Rosendale Audit Report

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 — April 3, 2014

2015M-38

Town of Rosendale

Financial Operations

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

EXECUTIVE SUMMARY 2

INTRODUCTION 4 Background 4 Objective 4 Scope and Methodology 4 CommentsofTownOfficialsandCorrectiveAction 4

SUPERVISOR’S RECORDS AND REPORTS 6 AccountingRecords 6 BankReconciliations 8 Recommendations 9

WATER AND SEWER OPERATIONS 10 Unaccounted-for Water 10 CostAllocation 11 Recommendations 12

APPENDIX A ResponseFromTownOfficials 13APPENDIX B OSCCommentsontheTown’sResponse 18APPENDIX C AuditMethodologyandStandards 22APPENDIX D HowtoObtainAdditionalCopiesoftheReport 23APPENDIX E LocalRegionalOfficeListing 24

Table of Contents

11Division of LocaL Government anD schooL accountabiLity

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability July 2015

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 reportofourauditofTownofRosendale,entitledFinancialOperations.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’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

TheTownofRosendale(Town)islocatedinUlsterCountyandhasapopulationofapproximately6,000 residents.TheTownprovides general government administration, streetmaintenance, snowremoval,waterdistribution,sewagetreatmentanddisposalandlawenforcementtoitsresidents.TheTownisgovernedbyanelectedTownBoard(Board),whichcomprisestheTownSupervisorandfourBoardmembers,responsibleforthegeneraloversightofTownoperations.TheTownSupervisoristheTown’schiefexecutiveandchieffiscalofficer.

TheTown’s2014budgetedappropriationstotaled$4.1millionforallfunds,includingspecialdistricts.For2014,theTown’sbudgetedwaterfundappropriationstotaled$290,093andbudgetedsewerfundappropriationstotaled$247,622.

Scope and Objective

TheobjectiveofourauditwastoreviewselectedTownfinancialoperationsfortheperiodJanuary1,2013throughApril3,2014.Ourauditaddressedthefollowingrelatedquestions:

• DidTownofficialsadequatelymonitorfinancialoperationstoensurefiscalstability?

• DidtheBoardprovideadequateoversightofwaterfundandsewerfundoperations?

Audit Results

TownofficialswereunabletoeffectivelymonitortheTown’sfinancialoperationsandensurefiscalstabilitybecausetheTown’sfinancialaccountingsystemwasinadequateandtheTown’saccountingrecordswereinaccurateandincomplete.Additionally,theTown’saccountingrecordsdidnotsupporttheamountsreportedtotheStateComptroller,includingmorethan$850,000infundbalancevariances.Further,monthlybankreconciliationswerenotproperlyperformed.Asaresult,Townofficialsdonothave adequate assurance that all funds received are properly recorded and accurately accounted for. Withoutproperrecordkeeping,theBoarddoesnothavecompleteandaccurateinformationonwhichtobasefinancialdecisions.

WhiletheBoardimproveditsoversightofwaterandsewerfundoperationsduringourauditperiod,theTowncouldnotaccountforapproximately55percentofitswater.TheUnitedStatesEnvironmentalProtectionAgency(EPA)hasestablishedanindustrygoalof10percentforunaccounted-forwatersystemlosses.Wecalculatedthewaterloss,afterdeductingthe10percentEPAallowance,andfoundtheTowncouldnotaccountforalmost24milliongallonsofwatervaluedat$30,900.Toaddressthis


water loss,Townofficialsplantoreplacewatermetersandlocateandrepairwater leaksandwerenotifiedthataNewYorkStateEnvironmentalFacilitiesCorporationgrantwasapprovedtohelpfinancethese improvements. We also found that the Town’s allocation of personnel service costs between the waterandsewerdistrictfundswasnotbasedonreasonablemethodologies.Asaresult,Townofficialscannotbeassuredthatthewaterandsewerfundsareoperatingefficiently.

Comments of Town Officials

The results of our audit and recommendationshavebeendiscussedwithTownofficials, and theircomments,whichappearinAppendixA,havebeenconsideredinpreparingthisreport.Townofficialsdisagreedwiththefindingsandrecommendationsinourreport.AppendixBincludesourcommentson the issues raised in the Town’s response letter.


Background

Introduction

Objective

Scope andMethodology

Comments ofTown Officials andCorrective Action

TheTownofRosendale(Town)islocatedinUlsterCountyandhasapopulationofapproximately6,000 residents.TheTownprovidesgeneral government administration, street maintenance, snowremoval,waterdistribution,sewagetreatmentanddisposalandlawenforcement to its residents. The Town is governed by an elected Town Board(Board),whichcomprises theTownSupervisor(Supervisor)andfourBoardmembers,andisresponsibleforgeneraloversightofTownoperations.TheSupervisoristheTown’schiefexecutiveandchieffiscalofficer.

The Water and Sewer Department (Department) Superintendent(Superintendent) is responsible for the Town water and sewerdistricts’ day-to-day operations. In addition, the Superintendent isresponsiblefortheHighFallsJointWaterDistrict’s(HFJWD)day-to-dayoperatingactivities,whichwasestablishedby theTownsofMarbletownandRosendaletoserveresidentslocatedinpartsofbothtowns.

The Town’s 2014 budgeted appropriations totaled $4.1 million for allfunds,includingspecialdistricts.For2014,theTown’sbudgetedwaterfundappropriationstotaled$290,093andbudgetedsewerfundappropriationstotaled$247,622.

The objective of our audit was to review selected Town financialoperations.Ourauditaddressedthefollowingrelatedquestions:

• DidTownofficialsadequatelymonitorfinancialoperationstoensurefiscalstability?

• Did the Board provide adequate oversight of water and sewer fundoperations?

WeexaminedtheTown’sfinancialwaterandseweroperationsfortheperiodJanuary1,2013throughApril3,2014.

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

The results of our audit and recommendations have been discussed withTownofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report. Town officials


disagreed with the findings and recommendations in our report.AppendixBincludesourcommentsontheissuesraisedintheTown’sresponse letter.

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.


Supervisor’s Records and Reports

The Town’s financial activities should be accurately recorded intheaccountingrecordsandsummarizedininterimfinancialreportsthat are presented to the Board on a monthly basis to help it monitor and manage the Town’s financial operations and assess financialcondition. To accurately determine the Town’s fiscal health, theBoard must have a system in place to account for all money received anddisbursed.TheSupervisor,aschieffiscalofficer,isresponsibleforperformingbasicaccountingfunctions.TheTownClerk(Clerk),asrecordsofficer,isresponsibleformaintainingcustodyofallTownbooks,documentsandrecords.

Town officials were unable to effectively monitor Town financialoperations and ensure fiscal stability because theTown’s financialaccounting system was inadequate and the Town’s accounting records wereinaccurateandincomplete.Additionally,theTown’saccountingrecordsdidnotsupporttheamountsreportedtotheOfficeoftheStateComptroller (OSC), includingmore than$850,000 infundbalancevariances.Further,monthlybank reconciliationswerenotproperlyperformed.Asaresult,Townofficialsdonothaveadequateassurancethat all funds received are properly recorded and accurately accounted for.Withoutproperrecordkeeping,theBoarddoesnothavecompleteandaccurateinformationonwhichtobasefinancialdecisions.

TheTown’sfinancialrecordsmustbecomplete,accurateandup-to-datetobeusefulformanagingTownoperations.Adequateaccountingrecordsconsistofjournals,ledgersandotherfinancialdocumentsthatprovide an accurate and up-to-date record of all Town transactions and account balances. The general ledger is a detailed record containing the accounts needed to reflect the Town’s financial position andresults of operations.Thegeneral ledger includes assets, liabilitiesand equity (fund balance) accounts as well as control (aggregate)accountsforrevenuesandexpenditures.

ItisessentialthattheSupervisorensuresthattheinformationintheTown’sfinancialmanagementsystemisup-to-dateandaccuratesothat theBoard can effectively exercise its oversight responsibility.Aschieffiscalofficer,theSupervisorisresponsibleformaintainingaccountingrecordsthatallowforusefulperiodicandannualfinancialreportstobeprovidedtotheBoard.IftheSupervisorassignstheseduties to a bookkeeper, sufficient oversight should be provided toensurethatthebookkeeper’srecordsareaccurate,reliableandup-to-date.Inaddition,theClerkmustmaintaincustodyofallTownbooks,documents and records.

Accounting Records


The Supervisor did not provide adequate oversight to ensure that the bookkeeper properly maintained accurate accounting records. Throughout the audit we requested the general ledger and checkbook registertoverifymonthlyaccountingbalances,butwereinformedthatthey were not maintained. The Supervisor was under the impression that a general ledger was prepared and provided us with a trial balancereportwhichlistedtransactionsbyaccountcode.However,this report did not contain running account balances or any monthly accountactivity.Withoutsuchinformation,theSupervisorcouldnotverifythatcashwasavailabletofinanceTownoperations.

Additionally,thebookkeeperdidnotproperlyusetheTown’sfinancialaccounting system. She recorded disbursements in the system which allowed her to generate abstracts.1 However, cash receipts weremanually recorded in receipts ledgers and cash receipts were entered intotheaccountingsystemperiodically.Asaresult,thebookkeepercouldnotgenerateacurrentupdatedcheckbookregister.Therefore,Townofficialsdidnothaveadequateassurancethatallfundsreceivedwere recorded and accounted for in the Town’s accounting system.

Further, after recording financial transactions, the bookkeepermailed the Town’s accounting records2 to the Town’s accountant. Theaccountantpreparedmonthlyreportsandfiledtheannualupdatedocument(AUD)withOSCfortheBoardandmailedthedocumentsback to the bookkeeper. Mailing the Town’s original financialdocuments is not good business practice because it removes the documentsfromtheClerk’scustody,putstheTownatriskoflosingthe documents and prevents the Board from receiving up-to-date financialinformationtomonitortheTown’sfinancialoperations.

WefoundinconsistenciesintheTown’sfinancialrecordsandreportspresented to us during the audit. The Town’sAUD showed fundbalances using the difference between the assets and liabilities as reportedonthebalancesheets.However,thebalancesheetsindicateddifferentfundbalancesforeachfund,asshownfor2013inTable1.

1 Abstractsarealistofauditedclaimsspecifyingtheclaimnumber,theclaimant’sname,theamountallowed,thefundandappropriationaccountchargeableandother necessary and essential information directed to the Supervisor to pay the claimant the amount allowed.

2 Therecordsmailedtotheaccountantincludedrevenueandexpenditurereportsbyfund,abstractsandbankstatements.


Figure 1: Reporting Variances as of December 31, 2013Fund General Highway Water Sewer Total

Accounting Record Fund Balance $1,351,585 $37,192 $141,482 $140,553 $1,670,812

AUD Fund Balance $328,751 $347,838 $48,610 $86,337 $811,536

Variance $1,022,834 ($310,646) $92,872 $54,216 $859,276

Theaccountantexplainedthatthevarianceswerearesultoffinancialsystem software errors causing incorrect accumulated fund balances and also because the Town did not have a year-end general ledger module. In instanceswhere the accounting records do not supportthefinancialrecords,Townofficialsshouldreconcileanydifferences.The accountant stated that she reconciled the fund balances but does notprovidethisreconciliationtoTownofficials.Asaresult,thereisnoassurancethattheTown’sfinancialrecordsareaccurate.

Timely, complete and accurate bank reconciliations provide Townofficials with essential information needed to effectively manageandsafeguardcashandtoproperlymonitortheTown’sfiscalaffairs.Bank reconciliations also provide the opportunity to verify cash receipt and disbursement transactions. The bookkeeper was assigned the responsibility to reconcile the Town’s 26 bank accounts monthly for the Supervisor’s review.

Because the bookkeeper did not have current, updated accountbalances,whichweredevelopedaftermonth-endbytheaccountant,she could not perform proper bank reconciliations. She accounted for outstanding checks and deposits-in-transit but did not have the book balance to compare with her reconciliation. This was performed bytheaccountantand theywoulddiscussanydifferences.Further,although the bank sent the Supervisor the canceled check images at year-end,noTownofficialreviewedtheseimages.

The canceled check images were included on a password-protected compact disk. The bookkeeper told us she misplaced the password and never used it to gain access to the images. We were also unable to review the canceled check images because the bookkeeper did nothaveaccesstothem.Further,whiletherewasevidencethattheBoardannuallyauditedtheSupervisor’srecords,itwouldbedifficultto performa thorough auditwithout the benefit of canceled checkimages to review.

Without complete and accurate accounting records, proper bankreconciliations and a complete and thorough annual audit of the Supervisor’s records, the Board cannot be sure that the cashreportedisaccurateandthereportspresentedreflecttheTown’strue

Bank Reconciliations


financialcondition.Further,thereisanincreasedriskthaterrorsandirregularities could occur without detection.

TheSupervisorshouldensure:

1. The accounting system used is adequate, all financialtransactions are accurately recorded and a general ledger is maintained.

2. Allfundbalancevariancesareinvestigatedandreconciled.

3. Thebookkeeperperformsmonthlybankreconciliationsusinggeneral ledger balances.

4. Bank reconciliations, including canceled check images, arereviewed to ensure that all receipts and disbursements are included and submitted to the Board for the annual audit.

Recommendations


Water and Sewer Operations

Townofficialsareresponsibleforprovidingoversightofwaterandsewer operations. This includes monitoring water production to ensure aminimal level of unaccounted-forwater, ensuring thatwater andsewerdistrictsareoperatingeffectivelyandefficientlyandensuringthat all operating costs are properly accounted for. While the Board improved its oversight of water and sewer fund operationsduringourauditperiod,theTowncouldnotaccountforalmost24milliongallonsofwatervaluedat$30,900.Toaddressthiswater loss,Town officials plan to replacewatermeters and locateand repair water leaks and were notified that a New York StateEnvironmentalFacilitiesCorporation(EFC)grantwasapproved tohelp finance these improvements.We also found that the Town’sallocation of personnel service costs between the water and sewer districtfundswasnotbasedonreasonablemethodologies.Asaresult,Townofficialscannotbeassuredthatthewaterandsewerfundsareoperatingefficiently.

The United States Environmental Protection Agency (EPA) hasestablished an industry goal of 10 percent for unaccounted-for water system losses. Procedures should be in place to monitor and identify the causeofwaterlossthatisgreaterthantheindustrygoal.Itisessentialto perform a periodic reconciliation of water produced with water billedtoprovideresponsibleofficialswiththeinformationnecessarytodetectandreducewaterloss.Alargevolumeofunaccounted-forwatercouldbeawarningsignofsignificantinfrastructureproblems.

The Town has access to water from its reservoir which it treats and then distributesittocustomers.TheSuperintendentmeasurestheoutflowof treated water daily at the treatment plant meter. We compared daily outflowdatatothewaterbilledontheDepartment’sbillingjournalsforfiveconsecutivequarters (2013-2014)andfound that theTowncouldnotaccountformorethan35milliongallonsofwaterovertheperiodreviewed,whichrepresentsapproximately55percentoftotalwater treated.Wecalculated thewater loss, after deducting the10percentEPAallowance,tobeapproximately23.9milliongallons.Asaresult,theTownlostapproximately$30,900,whichrepresentsthecosttosupply,treatanddistributewater.

The Superintendent stated that most water loss was caused by old water infrastructure. Some pipes are over 100 years old and water meters are generally 15 years old. The Superintendent also told us theTownneedsfinancialassistancetofinancetheserepairs.During

Unaccounted-for Water


June2014,theTownwasnotifiedthatitsEFCgrantapplicationwasapproved and that the Town would receive a $2 million grant and a $1millionlow-interestloantohelpfinancereplacingthemetersandlocating and repairing leaks.

Cost allocation is the process of identifying and assigning certain expenditurestofunctionsoroperationswithwhichtheyareassociated.Suchallocations,whenconsistentlyappliedfromyeartoyear,providea useful tool to efficiently track the true costs of operations. Costallocationcanalsoprovideabetterway tomanageresources,helpinannualbudgetpreparationandprovideofficialswithanaccuratepicture of districts’ operating costs.

Water and sewer districts costs should be segregated for the purpose of carrying on specific activities or attaining certain objectives inaccordancewithspecialregulations, restrictionsor limitations.Thedistricts should also be financially independent of each other andrents,penaltiesandotherchargesshouldcoverthecostofoperationand maintenance for each district. Additionally, shared operatingcosts should be accurately allocated to each district to ensure that each district is charged fairly and equitably.

TheDepartmentprovidesservicestotheTownofRosendale’swaterandsewerdistricts,aswellastotheHFJWD,butdoesnothaveanywritten agreement in place stating how water and sewer costs should beallocatedbetween thedistricts.Additionally, there isnowrittenagreement between the towns specifying how shared costs should be allocated.Forexample,theDepartmentandtheHFJWDsharecertainequipment,butnorecordofequipmentuseismaintained.

TheTownusespayrollandpayrollbenefitexpendituresasabasistoreceivecostreimbursementfromtheHFJWDandallocateoperatingcosts by district.3 The three districts’ payroll and related employee benefits totaled $281,735 in 2013. However, the method used toallocate costs for the three districts was not based on any analysis of each district’s actual operating costs.

The Department’s actual costs were not fully allocated4 because employees did not indicate on the time cards which districts’ work theyperformed.NocostswereallocatedtotheHFJWDforemployee

Cost Allocation

3 Districtcostswereallocatedbasedonthefollowing:theSuperintendentreceivedthreepaycheckseachweek,onefromeachdistrictfund.Laborersreceivedtwoequalpaycheckseachweek,onefromthewaterfundandonefromthesewerfund.Thewaterclerkreceivedtwocheckseachweek,onefromthewaterfundand one from the sewer fund.

4 ThewaterfundpayrollincludedthetimespentprovidingservicetotheHFJWD.We separated theHFJWDpayroll for the purpose of showing how theTownallocatedtheseexpendituresbetweenthedistricts.


benefits and the bookkeeper’s time to ensure that the HFJWDreimbursements adequately covered the Department’s actual costs to provideservices to that theHFJWD.Inaddition,wefoundthat84percent of Department administrative payroll costs were charged to thesewerdistrict,ratherthanthewaterdistrict.

When costs arenot properly allocated,Townofficials donot haveassurance that costs have been allocated fairly and equitably to each district.

TheBoardshould:

5. Investigateandcorrectthereasonsforunaccounted-forwater,includinginaccuratemeteringandsignificantleaks.

6. Obtain a written agreement for the water services provided to the Town of Marbletown.

7. Develop a fair and equitable methodology for allocating costs among all districts.

Recommendations


APPENDIX A

RESPONSE FROM TOWN OFFICIALS

TheTownofficials’responsetothisauditcanbefoundonthefollowingpages.


SeeNotes1and2Page18

SeeNote3Page18

SeeNote4Page18

SeeNote5Page18


SeeNote6Page18

SeeNote7Page19

SeeNote7Page19

SeeNote8Page19

SeeNote9Page19

SeeNote10Page19

SeeNote11Page19

SeeNote12Page19


SeeNote13Page 20

SeeNotes12and13Pages19and 20

SeeNote14Page 20

SeeNote15Page 20

SeeNotes7,12and13Pages19and 20

SeeNotes12,13and15Pages19and 20

SeeNote16Page 21

SeeNote12Page19


SeeNote12Page19

SeeNote17Page 21

SeeNote10Page19


APPENDIX B

OSC COMMENTS ON THE TOWN’S RESPONSE

Note1 The Supervisor and all Board members were sent and received the audit engagement letter months beforeourauditbegan.Inaddition,theSupervisorattendedourentranceconference,whichwasheldonApril3,2014,beforethestartofouraudit.Atthattime,wediscussedtheauditobjectivewiththeSupervisor,Superintendentandwaterclerk.

Note2

Most documents submitted by the accountant and the bookkeeper5duringtheexitconferenceweredocumentswepreviously reviewedduringourauditfieldwork.Theonlynewdocumentsprovidedwere copies of journal entry pages the bookkeeper presented to show that she recorded receipts in theaccountingsystemperiodically.Therefore,thedocumentsdidnotchangeourfindingsrelatedtothe lack of a general ledger. The reconciliations that the accountant prepares are not provided to the SupervisoruntilitistimetopreparetheAUD,and,assuch,nooneverifiesmonthlyaccountbalances.Weupdatedourreporttoreflectanychangesthatweresubsequentlyverifiedattheexitconference.

Note3

We worked closely with the bookkeeper who provided the records needed for the audit.

Note4

Asoutlinedinthereport,theTownhasanineffectiveaccountingsystemandprocessesthatdidnotprovidecurrent,updatedaccountinginformationandputsTownassetsatrisk.Theadditionaloversightand reports referred to were not in place during the audit.

Note5

Asstatedinourreport,theTown’saccountingrecordsdidnotsupporttheamountsreportedtoOSC,includingmorethan$850,000infundbalancevariances.Duringourauditfieldwork,theaccountantexplainedthatthesevarianceswerearesultoffinancialsystemerrorscausingincorrectaccumulatedfund balances.

Note6

AuditteammembersactedinacourteousandprofessionalmannerandmetwiththeSupervisorandofferedguidancetoimproveTownoperations.Wedidnotmakeanystatementsattheexitconferenceregarding our previous audit.6 5 Theaccountantistheindividualreferredtoasthe“externalbookkeeper”andthebookkeeperistheindividualreferredtoasthe“internalbookkeeper”throughouttheTown’sresponse.

6 Seeourreportnumber2014M-232issuedinOctober2014,entitledTownofRosendaleJusticeCourtavailableat:http://www.osc.state.ny.us/localgov/audits/towns/2014/rosendalejc.pdf


Note7

Ourauditfieldwork tooka totalof60daysover thecourseofoneyearbecauseTownemployeeswere part-time and not always available to provide documentation and answers our questions. The bookkeeperwasalsonotalwaysavailable.Asaresult,theauditorswereflexibleandworkedaroundTownofficials’andemployees’workschedules.OurplannedreviewedofwaterdepartmentfinancialactivitiesrelatedtothethreedistrictswasexplainedtotheSupervisorattheentranceconference.Asstatedinourreport,duringJune2014theTownwouldreceivea$2milliongrantanda$1millionlow-interestloantohelpfinancecertainwaterdistrictrepairsandimprovements.

Note8

Asstatedintheauditreport,84percentofDepartmentadministrativepayrollcostswerechargedtothesewerdistrict,ratherthanthewaterdistrict.WecalculatedthispercentagefromtheexpendituresasreportedontheAUD.

Note9

Thiscorrectiveactiontookplaceafterourauditfieldworkwascomplete.

Note10

WediscussedwaystocorrectthedeficienciesidentifiedduringtheauditwiththeSupervisorandTownemployees. The Board and the Supervisor are responsible for ensuring that the corrective actions discussed are implemented.

Note11

Deficienciessimilartothoseoutlinedintheauditreportwerealsoidentifiedinourpriorreport.Thesedeficienciesremaineduncorrected.

Note12

Duringouraudit,weidentifiedthefollowingaccountingsystemdeficiencies:

• Book balances did not include any prior month outstanding checks and instead included only the current month’s outstanding amounts.

• The bookkeeper’s hand written reconciliations on the bank statements indicated the closing balance, theoutstandingchecksandthecalculatedcurrentbalance(therewerenodeposits-in-transitinthewaterandsewerbankaccountsduring2013).Wewereunabletodeterminewhat balance the bookkeeper reconciles her calculated current book balance with at the end ofthemonth.Attheexitconference,weconfirmedthatonlytheaccountantmaintainsabookbalance.

• One-writesystemsaremanualrecordsusedtocapturealldatawhenatransactionismade(i.e.,checksarewrittenorcashisreceived)eliminatingtheneedtocopydisbursementorreceipt


informationtoaseparaterecord.Wewereunawaretheserecordsexistedwhileconductingtheaudit because the bookkeeper used the Town’s computerized accounting system to process checks.Inaddition,theSupervisorandthebookkeepertoldusthattheaccountspayableclerkrecorded all vouchers in the accounting system using the vouchers when paying claims. During ouraudit, theTowndidnotuseaone-writesystemfor receiptsbut insteadmaintainedandprovided us with a manual cash receipts journal.

• The bookkeeper told us she periodically records the daily transactions in the Town’s computerized accounting system. The accountant indicated that there are two separate computerized accounting systems7 and one manual accounting system.8

• Theaccountantmaintainedandkeptthefundbalancereconciliations,whichwerenotprovidedtotheBoard.Therefore,Townofficialshadnowaytoverifyiftheamountofreportedfundbalancewasaccurate.Thedocumentstheaccountantprovidedtousduringtheexitconferencewere not reconciliations but spreadsheets showing the two methods used to calculate fund balance.9 There was no reconciliation between the amount of fund balance shown on the Town’sbalance sheet and theamountof fundbalance reportedon theAUD toexplain thevariancesweidentified.

Note13

The three accounting systems combined cannot generate a general ledger or produce current and completeaccountinginformation.Eachcomponentofthesesystemsperformsseparateandindependenttasks,whichresultedinthetypesofdeficienciesidentifiedinthereport.

Note14

Our publication entitled Information for Town Officials10specificallystatesthat,amongotherreports,a general ledger is required.

Note15

Asoutlined in the report, all recordswerenot current andcomplete.Duringour audit period, thebookkeeperrecordedcashreceiptsperiodically(notonascheduledordailybasis)andtheaccountantrecordedthesetransactiononceortwiceamonth.Therefore,Districtofficialshadnoassurancethatallfunds received and disbursed were accurately accounted for.

7 The Town maintained the bookkeeper’s accounting software on one Town computer. The accountant had the same softwareonacomputeratheroff-sitelocation.However,thetwocomputerswerenotlinkedornetworkedtogetherandwere used independently of each other.

8 Thebookkeeperrecordedreceiptsinahandwrittenjournal,whichsheperiodicallyenteredintotheTown’saccountingsoftware. The accountant then entered these transactions in her software via batch journal entry at month-end.

9 Thefirstcalculationwasassetsplusliabilitiesequalsfundbalanceandthesecondwasrevenuesminusexpendituresplusprioryearfundbalanceequalsfundbalance,neitherofwhichwereareconciliation.

10Availableonourwebsiteat:http://www.osc.state.ny.us/localgov/pubs/townoff/ito.pdf


Note16

Duringourauditfieldwork,weobservedthatoriginalrecordsweremailedtotheaccountant.

Note17

The bookkeeper’s water and sewer account bank reconciliations contained calculated balances that werenotcomparedwithanymaintainedbookbalances.Therefore,thereconciliationswereinadequate.


APPENDIX C

AUDIT METHODOLOGY AND STANDARDS

TheobjectiveofourauditwastoreviewtheTown’sselectedfinancialoperationsfortheperiodJanuary1,2013 throughApril3,2014.Toachieveourauditobjectiveandobtainvalidauditevidence,weperformedthefollowingauditprocedures:

• WeinterviewedTownofficialstogainanunderstandingofinternalcontrolsovertheaccountingrecords.

• We reviewed Board minutes to determine if adequate oversight of the Department was provided.

• Weexaminedaccountingreportssuchasabstracts,trialbalances,operatingstatements,balancesheets,bankdepositslipsandbankstatements.WecomparedthefundbalancesreflectedonthetrialbalancereportswiththebalancesreportedontheAUD.

• We interviewed the Supervisor and the Superintendent to gain an understanding of water and sewer operations and the high level of unaccountable water and recordkeeping for the water and sewer operations.

• We calculated the unaccountable water and determined potential cost savings if remediated.

• We reviewed and tested the billing journal downloads for the audit period for accuracy and compliance with the Town Code and water and sewer rates.

• We tested the penalties assessed against the penalties received.

• We tested the re-levy of water and sewer charges.

• We reviewed the cost allocation payroll between the sewer andwater districts, aswell asbetweentheRosendalewaterdistrictandtheHFJWD.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.


APPENDIX D

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

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

Toobtaincopiesofthisreport,writeorvisitourwebpage:


APPENDIX EOFFICE 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,ChiefExaminerOfficeoftheStateComptrollerOne Broad Street PlazaGlensFalls,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

Documents

Rosendale Audit Report