Sodus Center Fire District - New York State Comptroller · 2020-05-26 · 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

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, 2015 – March 13, 2017

2017M-108

Sodus Center Fire DistrictBoard Oversight

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

EXECUTIVE SUMMARY 2

INTRODUCTION 4 Background 4 Objective 4 Scope and Methodology 4 CommentsofDistrictOfficialsandCorrectiveAction 5

BOARD OVERSIGHT 6 ClaimsAudit 7 Segregation of Duties 9 Control Environment 10 Financial Records and Reports 13 Recommendations 15 APPENDIX A ResponseFromDistrictOfficials 18APPENDIX B AuditMethodologyandStandards 20APPENDIX C HowtoObtainAdditionalCopiesoftheReport 21APPENDIX D LocalRegionalOfficeListing 22

Table of Contents

11Division of Local Government and School Accountability

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability May2020

DearDistrictOfficials:

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

FollowingisareportofourauditoftheSodusCenterFireDistrict,entitledBoardOversight.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

The Sodus Center Fire District (District) is located in the Town of Sodus (Town) in Wayne County. TheDistrictservesapproximately1,200residents.TheDistricthasonefiredepartment(SodusCenterFireDepartment)withapproximately25volunteers.TheDistrictisadistrictcorporationoftheState,distinctandseparatefromtheTown,governedbyanelectedfive-memberBoardofFireCommissioners(Board).

Districtexpendituresfor2016totaled$108,631,fundedprimarilywithrealpropertytaxes.TheBoardannually appoints the Treasurer as Secretary.

Scope and Objective

TheobjectiveofourauditwastoexaminetheBoard’soversightoffinancialoperationsfortheperiodJanuary1,2015throughMarch13,2017.WeextendedourauditscopeperiodbacktoJanuary1,2014toreviewdisbursementsanddeposits.WeexpandedourauditscopeperiodforwardthroughDecember6,2019tofurtherreviewquestionablepayments.Ourauditaddressedthefollowingrelatedquestion:

• Did theBoard provide adequate oversight overDistrict financial operations to ensure thatassets are safeguarded?

Audit Results

TheBoardmaintainedalaxcontrolenvironmentanddidnotcarryoutitsresponsibilitytooverseeDistrictfinancialoperationsandsafeguardDistrictassets.Forexample,theBoardallowedtheTreasurertoperformallkeyaspectsofDistrictfinancialoperationswithoutprovidingindependentoversight.

The Treasurer was the sole proprietor of an electrical contracting business and also did general contractingwork.TheTreasurermade$15,943inquestionablepaymentstohimselfandhisbusinessanddid not provide sufficient documentation for $6,934 in other questionable disbursements.TheTreasurermaintainedthatsomeofthepaymentswereforroofingworkheperformedfortheDistrict.However,Districtofficialstoldusthattheyhiredanothercontractortoperformtheroofingwork,notthe Treasurer.

The Board did not attend required mandatory Office of the State Comptroller (OSC) prescribedtraining,properlyadvertiseforelections,takeorfileoathsofoffice(requiredbystatute)inatimelymanneror establishwrittenpolicies andprocedures togovernDistrict operations. In addition, the


BoardconductedbusinessatitsmeetingswithoutaquorumofBoardmembersinattendance.Asaresult,wequestionwhethertheBoardhadauthoritytofunctionabsentsufficientevidencethateachBoardmemberattainedtheirofficebyfollowingallrequiredprocedures.

Further,theBoarddidnotensurethattheTreasurersubmittedtherequiredannualfinancialreportsandtaxlevylimitcalculationstoOSCandtheDistrict’sbudgetstotheTown.1 The lack of adequate Board oversight resulted in serious deficiencies in controls, financial reporting and public transparency.District officials and residents have no assurance thatDistrict funds are being used economically,prudently and for reasonable purposes.

WereportedsimilarfindingsinourpreviousauditreportandprovidedtheBoardwithrecommendationstoassistthemwithimprovingoversightoffinancialoperations.2However,theBoardfailedtofileacorrectiveactionplan(CAP)anddidnotimplementcorrectiveactiontoaddressthesedeficiencies.

Comments of District Officials

TheresultsofourauditandrecommendationshavebeendiscussedwithDistrictofficials,andtheircomments,whichappearinAppendixA,havebeenconsideredinpreparingthisreport.Districtofficialsagreed with our recommendations and have initiated or indicated they planned to initiate corrective action.

1 TheStateLegislatureandtheGovernorenactedChapter97oftheLawsof2011thatestablishedataxlevylimitonalllocalgovernments,whichwaseffectivebeginninginthe2012fiscalyear.Thelawprecludeslocalgovernmentsfromadoptingabudgetwithataxlevythatexceedstheprioryeartaxlevybymorethan2percentortherateofinflation,whicheverisless,andcertainexclusionspermittedbylaw,unlesstheBoardadoptsaresolutiontooverridethetaxlevylimitation.

2 Refertoourpriorauditreport,Sodus Center Fire District – Internal Controls Over Financial Operations (2010M-74),issuedinAugust2010.


Background

Introduction

Objective

Scope and Methodology

The Sodus Center Fire District (District) is a district corporation of theState,distinctandseparate from theTownofSodus (Town)in Wayne County. The District covers approximately 6.6 squaremilesandprovidesfireprotectionandemergencyrescueservicestoapproximately1,200residents.TheDistricthasonefiredepartment,Sodus Center Fire Department (Department), with 25 volunteermembersandisoneofthreefiredistricts3 located in the Town. District expendituresfor2016totaled$108,631,fundedprimarilywithrealpropertytaxes.

TheDistrict is governedby an electedfive-memberBoard ofFireCommissioners (Board). The Board is responsible for managing the District’s overall finances, safeguarding its resources andmaintainingthefirehouse.TheBoardannuallyappointstheTreasurerastheSecretary.TheSecretary-Treasurer(Treasurer) isresponsiblefor receiving and having custody ofDistrict funds, disbursing andaccountingforthosefunds,preparingmonthlyandannualfinancialreports and meeting any other reporting requirements. The Treasurer is also responsible for recording all Board meeting proceedings and maintaining custody of all District records.

The objective of our audit was to examine the Board’s oversightof financial operations. Our audit addressed the following relatedquestion:

• Did the Board provide adequate oversight over District financialoperationstoensurethatassetsaresafeguarded?

We examined theBoard’s oversight of financial operations for theperiod January1, 2015 throughMarch13, 2017.Weextended theauditscopeperiodbacktoJanuary1,2014toreviewdisbursementsanddeposits.WeexpandedourauditscopeperiodforwardthroughDecember6,2019tofurtherreviewquestionablepayments.

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

3 These districts include the District, Alton Fire District and Wallington FireDistrict.


Comments of District Officials and Corrective Action

The results of our audit and recommendations have been discussed withDistrictofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report.District officialsagreed with our recommendations and have initiated or indicated they planned to initiate corrective action.

TheBoardhastheresponsibilitytoinitiatecorrectiveaction.PursuanttoSection181-bofNewYorkStateTownLaw,awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendationsinthisreportmustbepreparedandforwardedtoourofficewithin90days.Totheextentpracticable,implementationoftheCAPmustbeginbytheendofthenextfiscalyear.FormoreinformationonpreparingandfilingyourCAP,pleaserefertoourbrochure,Responding to an OSC Audit Report,whichyou receivedwith thedraft audit report.TheBoardshouldmaketheCAPavailableforpublicreviewintheSecretary-Treasurer’soffice.


Board Oversight

TheBoardisresponsibleformanagingandoverseeingtheDistrict’soverallfiscalaffairsandsafeguardingitsresources.Thisresponsibilityincludesestablishingasystemofinternalcontrols,includingwrittenpoliciesandprocedures,toprovidereasonableassurancethatcashandother resources are properly safeguarded; transactions are authorized and properly recorded; financial reports are accurate, reliable andfiledinatimelymanner;andapplicablelaws,rulesandregulationsare followed.

TheBoardmaintaineda laxcontrolenvironmentanddidnotcarryout its responsibility to overseefinancial operations and safeguardDistrict assets. For example, the Board allowed the Treasurer toperform all key aspects of District financial operations withoutproviding independent oversight.

The Treasurer was the sole proprietor of an electrical contracting business and also did general contracting work. The Treasurer made $15,943 in questionable payments to himself and his business. Inaddition, he did not provide sufficient documentation for another$6,934inotherquestionabledisbursements.TheTreasurerindicatedthatsomeofthepaymentswereforworkheperformedfortheDistrict,specificallycitingroofingwork.

However,wewerenotprovidedwithanyevidence to support thattheTreasurerhad,infact,performedanyroofingwork.Additionally,Districtofficialstoldusthattheyhiredanothercontractortoperformtheroofingwork,nottheTreasurer.

The Board did not attend required mandatory OSC prescribed training,properlyadvertiseforelections,takeorfileoathsofoffice(required by statute) in a timely manner or establish written policies andprocedurestogovernDistrictoperations.Inaddition,theBoardconducted business at its meetings without a quorum of Board membersinattendance.Asaresult,wequestiontheBoard’sauthorityto function absent sufficient evidence that each Board memberattainedtheirofficebyfollowingallrequiredprocedures.

Further, theBoard did not ensure that theTreasurer submitted therequired annual financial reports and tax levy limit calculations to


OSCandtheDistrict’sbudgets to theTown.4 The lack of adequate Boardoversightresultedinseriousdeficienciesincontrols,financialreporting and public transparency. District officials and residentshavenoassurancethatfundsareusedeconomically,prudentlyandfor reasonable purposes.

Wereportedsimilarfindingsinourpreviousauditreportandprovidedthe Board with recommendations to assist them with improving oversight of financial operations.5 However, the Board has notimplementedcorrectiveactiontoaddressthesedeficiencies.

NewYorkStateTownLaw(TownLaw)requiresthattheBoardauditall claims against the District before the Treasurer makes payments.6 The Board minutes should indicate the claims the Board audited and approved. The abstract (list of claims approved) should identify eachclaimandincludethevendor,amount,appropriationcodeandaggregate amount to be paid. The Board should ensure that each claim has sufficient supporting documentation and the Treasurer shouldmaintain this documentation for all payments.

TheBoarddidnotauditclaims,includingthosepaidtotheTreasurerand his business, which resulted in questionable payments.WhileBoardminutesidentifiedvendorsandpaymentamounts,appropriationcodes and Board approvals were not included.

Questionable Payments – We initially reviewed all disbursements andsupportingdocumentation forpaymentsmade fromJanuary1,2015throughSeptember30,2016totaling$191,347.Wefoundthat24 disbursements (16 percent) totaling $49,121 did not have anysupportingdocumentationandninedisbursements(6percent)totaling$1,008 had insufficient support. We also identified questionabledisbursementspaidtotheTreasurer,hisbusinessandothervendorsthat could have been for personal use.

Asa result,we expandedour disbursements review to include theperiodsJanuary1throughDecember31,2014andOctober1throughDecember31,2016todeterminewhetherthesedisbursementswere

4 TheStateLegislatureandtheGovernorenactedChapter97oftheLawsof2011thatestablisheda taxlevylimitonall localgovernments,whichwaseffectivebeginning in the 2012fiscal year.The lawprecludes local governments fromadoptingabudgetwithataxlevythatexceedstheprioryeartaxlevybymorethan2percentortherateofinflation,whicheverisless,andcertainexclusionspermittedbylaw,unlesstheBoardadoptsaresolutiontooverridethetaxlevylimitation.

5 Refer toourprioraudit report,Sodus Center Fire District – Internal Controls Over Financial Operations (2010M-74)issuedinAugust2010.

6 NewYorkStateTownLaw(TownLaw),Section176(4-a)

Claims Audit


for appropriate expenditures. We reviewed all 280 disbursementstotaling $299,876 and identified inappropriate and questionablepayments.

The Treasurer made five payments totaling $15,943 to himself orhisbusiness.TheTreasurerrepaidtheDistrict$8,623ofthe$15,943bydepositingpersonalcheckstotheDistrict’scheckingaccountonSeptember 2, 2016, shortly after we notifiedDistrict officials thatwe would be conducting an audit.7 The Treasurer told us that this repayment was for payments he made to himself with District funds in2016foraroofingproject.

However, District officials and Department personnel told us thatroofingprojectworkwasnotplannedorperformedbytheTreasurerin2016,becauseofficialshiredanothercontractor tomakeroofingrepairs that year. The contractor told us that they performed the roofingrepairsandprovideduswithaninvoicetosupportthisfact.Further,twoCommissionerstoldusthattheyhiredthecontractor,nottheTreasurer,todotheroofingproject.

Also, we question whether three payments totaling $7,320 werelegitimateexpenditures.TheTreasurerindicatedthesepaymentswerefor the installation of an exterior door in 2014 ($1,560), a roofingprojectin2015($3,840)andinstallationoflightemittingdiode(LED)lightsin2016($1,920).DistrictofficialsandDepartmentpersonneltoldusthattheTreasurerdidnotdoanyroofworkin2015anddidnot install LED lights. We did not observe any LED lights installed atthefirehouseandwereunabletodeterminewhethertheTreasurerperformedthedoorinstallationin2014.

Wealsoquestionanother16disbursements totaling$6,934paid tovendors(e.g.,forelectricalsupplies)foritemsthattheTreasurercoulduse for his business. Claims for these disbursements did not have sufficient supporting documentation. Furthermore,District officialswere unaware of any projects undertaken that would have required these building materials. The other 259 disbursements totaling$277,000 appeared tobe for appropriatepurposes andDepartmentofficialstoldusthattheDistrictpurchaseditemsfromthesevendors(whosoldsuchitemsasautopartsandgenerators).However,officialshave no assurance that such items were not purchased for personal use.

7 AlthoughthesechecksweredatedAugust8,2016theywerenotdepositeduntilshortlyafterweinformedDistrictofficials,inaletterdatedAugust29,2016,thatwe would be initiating our audit.


Withoutsufficientsupportingdocumentationandathoroughclaimsaudit,theBoardcannotbesurethatalldisbursementsmadeareforvalid and necessary purposes.

The Board must ensure that cash management duties are adequately segregated so that one individual does not handle all aspects of a cash transaction. This helps ensure that cash is safeguarded and reduces the risk that errors or irregularities could occur without detectionorcorrection.IfsegregatingtheTreasurer’sfinancialdutiesis impractical, theBoard should implement compensating controlstoprovidemoreoversight, suchas requiringdualsignaturesonallchecks and having someone other than the Treasurer receive the bank statementsinthemailandperformroutinereviewsofbankstatements,reconciliationsandcanceledchecks,tominimizetheassociatedrisks.Inaddition,itisessentialfortheTreasurertoprepareandprovidetothe Board a monthly report with detailed information for all receipts and disbursements.

TheTreasurerperformedallfinancialdutieswithnoBoardoversight,including receiving and disbursingmoney,maintaining accountingrecordsandreceivingandreconcilingbankstatements.AsSecretary,theTreasurerwasresponsibleforenteringalistofBoard-approvedclaims for payment in the minutes. The Board did not review bank statements,canceledchecks,reconciliationsandaccountingrecordsorreceiveamonthlyreportofreceiptsanddisbursements.Asaresult,the Treasurer could pay for inappropriate purchases and enter the unauthorized claims in the minutes. Because the Treasurer held both offices itheightens the risk thaterrorsor irregularitiescouldoccurand not be detected.

One Board member told us that the Treasurer read information aloud atBoardmeetings.Further, theTreasurermaintainedmost recordsathishomeinsteadofatthefirehouse.Asaresult,Districtrecordsare not available for review and the Board has no assurance that appropriate records are maintained throughout the year.

Whenwe requestedDistrict records, theTreasurer told us that heneeded to organize receipts and provided us with a general ledger that appeared new and hardly opened. During our previous audit we recommended to District officials that records be maintained in asecurelocationatthefirehall.TheselackofcontrolsexposeDistrictassets and records to theft, loss or damage that could prevent theDistrict from meeting its goals and obligations.

Segregation of Duties


A vital component of any internal control system is the controlenvironment or “tone at the top.” The control environment is a reflectionoftheBoard’sattitudeaboutinternalcontrols,involvementandscrutinyoffinancialoperationsandincludestheintegrity,ethicalvaluesandthecompetenceoforganizationemployeesandtheBoard’sphilosophy and operating style. When the control environment is strong, there is an expectation that everyone, including theBoard,will conform to established controls and uphold the public’s trust.The foundation of any effective control environment is competentmanagers, with integrity, who attentively monitor operations tosafeguard public resources.

The Board has not established an adequate control environment,resulting in an ineffective “tone at the top.” The Board did notimplementcorrectiveactionfromourpreviousaudit,whichidentifiedseveredeficienciesinoperations.Asaresult,thesedeficienciesstillexist.Boardmembersdidnotattendthemandatorytrainingrequiredby Town Law.8Additionally, theBoard did not adopt the requiredcodeofethicsorotherpolicies,provideevidenceofelectionresults,takerequiredoathsofofficeandconductedbusinessatitsmeetingswithout a quorum of Board members present. Because of the Board members’ineffectivemanagement,theDistrict’scontrolenvironmentleaves residents with little or no assurance that funds are being spent appropriately and economically.

Corrective Action – The Board is responsible for implementing correctiveactiontoaddressweaknessesidentifiedinanyauditreportnolaterthantheendofthenextfiscalyear.

TheBoarddidnotfileawrittenCAPwithOSCor implementanycorrective action from our previous audit. As a result, there arestill severe deficiencies inDistrict operations.The previous reportdiscussed the following issues that will also be addressed further in this report. The Board has not completed mandatory training,properlyconductedelectionsorfiledoathsofoffice,ensuredmajorityattendanceatBoardmeetings,ensuredadequateBoardminutesaremaintained,adoptedrequiredpolicies,ensuredreportsarecompletedandfiledorannuallyauditedtheTreasurer’srecords.TheBoardwasinformedofthesedeficienciesanddisregardedrecommendationsforimprovingoversightoffinancialoperations.

Commissioner Training – Statutory provisions and sound management practicescomplementtheBoard’sguidanceandoversight.OnewayBoard members can become aware of proper statutory provisions and sound management practices is to participate in the mandatory

Control Environment

8 TownLaw,Section176-e


training as prescribed byOSC.All fireDistrict commissioners arerequired to complete anOSCapproved training coursewithin270daysoftakingoffice.Thetrainingcoverslegal,fiduciary,financial,procurement and ethical responsibilities. Beyond the mandatory training,OSCprovidestrainingandmanualstohelpBoardmembersdevelop policies and implement appropriate controls.

Boardmembers did not complete the required training, althoughcertainmemberswereawareoftherequirement.TheBoardmembers’failure to comply with legal requirements indicates to District membersthatlegalcomplianceisunimportant.Inaddition,withoutproper training, it’sdifficult toperformthesedutieseffectivelyandthe Board cannot assure residents it possesses the basic knowledge to provideeffectivemanagementofDistrictfinancialandnon-financialactivities to comply with relevant legal requirements. Our last audit made it clear that the Board needed to take a more active approach inmanaging theDistrict,butBoardmembers stilldidnot take thebasic mandatory training or take advantage of the many additional resources provided by OSC to establish appropriate policies and procedures.

Election and Oaths of Office – The Board is required to publish a notice of elections in one or more newspapers having a general circulationintheDistrictbetween27and34daysbeforetheelectiondate. The notice should specify the time and place that the election willbeheld,theofficerstobeelectedandtheirtermsofofficeandthe hours during which the polls will be open to receive ballots. The Boardmustfile theelectionresultswith theTownClerkwithin72hours after the election.Additionally,TownLaw requires that firedistrictofficerstakeandfileoathsofofficewiththeTownClerk.9

Absent sufficient evidence supportingpropernotifications, electionresults and oaths of office, we question the Board’s authority toconductDistrictbusiness.Districtofficialsdidnotprovideevidencethattheyproperlyadvertisednotificationsfortheannualelectionsorheld elections.Although a notice of electionwas published in thenewspaper for one Board member election, it was not publishedwithin the required number of days before the election.

Inaddition,theBoardminutesdidnotcontainsufficientdocumentationfor election results andno resultswerefiledwith theTownClerk.WealsofoundthatthreeBoardmembersdidnottakeorfileanoathofofficeandthetwowhodidwerefiledsignificantlylate,basedonthetermdatesindicatedontheoaths.Further,Departmentpersonneltoldusthat,asofMarch2017,therewereonlyfourBoardmembers

9 TownLaw,Section214


becauseDistrictofficialsdidnottakeactiontoelectafifthmemberfortheyearwhenthepriormember’stermexpired.

The Treasurer told us that they have a hard time getting individuals to fill positions. However, following proper procedures, such asnotifying the public through advertisements,may improve turnoutandinterest.IfthecurrentBoardmembersarenotwillingorcapableof performing the required duties they should step down and allow moreactiveBoardmembers to takeofficeorconsiderwhether theDistrictasitexiststodaycancontinueandwhetheritwouldbeintheresidents’bestinteresttodissolveorconsidermergingwithanotherdistrict.

Board Meetings – Regular Board meetings throughout the year help ensure that all Board members are fully informed of District activities so that they can properly oversee operations and approve bills for payment. Good business practices require that the Board meet atleast monthly and that a majority of Board members are present at each meeting. The Secretary must attend all Board meetings and keep complete and accurate records of the proceedings for each meeting. The minutes are a permanent record of Board actions and key decisions. The Board should review and approve the minutes to ensure all relevant discussions,motions, proposals and resolutionsare accurately captured.

Board members did not advertise to notify the public of its meetings and told us that there has been a problem getting a majority of Board members to attend each meeting. We reviewed the attendance as recorded in the minutes for meetings held from January 2015throughAugust2016.Wefoundthat7ofthe20meetingsheld(35percent)didnothavesufficientBoardmemberattendancetoformthequorumnecessaryforanofficialBoardmeeting.Further,thoseBoardmemberspresentconductedbusinessatallof thesemeetings,eventhough there was not the needed quorum.

Although the Treasurer maintains meeting minutes, they arehandwritten on loose paper that would allow pages to be added or removedatanytime.Offurtherconcern,aBoardmemberandthefirechief toldus that theminutesarenotreviewedorapprovedbytheBoardbecausetheTreasurerdoesnotprovidethemforreview.Asaresult,theminutesdonotcontainsufficientinformationandthereisnoassurancethattheyaccuratelyrepresentallBoarddiscussions,decisions and actions.

WhentheBoarddoesnotmeetregularly,itsmembersareunabletoexercisetheiroversightresponsibilities,suchastheproperauditandapproval of claimsbefore payment as requiredby statute.Further,


Board members who often miss meetings may not completely understand the issues at hand. Chronic absenteeism sets a poor exampleforDistrictvolunteersthatcouldleadtomisuseofDistrictresources. In addition, information to inform the public regardingDistrict operations is limited.

PoliciesandProcedures–TheBoardshould,andinsomecasesmust,develop and formally adopt policies that establish control procedures andotherrequirementsfordailyfinancialandotheroperations.NewYork State General Municipal Law (GML) requires the Board toadopt investment and procurement policies and a code of ethics.10 The purposeofacodeistoguideDistrictofficialsandfirefightersandsetastandardofconductexpectedinthedischargeofofficialbusiness.

The Board has not adopted a code of ethics or procurement and investmentpoliciesasrequired.Additionally,theBoardhasnotadoptedanyotherfinancial policies, such as those coveringdisbursements,requiredfinancialreportsandbudgets.Asaresult,theBoardhasnotprovided guidance for District personnel to adequately perform their financialduties.Further,withoutacomprehensivecodeofethics,theBoard has not set a standard of ethical conduct for District business or providedthepublicwithassurancethatDistrictofficialsareexpectedto perform their duties with high ethical standards.

TheBoardhasaresponsibilitytooverseeDistrictfiscalactivitiesandsafeguarditsresources.Tofulfill thisduty, it isessential theBoardestablish a system of internal controls to ensure that transactions areauthorizedandproperlyrecorded;financialreportsareaccurate,reliableandfiledtimely;andapplicablelaws,rulesandregulationsarefollowed.TheTreasurermustmaintaincomplete,accuraterecordstoproperlyaccountforallDistrictfinancialactivitiesinatimelymanner.

The Board did not ensure that all required financial reports werepreparedandfiled,auditclaimsoraudittheTreasurer’srecords.ThislackofoversightdiminishedtheBoard’sabilitytoproperlymonitorfinancial operations and allowed questionable payments, includingthose to the Treasurer and his business.

AnnualBudget–TheDistrict’sspendinglimitisestablishedbyTownLaw.11Thespendinglimit is themaximumamountthat theDistrictmayexpendwithouthavingtoobtainvoterapproval.TheDistrict’sbudget is a tool used to guide financial transactions. Town LawrequirestheDistricttofileitsannualspendinglimitationworksheet

Financial Records and Reports

10NewYorkStateGeneralMunicipalLaw,Sections39,104-band80611TownLaw,Section176(18)


andbudgetwith theTown’sbudgetofficer.12Theproperty tax levylimit restricts theamountof realproperty taxes thatcanbe raised.Beforeadoptingabudgetforthecomingyear,Districtofficialsmustsubmittheinformationnecessarytocalculatethetaxlevylimitforthe coming year to OSC.

TheBoarddidnotfiletheirbudgetsfor2015or2016withtheTownand did not calculate their statutory spending limit as required. We alsofoundthattheTreasurerhasnotcalculatedorfiledtheDistrict’stax levy limit calculation since 2012.We determined that Districtofficialsstayedwithinthe2016statutoryspendinglimitandtaxlevylimit.However,withoutcalculatingtheselimitsofficialsrisklevyingmoretaxesthanallowedbylaw.Additionally,residentsdonothaveatransparentviewofDistrictfinances.

Bank Reconciliations – Reconciling bank account cash balances with the accounting records monthly is an essential control activity that allows District officials to determine whether all cash receipt anddisbursement transactions are captured and correctly recorded in a timely manner.

The Treasurer told us that he performed bank reconciliations. However,thesereconciliationswereinadequatebecause,whiletheyconsideroutstandingchecksanddeposits,therewasnocomparisonwith the book balance. Had proper bank reconciliations been performed and reviewed, officials could likely have identified twodisbursements totaling $1,150 that the Treasurer did not record.Thesedisbursements,forreorderingchecks,gasandelectricity,werefor proper purposes.

AnnualReports–GMLrequiresthattheTreasurerprepareandsubmitanannualfinancialreporttoOSCwithin60daysafterthecloseofthefiscalyear.13Thisreport,knownastheannualupdatedocument(AUD), is an important fiscal toolwhich provides theBoardwiththe financial information necessary to monitor District operationsand other interested parties with a complete summary of District financialactivities.ProperlycompletedandfiledAUD’sincreasethetransparencyofDistrictfinancialactivity.

TheTreasurerdidnotfileannual reports for2009,2010and2012through2015.The2011reportwasfiled133dayslate.TheTreasurerprovideduswithapreparedAUDfor2015butdidnotfilethereport.As a result, District officials are not complying with statute andDistrict residents have limited access to financial data to monitor

12TownLaw,Section10513GML,Section30


Districtfinancialactivities.TheBoard’scontinuedinactiontoensurethe Treasurer files these annual reports further demonstrates theBoard’sdisregardfortheirfiscaloversightresponsibilities.

AnnualAudit – The Board should annually audit the Treasurer’srecords.TownLawrequirestheTreasurertoproduceallbooks,records,receipts, vouchers, and canceled checks to the Board annually.14 Board oversight is particularly important when one employee is able toperformallaspectsofafinancialtransaction.Whensegregationofdutiesisimpractical,activesupervisionandoversightbecomeevenmore important. OSC also provides guidance to help Board members conduct these audits.15

Anannualauditservesasanimportantcontrolprocedurebecauseitgives the Board an opportunity to verify that cash has been properly accountedforandtransactionshavebeenaccuratelyrecorded.Italsoprovides Board members with an added measure of assurance that the Treasurer’sfinancialrecordsandreportscontainreliableinformationupon which to base management decisions.

The Board did not conduct or contract for an annual audit of the Treasurer’s records.This lack of oversight diminished theBoard’sability to properly monitor financial operations and allowed theTreasurer to make questionable disbursements without detection.

TheBoardshould:

1. Take a much more active role in managing the District and understanding the responsibilities of their positions.

2. Audit all claimsbeforepayments aremadeandensure thatallclaimshavesufficientsupportingdocumentationandareappropriateDistrictexpenditures.

3. Review the questionable disbursements identified in thisreport and seek reimbursement from the Treasurer for any misappropriated money.

4. EnsurethattheTreasurer’sdutiesaresegregatedorimplementcompensating controls.

5. Implementcorrectiveactiontoaddresstheseveredeficienciesin internal controls and improve oversight of financialoperations.

Recommendations

14TownLaw,Section17715www.osc.state.ny.us/localgov/firedist/internalauditprocess.pdf


6. Completethemandatorytrainingasrequiredwithin270daysoftakingoffice.

7. Ensurethatallelectionsareproperlyadvertised,asrequired,so all eligible District residents have the opportunity to vote.

8. ProperlydocumentelectionresultsintheBoardminutesandprovide election results to the Town Clerk within the required timeframe.

9. InstituteprocedurestoensurethatallelectedandappointedofficersfileanoathofofficewiththeTownClerk.

10.EnsureamajorityofBoardmembersmeetonaregularbasis,at leastmonthly,toconductDistrictbusinessandnotifythepublic of meeting time and dates.

11. Review and approve Board minutes that accurately document all its discussions and decisions.

12.Adoptacodeofethics,aprocurementpolicy,aninvestmentpolicyandotherpoliciesrelatedtofinancialoperations.TheBoardshouldalsoensurethatDistrictofficialscomplywiththe code and policies.

13.Ensure that the Treasurer completes and files all requiredcalculations,recordsandreports.

14.Conduct or contract for an annual audit of the Treasurer’srecords.

15.Actively recruit competent interested Board members orevaluatewhetheritwouldbeintheresidents’bestinteresttodissolveormergewithanotherfiredistrict.

TheTreasurershould:

16.Annuallycalculatethestatutoryspendinglimitandfileitandthe District budget with the Town.

17.Prepareandsubmitaccurateannualfinancialreportsandtaxlevy calculations to OSC in a timely manner.

18.Maintainadequatesupportingdocumentationforallclaims.


19.EnsurethattheDistrict’sbooks,recordsandotherdocumentsarekeptinasecurelocationinthefirehouse.

20.Perform adequate bank reconciliations and provide thereconciliations and bank statements to the Board for review.

21.PrepareandprovidetheBoardwithamonthlyreportcontainingdetailed information for all receipts and disbursements.


APPENDIX A

RESPONSE FROM DISTRICT OFFICIALS

TheDistrictOfficials’responsetothisauditcanbefoundonthefollowingpage.



APPENDIX B

AUDIT METHODOLOGY AND STANDARDS

Toachieveourauditobjectiveandobtainvalidevidence,ourauditproceduresincludedthefollowing:

• We interviewed District officials and Department personnel to determine the controls andproceduresinplaceandgainanunderstandingoffinancialoperations.

• WeinterviewedTownofficialstodeterminetheDistrictinformationfiledwiththeTown.

• We reviewed Board minutes, budgets, oaths of office, financial records, reports and bankreconciliations.

• WecomparedfindingstoourpreviousaudittoassesswhethertheBoardimplementedadequatecorrective action.

• We reviewed claims and supporting documentation provided by the Treasurer for the period January2015throughSeptember2016toassesswhetherdisbursementshadpropersupportingdocumentation, were approved by the Board, properly recorded and appropriate Districtexpenditures.

• WeobtainedbankstatementsandcanceledchecksdirectlyfromthebankforJanuary2014throughDecember 2016.We reviewed all bank documentation to determinewhether cashreceipts and disbursements cleared the bank and identify any questionable disbursements.

• We interviewed District officials and Department personnel to identify the vendors usedand determinewhether disbursements were proper District expenditures.We observed thefirehouse’scontents.

• WecalculatedtheDistrict’s2016spendinglimitandtaxlevylimit.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtain sufficient, appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.


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 ACCOUNTABILITY

ElliottAuerbach,DeputyComptrollerTraceyHitchenBoyd,AssistantComptrollerRandyPartridge,AssistantComptroller

LOCAL REGIONAL OFFICE LISTING

BINGHAMTON REGIONAL OFFICEAnnC.Singer,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 OFFICEGaryG.Gifford,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 OFFICELisaA.Reynolds,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,Room409333 E. Washington StreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]

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

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

Documents

Sodus Center Fire District - New York State Comptroller · 2020-05-26 · 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