Town of Exeter...costs and to strengthen controls intended to safeguard local government assets....
Transcript of Town of Exeter...costs and to strengthen controls intended to safeguard local government assets....
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:
January 1, 2013 — September 4, 2014
2015M-23
Town of ExeterRecords and Reports
thomas p. Dinapoli
Page
AUTHORITY LETTER 1
INTRODUCTION 2 Background 2 Objective 2 Scope and Methodology 2 CommentsofLocalOfficialsandCorrectiveAction 2
RECORDS AND REPORTS 4 Recommendations 6
APPENDIX A ResponseFromLocalOfficials 7 APPENDIX B AuditMethodologyandStandards 9APPENDIX C HowtoObtainAdditionalCopiesoftheReport 10APPENDIX D LocalRegionalOfficeListing 11
Table of Contents
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State of New YorkOffice of the State Comptroller
Division of Local Governmentand School Accountability August2015
DearTownOfficials:
A toppriorityof theOfficeof theStateComptroller is tohelp localgovernmentofficialsmanagegovernment resources efficiently and effectively and, by so doing, provide accountability for taxdollarsspenttosupportgovernmentoperations.TheComptrolleroverseesthefiscalaffairsoflocalgovernmentsstatewide,aswellascompliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversightisaccomplished,inpart,throughouraudits,whichidentifyopportunitiesforimprovingoperationsandTownBoardgovernance.Auditsalsocanidentifystrategiestoreducecosts and to strengthen controls intended to safeguard local government assets.
Following isa reportofourauditof theTownofExeter,entitledRecordsandReports.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’sauthorityassetforthinArticle3ofNewYorkStateGeneralMunicipalLaw.
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
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Background
Introduction
Objective
Scope andMethodology
Comments ofLocal Officials andCorrective Action
The Town of Exeter (Town), located in Otsego County, isapproximately32squaremilesandservesabout990residents.Theelected five-member Town Board (Board) is the legislative bodyresponsible for managing Town operations, including maintainingsound financial condition.TheTown Supervisor (Supervisor)1 is a memberoftheBoardandservesastheTown’schiefexecutiveofficerandchieffiscalofficer.
TheTownprovidesvariousservicestoitsresidents,includinghighwaymaintenance, snow removal and general government support. TheTown’s 2014 budget appropriationswere approximately $659,000,fundedprimarilywithrealpropertytaxesandStateaid.
The objective of our audit was to review the Town’s financialoperations.Ourauditaddressedthefollowingrelatedquestion:
• Did the Supervisor and Board ensure accounting records wereaccurateandup-to-dateandfinancialreportswerefiledtimely?
WeexaminedtheTown’srecordsandreportsfortheperiodJanuary1,2013throughSeptember4,2014.Wealsoextendedourscopebackto2010 for annualfinancial reports and to2012 for tax levy limitcalculations.
We conducted our audit in accordance with generally accepted governmentauditingstandards(GAGAS).Moreinformationonsuchstandards and the methodology used in performing this audit are includedinAppendixBofthisreport.Unlessotherwiseindicatedinthisreport,samplesfortestingwereselectedbasedonprofessionaljudgment,asitwasnottheintenttoprojecttheresultsontotheentirepopulation.Where applicable, information is presented concerningthe value and size of the relevant population and the sample selected forexamination.
The results of our audit and recommendations have been discussed withTownofficialsandtheircomments,whichappearinAppendixA, have been considered in preparing this report. Town officialsgenerally agreed with our recommendations.
1 The Supervisor resigned on December 31, 2014, and a new Supervisor waselectedtoaone-year termthatcommencedJanuary1,2015.For thepurposesofthisauditreport,“Supervisor”referstotheTownSupervisorthatresignedonDecember31,2014.
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The Board has the responsibility to initiate corrective action. Awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendations in this report should be prepared and forwarded toourofficewithin90days,pursuanttoSection35oftheGeneralMunicipalLaw.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 Town Clerk’soffice.
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Records and Reports
TheBoardhasaresponsibilitytooverseetheTown’sfiscalactivitiesand safeguard its resources.TheSupervisor, as chieffiscal officer,is responsibleforperformingbasicaccountingfunctions, includingmaintaining accounting records, performing monthly bankreconciliationsandfilingannualfinancialreportsandtaxlevylimitcalculations2asrequiredbytheOfficeoftheStateComptroller.Theaccounting records and reports must be up-to-date, complete andaccurate to be relevant and useful for managing Town operations andevaluatingtheTown’sfinancialcondition.Anannualaudithelpsthe Board fulfill its fiscal oversight responsibilities by providinganopportunitytoassessthereliabilityandtimelinessofthebooks,records and supporting documents. Records and reports should also beavailableforanalysisbythird-partyusersoffinancialinformation,such as taxpayers, bonding agencies and other State and federalagencies.
The Board did not ensure the Supervisor maintained up-to-date,completeandaccuraterecords.AlthoughtheSupervisorprovidedtheBoardwith accuratemonthly budget-to-actual reports, the balancesheetsincludedinaccurateaccountbalances.Forexample,theJuly31,2014highwayfundbalancesheetoverstatedliabilitiesbymorethan$76,000becausetheSupervisorhadincorrectlyrecordedareceipt.3
Further, bank reconciliations containedoutdateddeposits in transitand inaccurate transactions,4 including journal entries that should havebeenremovedtoreflecttheactualcashbalancesintheaccounts.Moreover,thelasttimetheSupervisorfiledtheannualfinancialreportwasforthe2010fiscalyear,eventhoughourOfficesentoutseveralnotices to remind theSupervisor of thefiling deadlines and offers
2 TheStateLegislatureandtheGovernorenactedalawin2011thatestablishedataxlevylimitonalllocalgovernments,whichwaseffectivebeginninginthe2012fiscalyear.Thelawprecludeslocalgovernmentsfromadoptingabudgetthatrequiresataxlevythatexceedstheprioryeartaxlevybymorethan2percentor therateof inflation,whichever is less,unless thegoverningboardadoptsalocallawtooverridethetaxlevylimitation.
3 This receipt represents a reimbursement fromCHIPS for improvementsmadein 2013. When the Supervisor received the money, she applied it against areceivable,whichwas incorrect because the receivablewasnever created.Asaresult,thisentrycreatedanegative(credit)balanceinthereceivableaccount.When the Supervisor received themoney, she should have debited cash andcredited revenue.
4 UnreconciledtransactionsasofDecember31,2014includeddepositsintransitdatingbackseveralyears, includingonefromJanuary2012for$7,229,andajournalentry(credit)tocashdatedDecember30,2011for$22,958.Inaddition,therewereunreconcileddepositsintransitfrom2012and2013.
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forassistance,andthetaxlevylimitcalculationhasneverbeenfiledsincetheinceptionofthetaxcaplawforthe2012budgetyear.
The Supervisor told us these conditions occurred because she was notfamiliarwiththeaccountingsoftwareandbecauseTownofficialswereunabletofindareliablebookkeeper.Forexample,in2012,theBoardhiredabookkeepertocorrectdeficienciesintherecordsandfile the2011annualfinancial report;however, thebookkeeperwasunabletocorrectlybalancethebooksandthereforecouldnotfilethereport.TheSupervisor,whohadexpressedherdesiretoresignfromherpositionseveralyearsago,failedtofiletherequiredtaxlevylimitcalculationsinceitsinception.Further,theBoardhasnotauditedtheSupervisor’srecordsduringourauditperiodbecauseitreliedsolelyon its trust of the Supervisor.
HadtheBoardperformedevenacursoryauditoftheTown’srecords,5
itwould have identified the discrepancies described in this report.Asa result, theBoarddoesnothaveaccurate,up-to-datefinancialinformationsuchashowmuchcashisavailable,tomakeinformeddecisions. For example, without accurate bank reconciliations andbalancedfunds,itisnotpossiblefortheBoardtoknowtheamountoffundbalanceineachfund,andthereisanincreasedriskthaterrorsorirregularities have occurred and remain undetected.
Furthermore, this lack of information limits the Board’s ability tomonitorfinancialoperationsandcanleadtounplanneddeficits,suchasthosethatwereexperiencedbytheTown’shighwayfundfortwoofthepastthreefiscalyears.ThesedeficitscausedtheBoardtouse$52,000ofunrestrictedfundbalancetosupporthighwayoperations.While the general fund currently has enough resources to support highwayoperations,thisdemonstratestheneedfortheBoardtohavesufficientinformationtoensuretheTownhastheresourcesnecessaryto provide the desired level of services in the future.
Moreover,thislackofinformationcausesalackoftransparencyforthird-partyusersoffinancialinformation,suchastaxpayers,bondingagenciesandotherStateandfederalagencies.Forexample,becausetheannualfinancialreportshavenotbeenfiled,theTownhasnotbeenevaluated forfiscal stressbyourOffice’sFiscalStressMonitoringSystem.6 This evaluation can be a valuable tool in assessing the
5 Toassistintheperformanceofitsauditfunction,theBoardshouldreviewouroffice’spublicationentitledFiscal Oversight Responsibilities of the Governing Board. This publication is available on our website: www.osc.state.ny.us/localgov/pubs/lgmg/fiscal_oversight.pdf.
6 Ourofficehasdevelopedasystemofevaluatingamunicipality’ssusceptibilitytofiscalstressbasedontheannualfinancialstatementsfiled.Fordetails,see:www.osc.state.ny.us/localgov/fiscalmonitoring/index.htm.
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Town’s financial condition for both taxpayers and Town officials.Finally,becausetheannualtaxlevylimitcalculationshavenotbeenfiled,theBoarddoesnotknowifitisincompliancewiththelawandtheTowntaxpayersareunabletoreceivepropertytaxfreezecredits.7
TheSupervisorshould:
1. EnsurethattheTown’saccountingrecordsandreportsareup-to-date,completeandaccurate.
2. SubmitannualfinancialreportsandtaxlevylimitcalculationstoourOfficeinatimelymanner.
TheBoardshould:
3. Conduct a comprehensive annual audit of the Supervisor’sfinancialrecords.
Recommendations
7 The property tax freeze credit reimburses homeowners for increases in localproperty taxeson theirprimaryresidences.Toreceive thecredit,homeownersmust meet certain eligibility requirements and the municipality where the homeowner'spropertyislocatedmustcomplywiththeNewYorkStatepropertytaxcap.TheNewYorkStateTaxDepartmentreviewseligibilitydata,calculatesthe credits and automatically mails checks to eligible homeowners.
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APPENDIX A
RESPONSE FROM LOCAL OFFICIALS
Thelocalofficials’responsetothisauditcanbefoundonthefollowingpage.
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APPENDIX B
AUDIT METHODOLOGY AND STANDARDS
OuroverallgoalwastoreviewtheTown’srecordsandreportsfortheperiodJanuary1,2013throughSeptember4,2014.Wealsoextendedourscopebackto2010forannualfinancialreportsandto2012fortaxlevylimitcalculations.
To achieveour audit objective andobtainvalid audit evidence,weperformed the following auditprocedures:
• WeinterviewedTownofficialsandreviewedBoardminutestogainanunderstandingofTownprocesses and operations and to determine the internal controls in place.
• We compared theTown’s adjusted bank balances for all funds to the cash recorded in theaccountingrecordstodeterminetheTown’sbookbalanceasofDecember31,2014.
• We interviewed the Supervisor to gain an understanding of the accounting records and determine whythe2011,2012and2013annualfinancialreportshadnotbeensubmittedtoouroffice.
• WeinterviewedTownofficialstodetermineifanannualauditwasperformedoftheSupervisor’srecords and reports and to gain an understanding of their review of monthly Board reports.
WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.
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APPENDIX C
HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT
OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/
Toobtaincopiesofthisreport,writeorvisitourwebpage:
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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.,ChiefExaminerOfficeoftheStateComptrollerThePowersBuilding16WestMainStreet,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