How did this HUGE local story not get in the paper? This report is hot: New Lebanon is not looking good. This is 5 days old! Here is the meat:
Internal controls over wire transfers were not appropriately designed and operating effectively to safeguard Town assets. The Board did not establish written policies or procedures for wire transfers. Consequently, online access to the Town’s bank accounts is not effectively limited. For example, the Supervisor, bookkeeper, and accountant (who is not a Town employee) all have online access to the Town’s bank accounts via a shared user name and password. In addition, the Town does not require confirmations from the bank prior to wire transfers being completed. Furthermore, all 41 of the wire transfers we tested, totaling $949,498, lacked documentation identifying the individual who initiated the transfer, and five of those, totaling $62,195, lacked documentation as to the purpose of the transfer. Due to these control weaknesses, the Board cannot be sure who initiates wire transfers, or if they are appropriate.
Internal controls over purchasing were not adequate. As a result, Town officials made purchases of highway materials totaling $84,570 without properly soliciting or awarding bids, and made procurements of goods and services, such as for the rental of equipment, totaling $36,356 without using requests for proposals or solicting written quotes, as required. The failure to comply with legal requirements and Town policies increases the risk that the Town could overspend for goods and services.
Internal controls over IT are not appropriately designed. The Board has not established policies or procedures for the back up of Town and Court data and remote access to the Town’s computers, or adopted a formal disaster recovery plan. Additionally, backup copies of the Town’s financial data are not stored in a remote location or tested to ensure that the data can be restored. In addition, the Court’s case management application has not been backed up, or tested, since January 2009. As a result, there is an increased risk of loss of important data along with a serious interruption to Town operations, such as not being able to process vendor claims or operate the Justice Court.
Clermont giving away the store?
The Board has not adopted a policy nor have Town officials developed procedures to govern the level of unreserved, unappropriated fund balance to be maintained and/or to determine whether the amount maintained is reasonable. In recent years, the Board has generally adopted highway fund budgets that under-estimated revenues and over-estimated expenditures, which generally resulted in annual increases to the amount of total fund balance. Actual sales tax revenues were also higher than estimates in the general fund over this time period, contributing to that fund’s excessive fund balance. Further, Town budgets have not always included sufficient appropriated fund balance to help offset highway fund property taxes in ensuing years’ budgets. These budgeting practices have resulted in excessive general fund and highway fund balances. At fiscal year end December 31, 2009, the general fund unreserved, unappropriated fund balance was reported at $322,688, 102 percent of the ensuing year’s total budgetary appropriations of $316,395. The highway fund unreserved, unappropriated fund balance was $175,279, 64 percent of the ensuing year’s total budgetary appropriations of $274,215. Collectively, these factors have contributed to the highway fund levying more property taxes than necessary to fund operations. In addition, Town officials did not properly establish a capital reserve fund, totaling $97,305, in the highway fund.
The Town’s procurement policy does not address the procurement of professional services. As a result of this lack of policy direction, the Town spent about $100,750 for professional services without seeking competition and did not enter into written agreements with these service providers. In addition, the Town, in conjunction with two neighboring towns, acquired a used paving machine for $28,000 without complying with competitive bidding requirements. As a result, Town officials may have paid more than necessary to procure these professional services and the paver. Additionally, the Town paid a contractor $6,000 prior to services being rendered without the legal authority to do so. This and two additional payments to the contractor, totaling $18,000, did not follow proper claim voucher processing procedures. Making payments prior to services being rendered or goods being delivered increases the risk that a vendor could collect payment and then not deliver the agreed upon services. Furthermore, the practice of making payments outside of the normal claim voucher process increases the risk of unauthorized or inappropriate payments being made and not detected in a timely manner.
During our audit period, Town officials donated approximately $24,000 in Town funds to outside service organizations. We believe that $10,000 of the donations were not appropriate because they were for events considered social in nature, which did not further legally authorized Town purposes. While some of these monies were for allowable youth programs promoting a Town purpose, the Town did not have a written contract with the organization providing the service, as required by law.
