,salariesandleavebenefitstowhichtheyare not entitled. The Board has not properly audited claims to ensure the claims were adequately supported or were for properVillagepurposes.Instead,theBoardreviewedandapprovedabstractsforthegeneral,waterandsewer funds and one Board member reviewed any capital fund claims related to construction costs. Wereviewed171claimstotalingapproximately$1.8millionandfoundthat28oftheclaims2 totaling $1.5millionwerenotincludedonabstractspresentedtotheBoard.Theremaining143claimstotaling$299,254wereincludedonBoard-approvedabstracts,buttheMayordidnotcertifytheabstracts.Inaddition,40claimstotaling$277,808hadoneormoresignificantdeficiencies.Although,theclaimsappearedtobeforproperVillagepurposes,theBoarddidnotconductathoroughclaimsaudit,andtheMayor did not sign abstracts ordering claims to be paid. This increases the risk that the Village could payforexpendituresthatareunauthorizedorunnecessary. Comments of Local Officials

TheresultsofourauditandrecommendationshavebeendiscussedwithVillageofficials,andtheircomments,whichappearinAppendixA,havebeenconsideredinpreparingthisreport.Villageofficialsgenerallyagreedwithourrecommendationsandindicatedtheyhavetaken,orplantotake,correctiveaction.

2 Twenty-threecapitalprojectclaimstotalingmorethan$1.4millionandfivehealthinsuranceclaimstotaling$31,645


Background

Introduction

Objectives

Scope andMethodology

Comments ofLocal Officials andCorrective Action

The Village of Cape Vincent (Village) is located in Jefferson County and has a population of approximately 700 residents. TheVillageisgovernedbyanelectedfive-memberBoardofTrustees (Board),comprising a Mayor and four Trustees. The Board is responsible forthegeneralmanagementandoversightoftheVillage’sfinancialaffairs.TheMayorservesaschiefexecutiveofficerandanappointedClerk-Treasurerservesaschieffiscalofficer.

The Village provides various services to its residents, includingstreet maintenance and improvements, water, sewer and generalgovernmentsupport.TheVillage’sbudgetedappropriationsforfiscalyear2014-15wereapproximately$1.8millionforthegeneral,waterandsewerfunds,fundedprimarilyfromrealpropertytaxes,salestaxand user charges.

The objectives of our audit were to review internal controls over payroll and review the claims audit process at the Village. Our audit addressedthefollowingrelatedquestions:

• Did the Board establish adequate internal controls over payroll toensure thatsalariesandbenefitswerepaid inaccordancewith Board authorization and that adequate leave recordswere maintained?

• Did the Board properly audit claims to ensure that they were adequately supported and for proper Village purposes?

We examined the Village’s payroll records and the claims auditprocessfortheperiodJune1,2013throughDecember31,2014.Weextended our scope back to calculate the formerClerk-Treasurer’ssalaryforthe2012-13fiscalyear.

We conducted our audit in accordance with generally acceptedgovernmentauditingstandards(GAGAS).Moreinformationonsuchstandards and the methodology used in performing this audit are includedinAppendixBofthisreport.

The results of our audit and recommendations have been discussed withVillageofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report.Village officialsgenerally agreed with our recommendations and indicated they have taken,orplantotake,correctiveaction.


The Board has the responsibility to initiate corrective action. Awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendations in this report should be prepared and forwarded to our office within 90 days, pursuant to Section 35 of GeneralMunicipalLaw.FormoreinformationonpreparingandfilingyourCAP, please refer to our brochure, Responding to an OSC Audit Report,whichyoureceivedwiththedraftauditreport.Weencouragethe Board to make this plan available for public review in the Clerk-Treasurer’soffice.


Payroll

The Board is responsible for establishing internal controls over payrolltoensurethatsalariesandbenefitsarepaidinaccordancewithBoardauthorizationandthatadequateleaverecordsaremaintained.Goodcontrols include thesegregationofduties,whenpossible, sothat no individual controls all phases of a payroll transaction. The BoardmustauthorizeallcompensationandleavebenefitsprovidedtoVillageemployeesandofficialsandshouldensurethatpayrollsarecertifiedbyanemployeeorofficialthatisindependentofthepayrollprocess.Aperiodicindependentreviewofleaveaccrualrecordsandbalances should also be performed.

The Board needs to improve internal controls over payroll. Payroll duties are not adequately segregated and there is no periodic management review of transactions, certification of payrolls orreview of leave records. The Board also did not clearly document its authorization of compensation for all Village employees.As aresult,VillageofficialscouldnotprovidedocumentationshowingtheBoard’sauthorizationfor$15,309oftheClerk-Treasurer’ssalary,andthe formerClerk-Treasurerwas overpaid $10,638 for a separationpayment.Inaddition,sevenemployeesreceivedpaymentsthatwerenot authorized by theBoard, totaling $5,091.TheClerk-Treasurerdid notmaintain adequate leave records for herself, and for fiscalyear2013-14,fiveemployeesreceivedlesssickleavethantheBoardauthorized.TheDepartmentofPublicWorks(DPW)Superintendent(Superintendent) also prepared and approved his own leave-time slips with no oversight.

Whenpossible,theBoardshouldsegregatepayrolldutiestoensurethatno individual controls all phases of a payroll transaction. The Board is alsoresponsiblefordocumentingauthorizationsforallcompensationforVillage employees and officials.Written documentation of thisauthorization – by resolution, a policy document approved by theBoard, a negotiated employment contract or a supplemental salaryschedule in the Village’s annual budget3 – is an important internalcontrol over payroll because it communicates the Board’s intent. TheBoardshouldensurethatpayrollsarecertifiedbyanemployeeor official independent of the payroll process. This certificationprocess should involve comparing payroll source documents with payroll registers to verify that payments are based on actual hours ordaysworkedandBoard-authorizedpayrates.Independentpayroll

Payroll Processing

3 NewYorkStateVillageLaw(VillageLaw)requiresvillagestoattachasalaryschedule to their annual operating budgets.


certificationbecomesanevenmoreimportantcontrolwhenpayrollduties are not adequately segregated.

The Board has not ensured adequate segregation of payroll duties or provided sufficient oversight of the payroll process.TheClerk-Treasurer enters new employees in the payroll system, processespayrolls,preparesandsignschecksandisresponsibleforperformingbankreconciliations,withoutoversight.Inaddition,Villageofficialstoldus that there isnopayrollcertificationor reviewbyanyotherVillage employee. The Clerk-Treasurer told us that the Board documents approval of an employee’s initial salary or pay rate in Board minutes at the time the employee is hired and approves a percentage increase by category of employee annually in Board minutes.However,VillageofficialswereunabletoprovideuswithdocumentationshowingtheBoard-authorizedsalariesandpayratesforemployeesandcertainofficials.

We reviewed all payroll payments for November 2013 and 2014,totaling$51,670,todeterminewhetherhoursenteredintothepayrollsystem agreed with time records, whether employees were paidBoard-authorizedsalariesandwhethertheirgrosspaywascalculatedcorrectly.Wefoundthathourspaidwereappropriatelysupportedbytimerecords.However,therewasnoannualBoard-authorizedsalaryor pay rate for Village employees and officials other than Boardmembers.4 We applied the Board-authorized percentage increasesfrom the Board minutes to the employees’ salaries and pay rates fromfiscalyears2012-13and2013-14todetermineiftheemployeesreceivedtheBoardauthorizedsalaryincreasesforfiscalyears2013-14and2014-15.Wefoundthefollowingdiscrepancies:

• AccordingtotheBoardminutes,5 the Clerk-Treasurer’s salary is “to be the full budgeted portion for the Clerk-Treasurer position.” The 2013-14 Board adopted budget included $11,000fortheClerkpositionand$11,500fortheTreasurerposition.However,theClerk-Treasurerwaspaid$32,000forfiscalyear2013-14,$9,500morethantheBoard-authorizedbudgeted amounts. For fiscal year 2014-15, the Board-authorizeda6percentincrease.Therefore,theClerk-Treasurerwasauthorizedtoreceive$13,7606throughDecember31,2014based on the percentage increase of the prior year’s budgeted

4 Boardmembers’salaries’arepublishedannuallyinthenewspaperintheNoticeof Hearing.

5 BoardminutesdatedJune11,20136 2013-14Board-authorizedbudgetedsalaryof$22,500multipliedbya6percentincrease for 2014-15 equates to a 2014-15 authorized salary of $23,850.Theauthorized salary is divided into 26 equal paychecks. The Clerk-Treasurerreceived15of26paychecksthroughDecember31,2014($23,850dividedby26multipliedby15equals$13,760.)


amounts.However,shewaspaid$19,569,7$5,809morethanthedocumentedBoard-authorizedamount.AccordingtotheClerk-Treasurer,hersalarywasbudgetedbetweentheClerk,Treasurer and water administration, sewage treatment anddisposal positions. However, officials could not provide uswith any Board-approved documents to support additional salary allocations for the Clerk-Treasurer’s position. As aresult, theClerk-Treasurerwaspaid$15,309more than theBoard’sdocumentedauthorization.

• Five DPW employees and two police officers receivedpayments that were not formally authorized by the Board.This included $50 stipends for DPW employees workingweekends at the Village’s water plant and police officersreceivingstepincreasesof25centsperhour.Villageofficialstoldus that theyalwayspaidDPWemployees$50stipendsforworkingweekends and provided 25 cent step increasestopoliceofficers at the endof theirfirst, second, third andfourthyearsofemployment.However, theywereunable toprovideuswithdocumentationoftheBoardauthorizingeitherthestipendorstepincreases.ThefiveDPWemployeesandtwopoliceofficersreceivedunauthorizedpayments totaling$5,0918 in our audit period.

• Although the Board authorized the hiring of a codeenforcementofficer in January2013andapoliceofficer inSeptember2013, theBoarddidnotsetapayrateforeitheremployee.Thepoliceofficerwaspaid$4,410and thecodeenforcement officer was paid $3,763 in our audit period.The Mayor stated that there is a salary schedule for police officersandtheofficer’spayratecorrespondedtothesalaryschedule.However,VillageofficialscouldnotfindanyBoardauthorizationfortheschedule.

Because the Board has not implemented adequate controls over payrollprocessing,theBoardcannotensurethatemployeesarebeingpaidatauthorizedamountsorthatVillageemployeesandofficialsareonly receiving appropriate payroll payments.

7 2013-14paidsalaryof$32,000multipliedbya6percentincreasefor2014-15equates to $33,920.The annual salary is divided into 26 equal paychecks, ofwhich the Clerk-Treasurer received 15 throughDecember 31, 2014 ($33,920dividedby26multipliedby15equals$19,569.)

8 $5,091 consists of $4,050 to thefiveDPWemployees and$1,041 to the twopoliceofficersforourauditperiod.


The Board is responsible for implementing controls over separation payments to ensure that eligible employees receive only the amount intendedbytheBoard.TheBoardmustauthorizeseparationpaymentsbyeither a collectivebargainingagreement, contract, resolutionorpolicydocument.Villageofficialsmustsufficientlyreviewseparationpayments and ensure that they are properly calculated and adequately supported.

The Board-approved personnel policy manual (Manual) establishes the terms of employment including payments for unused leave time upon separation from service. Full-time employees who retire from Villageserviceafter15yearsofemploymentareentitledtoreceiveaseparationpaymentforaccruedsickleaveuptoamaximumof180days at the employee’s pay rate at the time of retirement.

We reviewed separation paymentsmade to two former employeestotaling $72,537 to determine whether their separation paymentswerecorrectlycalculated,supportedandreviewed.

The formerClerk-Treasurer retiredonMay31, 2013 and receivedaseparationpaymenttotaling$33,067,whichincluded$32,184forunusedsicktimeandanadditional$883forsevenworkingdays.TheManualdefinestheformerClerk-Treasurerasafull-timeemployeeand records indicate that the former Clerk-Treasurer had more than the required 15 years ofVillage service and had 2,043.5 hours ofaccumulated sick time. There was no documentation that the Board reviewed the separation payment made to the former Clerk-Treasurer.

We reviewed the Clerk-Treasurer’s calculation of the formerClerk-Treasurer’s separation payment and found various errors. For example,theClerk-Treasurerconvertedthemaximum180allowablesickdaysintohoursusingan8-hourworkdaytodeterminethetotalnumberofhoursfor thesickleavepayoutandsheuseda5.5-hourwork day to determine an hourly rate of pay. This resulted in a larger rate of pay and more allowable hours for payout. The inconsistent use of hours worked per day in the Clerk-Treasurer’s calculation resulted in the former Clerk-Treasurer receiving a sick leave payout equivalenttoafullyear’ssalary,insteadofonly180days.

Village officialswere unable to provide uswith the formerClerk-Treasurer’s working hours, so we recalculated the separationpaymentusingthemaximumallowed180daysatadailyrate9 and alsorecalculatedhersalarypaymentforworkingthesevendays.We

Separation Payments

9 We found no Board authorization for the former Clerk-Treasurer’s 2011-12salary.Weapplieda2percentBoard-authorizedsalaryincreasetoher2011-12paid salary to calculate her 2012-13 salary and sick leave payout.


determinedthepayoutshouldhavebeen$22,429andthattheVillageoverpaidtheformerClerk-Treasurerby$10,638.

The Mayor told us that the Board was aware that the Village would be making a separation payment to the former Clerk-Treasurer. However, both theMayor and theClerk-Treasurer told us that theBoarddidnot review the separationpaymentcalculation.Officialsshould review separation payment calculations to ensure they are accurateandauthorized.

The separation payment made to the former Assistant Water/WastewaterTreatmentOperatorconsistedoftwopayments10 totaling $39,4711thatwerepaidinaccordancewiththeManual,weresupportedby leave records and reviewed by the Board.

The Board is responsible for implementing controls over leave benefits it intends toprovide toVillageemployees.TheBoardcando this by defining leave benefits towhichVillage employees areentitled.AgoodsystemofaccountingforemployeeleavetimerequiresVillageofficialstoperiodicallyverifytheaccuracyofemployeeleaverecords ensuring that employees earn leave time in accordance with Boardauthorizationsandthatleavetimeusedisaccuratelydeductedfrom employee leave accruals.

TheBoarddefinedtheamountandtypeofleavethatVillageemployeesare entitled to in the Manual. Full-time Village employees are entitled toearnpersonal,vacationandsickleave,andtheManualdescribeswhen and how much leave is earned by Village employees. Payment for unused vacation leave on an employee’s anniversary date is also authorized.

The Clerk-Treasurer processes and maintains leave records for all Village employees. DPW employees submit leave requests to theSuperintendent,whoapprovesandforwardstherequeststotheClerk-Treasurerforprocessing.Inaddition,theClerk-TreasurercomparesDPWemployee timecards to the leave requests, ensuring all leavetime is charged against accruals.

The Superintendent verbally requests time off from the Mayor or the Board. However, he prepares and approves his own leave requestslips and submits them to the Clerk-Treasurer to record. There is no

Leave Records

10VillageofficialspaidtheformeremployeehalfofhisaccruedsicktimeinJulyand paid the other half in September.

11The formerAssistantWater/WastewaterTreatmentOperatorwasemployedbytheVillageformorethan15yearsandwaspaidfor180daysofaccruedsicktimeathisrateofpayatretirement.Heworkedfivedaysperweek,eighthoursperday.180daysmultipliedbyeighthoursperdaymultipliedby$27.41perhourequals$39,470.


verificationprocessoftheSuperintendent’sleavetoensureallleaverequestslipshavebeensubmittedorrecorded.InAugust2014,theClerk-Treasurer made a vacation leave payout to the Superintendent totaling $2,364 for 86 unused vacation hours, which agreed withhis hourly rate multiplied by the unused vacation hours recorded. However,becausethereisnooversightordocumentationtoensuretheSuperintendentsubmitsallleaveslipsforverbalrequests,Villageofficialshavenoassurancethattheamountpaidwasaccurate.

The Clerk-Treasurer requests time off from the Mayor through phone calls,emailsortexts;however,neithershenortheMayormaintainany documentation of the days or hours taken off or the approval. The Clerk-Treasurertoldusthatshemakesanoteofhertimeoff,butshediscards the note once she records the hours in the payroll system.

Asaresultoftheseweakcontrols,thereisnoassurancethatalltheleave time taken by the Superintendent or the Clerk-Treasurer is recorded.Further,nootherVillageofficialperiodicallyreviewstheaccuracy of any leave balances.

Because of the lack of oversight of employee leave records, wereviewed leave accrual records for all full-time employees entitled to leave during our audit period to determine if the amounts of leave earned (sick, vacation and personal) were in accordance with theManual.Wealsotracedleavetimefromtheemployeetimerecordsto the approved leave requests and the Village’s payroll system to determine if the leave time used was authorized and accuratelyrecorded into the payroll system.12

WefoundtheemployeesreceivedtheBoard-authorizedamountsofvacationandpersonalleave.However,fiveemployeeseachreceived16fewerhoursinsickleavethantheBoardauthorizedforthe2013-14 fiscal year. We also found that leave time used by the DPWemployees was accurately recorded.

TheBoardshould:

1. Segregate payroll duties to ensure that one person does not controltheentirepayrollprocess.Ifsegregationofdutiesisnotpractical,theBoardshouldensurethatcompensatingcontrols,suchasincreasedmanagementoversight,areimplemented.

2. Ensurethatanindependentcertificationofpayrollisperformedand a review of leave records takes place periodically.

12SeeAppendixB,AuditMethodologyandStandards, for our sample selectionprocess.

Recommendations


3. AttachasalaryscheduletoitsannualoperatingbudgetsandensureallcompensationforVillageemployeesandofficialsisclearlydocumentedandauthorized.

4. ReviewsalarypaymentsmadetotheClerk-Treasurer,Police

andDPWemployees and consider taking action to recoveranyunauthorizedamounts.

5. Reviewthecalculationfortheseparationpaymentmadetotheformer Clerk-Treasurer and consider taking action to recover any overpaid amount.

6. Reviewandauthorizeallseparationpayoutspriortopayment.

7. Ensure that all compensation and leave benefits are clearlyauthorized, approved and provided, pursuant to applicableVillage policies or Board resolutions.

8. Implement a process to verify the leave time of theClerk-Treasurer andSuperintendent is documented, approved andrecorded.


Claims Auditing

The Board13 is responsible for auditing and approving all Village claims prior to payment.14 The Board’s claims audit should be a deliberate and thoroughprocesstoensureeachclaimcontainssufficientsupportingdocumentation to verify compliance with Board-adopted policies and statutory requirements and that each claim is for a proper Village purpose. Because the Clerk and Treasurer positions are combined in theVillage,theMayorisrequiredtosignanorderdirectingtheClerk-Treasurer to pay the claims that the Board has audited and approved.

The Board did not properly audit claims to ensure they were adequately supported or were for proper Village purposes. The Clerk-Treasurer provides the Board with abstracts and related claims for audit for the general, water and sewer funds. The Board reviewsand approves the abstracts without reviewing the actual claims and the Clerk-Treasurer documents the Board’s approval of the abstract in the Board minutes.15 The Clerk-Treasurer does not present the Board with abstracts or claims for capital project funds. One Board member reviews and approves any capital project claims related to constructioncosts.Withoutathoroughanddeliberateexaminationofthe individualclaimsand thesupportingdocumentation, theBoarddoes not have enough information to determine whether the claims it approves are appropriate and legitimate and there is an increased riskthatimproperclaimscouldbepaid.Also,thereisnoauthorityforthe Board to delegate the audit and approval of certain claims to one Boardmember.Furthermore,theMayordoesnotcertifytheabstractsauthorizingtheClerk-Treasurertopaytheclaims.

Duetothelackofaproperaudit,wereviewed171claimstotalingapproximately $1.8 million16 to determine whether they contained adequate supporting documentation and were in accordance with Villagepolicies, approvedbydepartmentheads, forproperVillagepurposesandlistedonapprovedabstracts.Weverifiedthatthepayees

13VillageLawallowsvillages toestablishanOfficeof theAuditor toaudit andapproveclaimsagainsttheVillage.However,theBoardhasnotestablishedanOfficeoftheAuditor.

14 Claims include bills or invoices submitted by vendors requesting payment for goods or services furnished to the Village. Village Law allows the Board to authorize,byresolution,paymentinadvanceoftheclaimsauditforpublicutilityservices,postage,freightandexpresscharges.SuchclaimsmustbepresentedforauditatthenextregularBoardmeeting.

15Boardminutescontainabstractnumbers,approvedclaimtotalsbyfundandeachBoardmember’s approval. If a claim is not approved, that is included in theminutes along with a brief description of the Board’s reasoning.

16SeeAppendixB,AuditMethodology andStandards, for our sample selectionprocess.


and amounts paid on canceled checks agreedwith the claims.Wefound that 28 claims17 totaling $1.5million were not on abstractspresentedtotheBoard.Theremaining143claimstotaling$299,254were includedonBoardapprovedabstracts,but theMayordidnotcertify the abstracts ordering the Clerk-Treasurer to pay these claims. We also found 4018 claims totaling $277,808 that did not includethesignatureoftheofficerwhoseactiongaverisetoeachclaim,toconfirmtheaccuracyoftheclaimandverifythegoodsorserviceshadbeenreceived,orwereunsupportedsinceportionsoftheclaimsdidnotcontainoriginalinvoicesanddidnothavesufficientdescriptionsof items purchased.

Examples of unsigned claims include claims for postage, watermeters and a sewer jetter.19Withoutdocumentation20 indicating goods werereceived,thereisanincreasedriskthattheVillagecouldpayforgoods that were not actually received. Unsupported payments include a billing statement that showed “for June charges” but provided no detail of the charges. Upon request, officials provided us withreasonableexplanationsfor thepurchasesbutcouldnotprovideuswith additional support for the claims.

SincetheBoarddidnotauditclaimsandtheMayordidnotauthorizetheClerk-Treasurertopayclaimsbycertifyingtheabstracts,thereisan increased risk that payments were for goods and services that were not received or that may not be for proper Village purposes.

TheBoardshould:

9. Ensure it conducts a thorough and deliberate audit of all VillageclaimsorformallyestablishanOfficeoftheAuditortofulfilltheclaimsauditfunction.

10. Ensure each claim contains appropriate approvals and sufficientsupportingdocumentation.

17Twenty-three capital project claims totaling more than $1.4 million and fivehealthinsuranceclaimstotaling$31,645

18Oneclaimhadmorethanonedeficiencyandsomeclaimshadpartialdeficiencies.19Apowerfuldraincleaningmachinethatusesahigh-pressurewaterjettoclear

obstructions in residential and commercial drain pipes as well as larger municipal sewer systems

20VillageLawstatesthat,withsomeexceptions,claimscannotbeorderedtobepaidunlessapprovedbytheofficeroremployeewhoseactiongaveriseororiginto the claim.

Recommendations


TheMayorshould:

11. Certify abstracts of claims to the Clerk-Treasurer with a statement indicating that the claims listed have been audited and approved by the Board.

TheClerk-Treasurershould:

12. Only pay claims upon order of payment from the Mayor.


APPENDIX A

RESPONSE FROM LOCAL OFFICIALS

Thelocalofficials’responsetothisauditcanbefoundonthefollowingpage.


APPENDIX B

AUDIT METHODOLOGY AND STANDARDS

The objectives of our audit were to review internal controls over payroll and review the claims audit processattheVillagefortheperiodJune1,2013throughDecember31,2014.WeextendedourscopebacktocalculatetheformerClerk-Treasurer’ssalaryforthe2012-13fiscalyear.Toachieveourauditobjectivesandobtainvalidauditevidence,weperformedthefollowingauditprocedures: Ourreviewofpayrollincludedthefollowing:

• WegainedanunderstandingoftheVillage’spayrollprocessandevaluatedtheinternalcontrols.

• WereviewedBoardmeetingminutesandtheVillage’sManual.

• Wereviewedallseparationpaymentsmadeduringtheauditperiod.

• WeconfirmedemployeesorofficialspaidduringtheauditperiodwereactualVillageemployeesorofficialsbytracingtopersonnelfiles,Boardminutesorleaverequestssignedbyadepartmenthead.

• Wejudgmentallyselected twomonths(November2013andNovember2014) to reviewallpayrolls.WeselectedthesetwomonthsbecauseallVillageemployeesandofficials(includingtheBoard,whichispaidquarterly)arepaidinthemonthofNovember.Wehadnoexpectationsofgreaterorlessererrorsinmakingourselection.Forallpayrollsinthesetwomonths,weverifiedwhetherinformationforallemployeesandofficialsenteredintothepayrollsystemagreedwithtimerecords,ifapplicable,anddeterminedwhetheremployeeswerepaidBoard-authorizedratesandifgrosspaywascalculatedcorrectly.

• We traced leave from time cards and leave requests for employeeswho took leave in themonthsofNovember2013and2014todetermineifleavewasaccuratelyrecorded.

• We reviewed leave accrual records for all employeeswho received leave during our auditperiodtodetermineiftheamountofleaveearnedwasinaccordancewithBoardauthorizations

• WereviewedpayrollrecordstodetermineifthetotalamountthattheClerk-TreasurerwaspaidduringourauditperiodagreedwithBoardauthorizations.

• Wereviewedcomputerizedpayrolldataforourauditperiodforpotentialhigh-riskpaymentsforfurtherreview.High-riskpaymentsincludedpaymentsofhighdollaramounts,paymentstoemployeesafterseparationandpaymentstoemployeeswithanexcessivenumbersofpaychecks.Weselectedonepaymentthatwedeterminedtobehighrisk(largedollaramount),madetotheSuperintendent.Wereviewedthepaymenttodetermineifthepayoutwassupportedandauthorized.


Ourreviewoftheclaimsauditprocessincludedthefollowing:

• WeinterviewedappropriateVillageofficialstogainanunderstandingoftheclaimsauditandapproval process.

• WereviewedBoardmeetingminutesandrelatedpolicies.

• WeusedarandomnumbergeneratortoselectthetestmonthsofFebruary2014,April2014andAugust2014toreviewclaims.Wereviewedall153claimstotaling$601,840thatclearedthebankduringourthreetestmonths.Wetestedclaimstodetermineiftheycontainedproperdepartmental approvals and sufficient supporting documentation, were for proper VillagepurposesandcompliedwithBoard-adoptedpolicies.Wealso reviewedabstractsassociatedwiththeclaimstodetermineiftheBoardapprovedtheabstractsandiftheMayorcertifiedtheabstractsorderingtheClerk-Treasurertopaytheclaims,andweexaminedrelatedcanceledchecks and abstracts to ensure consistency with the claims.

• Wejudgmentallyselected18claimspaidduringourauditperiodfromcanceledchecksandbankstatementstotalingapproximately$1.2millionforexamination.WeselectedtheseclaimsbecausetheyposedahigherriskofbeinginappropriateVillageexpenditures.Suchpaymentsincludedpayments toVillageofficials,questionablepurchasesorhigherdollaramounts,orboth.We tested claims to determine if they contained proper departmental approvals andsufficient supporting documentation, were for properVillage purposes and complied withBoard-adoptedpolicies.Wealsoreviewedabstractsassociatedwiththeclaimstodetermineif the Board approved the abstracts and if the Mayor signed the abstracts ordering the Clerk-Treasurertopaytheclaims,andweexaminedrelatedcanceledchecksandabstractstoensureconsistency with the claims.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperformtheaudittoobtainsufficient,appropriateevidencetoprovideareasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.Webelieve that theevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjectives.


APPENDIX C

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/

Toobtaincopiesofthisreport,writeorvisitourwebpage:


APPENDIX DOFFICE OF THE STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller

GabrielF.Deyo,DeputyComptrollerNathaalieN.Carey,AssistantComptroller

LOCAL REGIONAL OFFICE LISTING

BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Suite170244 Hawley StreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:[email protected]

Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties

BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:[email protected]

Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties

GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOneBroadStreetPlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:[email protected]

Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties

HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:[email protected]

Serving:NassauandSuffolkCounties

NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:[email protected]

Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties

ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThe Powers Building16WestMainStreet,Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:[email protected]

Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties

SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333E.WashingtonStreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]

Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties

STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding,Suite170244 Hawley Street Binghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313

State comptroller's audit of village of Cape Vincent

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