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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
11Division of LocaL Government anD schooL accountabiLity
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
2 Office Of the New YOrk State cOmptrOller2
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.
33Division of LocaL Government anD schooL accountabiLity
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.
55Division of LocaL Government anD schooL accountabiLity
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.
77Division of LocaL Government anD schooL accountabiLity
APPENDIX A
RESPONSE FROM LOCAL OFFICIALS
Thelocalofficials’responsetothisauditcanbefoundonthefollowingpage.
8 Office Of the New YOrk State cOmptrOller8
99Division of LocaL Government anD schooL accountabiLity
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.
10 Office Of the New YOrk State cOmptrOller10
APPENDIX C
HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT
OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/
Toobtaincopiesofthisreport,writeorvisitourwebpage:
1111Division of LocaL Government anD schooL accountabiLity
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