Loading...
2007 Findings and Determinations III .. .. ... ... ... ... TOWN OF WAPPINGER, NEW YORK FINDINGS AND RECOMMENDATIONS DECEMBER 31. 2007 .. III .. ... III III - III III .. - .. III .. .. .. .. TOWN OF WAPPINGER, NEW YORK TABLE OF CONTENTS DECEMBER 31. 2007 lilt DESCRIPTION PAGE(S) .. Independent Auditors' Report .. ......... ................. ............ ....... ........... ........................................ ..... ...1 .. Schedule of Findings and Recommendations and Town of Wappinger Responses .....................................................................................2-9 .. .. .. .. .. .. .. .. - - - .. ~~ Beechwood Office Park SEDORE & COMPANY 2678 South Road, Suite 101 Poughkeepsie, NY 1260 I lei 845.485.5510 r.l\ 845.485.5547 11,/,/1Ii 845897.1040 www.sedoreco.com .. III Certified Public Accountants, pc. III To the Supervisor and Members of the Town Board Town of Wappinger, New York 20 Middlebush Road Wappingers Falls, New York 12590 '/<lfllt'S I. .\crlon', !I:, (l'A 11/,lIk S. (iSII/III'dIl, Uj, jrlllll'S F Il'ill'J'/I!, II:. r.VJ Lindd AI. 1-{,lJl!lI~r.:,iltl, CP,j !\~nnl r 1111"-\('11, c'j~'l .. f<:(/i'cy I. IinN!'u. (.1'11 Chlrll'.' /I. III/I'. F. Ujl III III In planning and performing our audit of the financial statements of the Town of Wappinger, New York for the year ended December 31, 2007, we considered Town's internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. Accordingly, we do not express an opinion on the effectiveness of the Town's internal control. .. III However, we noted matters involving internal control and its operation that we consider to be a significant deficiency under standards established by the American Institute of Certified Public Accountants. Significant deficiencies involve matters coming to our attention relating to the design or operation of internal control that, in our judgment, could adversely affect the Town's ability to initiate, record, process, summarize and report financial data with the assertions of management in the financial statements. The significant deficiencies are summarized in Section 1. III .. During our audit we became aware of matters that are opportunities for strengthening internal controls and operating efficiency. Section II summarizes our findings and recommendations regarding those matters. III III We will review the status of these comments during our next engagement. We have previously discussed many of these comments and suggestions with Town personnel, and we will be pleased to discuss them in further detail, at your convenience, and to perform any additional study of these matters, or to assist you in implementing the recommendations. .. We would like to thank Christopher Colsey, Supervisor, Fredrick Awino, Town Accountant and Town staff, for their assistance. III This report is intended solely for information and use of the Board, management, and staff, and is not intended to be and should not be used by anyone other than the specified parties. III .. ~ . ~,CF7I1''S Poughkeepsie, New York December 29,2008, except for Finding 4 which is dated April 30, 2009 .. .. Large Firm Expertise", Local Firm Service III III TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS FOR THE YEAR ENDED DECEMBER 31.2007 filii .. SIGNIFICANT DEFICIENCIES: CURRENT YEAR FINDINGS: , Findin2 1 - General Led2er Reconciliations filii Findin2: Town management is required to reconcile the General Ledger to underlying documentation in order to report accurately to the Town Board, federal and state agencies and for the audited financial statements. During this process management should review each balance sheet line for each fund (cash, investments, receivables, accounts payable, deferred revenues, etc.) and make appropriate adjustments. However, accounting procedures followed failed to provide complete and accurate output necessary for management of the Town's finances and for budgetary control. Further, any material adjustments that the audit finds without management proposing them to the auditors are required to be reported as significant deficiencies of internal control under Statements on Auditing Standards No. 112. .. III IIllI filii Bank accounts were not reconciled timely for any of the Town's accounts. Numerous transactions were not recorded and/or cash transferred appropriately. Numerous errors made by the accounting department were not addressed in a timely manner (ex: payroll amounts were recorded incorrectly and transferred incorrectly all year, causing cash as well as due to's and due from's to become out of balance). Extensive reviews of transactions had to be performed in order to complete the bank reconciliations. The Town's bank account reconciliations were not completed until the end of the audit fieldwork in early November. filii filii filii .. Water and Sewer Revenue and Receivable reconciliations were not performed during the year. Revenues in Water & Sewer were overstated by $107,856 and $82,030, respectively. Cause: The Town did not have a bookkeeper for the second half of 2007, who had been responsible for reconciling cash, posting water and sewer payments and recording payroll. The Town also lost its comptroller in January 2008 when year end closing adjustments would have been made. The Town's accounting department was not fully staffed until July 2008. Temporary, part time assistance was not sufficient to both keep abreast of current needs and address backlogged reconciliations. Due to this loss in staffing, the 2007 reconciliations were not performed for over a year. In addition, during 2007, bank accounts were moved from one depository to another and old accounts were kept open which added to the reconciliation load. Further, numerous collections (amounts posted to the general ledger) did not match deposits made at the bank, requiring extensive and time consuming research by the accounting department and the auditors. .. ... filii - .... 2 - lilt lilt TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 lilt Findine: 1 - General Lede:er Reconciliations (Continued) lilt Effect: Unreconciled cash accounts affects every aspect of the General Ledger and makes it virtually impossible to understand the Town's financial position at any given point in time. Lack of current accounting information can allow for undetected misappropriation of funds and for poor decision-making as reliance is placed on incorrect financial data. Therefore, the audit of the Town's financial statements is significantly delayed. lilt lilt .. Recommendation: We note that the Town has implemented new cash reconciliation procedures and recommend that emphasis continues to be placed on performing these reconciliations on an on-going and timely basis. Cash reconciliations should be performed, completed and adjustments made to the General Ledger no later than 60 days after the month end. The Town needs to review the Water & Sewer revenues and receivables and reconcile quarterly. All general ledger balance sheet accounts need to be reviewed for accuracy before the audit begins in order to get a timely audit report. lilt lilt lilt Response: The Town of Wappinger updated its accounting software with utilization effected January 1, 2009 to more efficiently and accurately record related entries. Further, the Town incurred a shortfall in departmental personnel which was rectified in 2008. lilt iIlIIli PRIOR YEAR FINDINGS - CONTINUING: Findine: 2 - Escrow Recordkeepine: .. Findine:: During the audit we reviewed the escrow subsidiary ledgers and our test work revealed the following; . As part of an on-going analysis of Escrow subsidiary ledgers the Town has documented $634,912 of a reported $677,691 in escrow liabilities, amounting to a difference of $42,779. . Some escrow accounts are identified by more than one name; . Several invoices tested were not posted to subsidiary (individual) escrow accounts. The money was rightfully charged to the Trust and Agency Fund; . Comments related to escrows have been made since 1993; .. .. .. .. Cause: There has existed a lack of communication between the Planning Department and the Comptrollers Office regarding fees charged to individual escrows. Individual schedules were not always updated 3 - - III III TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 .. Findin22 - Escrow Recordkeepin2 (Continued) .. and invoices were coded incorrectly. Reconciliations between the Planning Department and the Comptroller's Office were not performed regularly so that these errors were not caught on a timely basis. Effect: The Town is responsible for payment of fees that should be taken from escrow accounts. If not reconciled timely, the Town may not be able to recover these fees from the rightful applicant. Recommendation: The analysis of Escrows schedules should be completed and be updated on an on-going basis with all charges posted to individual escrow schedules. Names of escrows should be consistent, such as code and name of property, to avoid confusion on posting charges. Escrow subsidiary ledgers should be reconciled with the general ledger on a monthly basis. .. .. .. .. Response: The Town appointed a part-time Escrow Clerk, as qualified by Civil Service, to handle the clerical administration of the escrow records under the direction of the Town Accountant. .. Findin23 - Escrow Funds Ne2ative Balances .. Findin2: Payments have been made in excess of escrow amounts collected resulting in excess payments to individual project owners/developers. As of December 31,2007 126 escrow accounts indicated debit/negative balances totaling $171,058, of a total of 362 accounts amounting to $677,691. .. .. Cause: The Town collects escrow funds to ensure that costs incurred by the Town, while projects or subdivisions are being considered by the Planning Board, are borne by the applicants. The Town maintains records for each project/applicant so that balances can be monitored; however, in numerous cases the disbursements exceeded the escrow collected. .. Effect: Unanticipated liabilities could be incurred by the Town for which no revenues/funds have been provided. .. .. Recommendation: We note that the Town Board authorized legislation during 2002 and 2006 which provided for policies and procedures to ensure that the Town does not subsidize applicant review costs. However, we note that debit balances have not significantly changed from 2006 to 2007, ($184,812 to $171,058). Along with the reconciliations noted above, we recommend that the Town make the collection of these balances a priority, reviewing the projects involved and determining a course of action for collection of each account. .. ... lIIllII 4 - .. .. TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 .. Findine: 3 - Escrow Funds Nee:ative Balances (Continued) ill Response: The Town has authorized the Town Supervisor, Town Accountant and/or Attorney to the Town to pursue any non-reconciled accounts through a formal collection process. ill III OTHER FINDINGS: CURRENT YEAR FINDINGS: Findine: 4 - Bid Documentation .. Findine:: As part of our audit we reviewed compliance with the competitive bidding process. Documents pertaining to the documentation of the emergency nature of certain Camwath mansion and carriage house expenditures were not centrally filed and extensive inquiries were needed to obtain them. .. .. Cause: Accounting department files did not have full descriptions of what was done in order to relate to authorizations and pertinent information had to be obtained from various other departments. .. Effect: Incorrect conclusions could be drawn if files are incomplete. .. Recommendation: At the time of these expenditures, the Town had established the office of Comptroller who authorized expenditures, and whose files should include sufficient documentation to demonstrate compliance with the Town's procurement policy. Since the Town has eliminated the office of Comptroller, the Town should authorize the Accounting Department or the Town Clerk's Department as the location of compliance files and those files should include all reports, minutes, correspondence from consultants and vouchers sufficient to document compliance with the policy. .. .. .. Response: The Town accepts the comments provided in respect to a centralized method of maintaining records, and has determined the venue to be the Town Clerk's office. The Town will work towards ensuring all original records lie in the possession of the Town Clerk. The Accounting office shall maintain copies of financial records necessary for their daily operations. The Town recognizes that the specific records reviewed were collected from different areas of Town Hall. .. .. .. .. 5 .. III III TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 III Findin2 5 - Comoensated Absence Liabilitv Findin2: During our audit we recalculated the Town's liability based on records maintained and provided by the Town. We also tested the reasonableness of these records. Our test work revealed the following: ... WIll .. . Inconsistencies existed between records of vacation, sick, and personal time submitted by Town employees and records maintained by the Town used to calculate the Compensated Absence Liability. . Ending balances of vacation time in the Highway Department do not appear reasonable when recalculating the balance using last years balance, adding current year earned time and subtracting current year used time. .. III Cause: Records for used vacation, sick and personal time are not being properly maintained and verified. ... Effect: The balance in the Compensated Absence Liability increased $52,652 in the current year. The inaccuracies in calculating this balance leaves the Town either over or understating the liability. ... Recommendation: The Town needs to verify the beginning balances of vacation, sick, and personal time for each eligible employee, and verify the time earned and used during the current year. Calculations need to be verified by management. ... .. Resoonse: The Town has maintained adequate records for employees' vacation, sick and personal time throughout 2008, and will continue to follow such practice. Opening balances will be verified and balances updated accordingly. For the majority of fiscal year 2007, the Town lacked a Bookkeeper who held assigned duties related to this function. III .. Findin2 6 - Recreation Deoartment Revenue Trackin2 Findin2: During our audit, we performed a test of the revenue collection process for the Recreation Department. We compared the amounts paid to the appropriate fee schedule in the 2007 recreation guide and compared the amount noted as paid per the receipt book to the amount remitted to the Town Clerk. In one instance, it was noted that $300 was paid for two campers to attend the Extended Hours .. III .. - 6 - .. .. TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 .. Findine: 6 - Recreation Department Revenue Trackine: (Continued) camp. However, the rosters noted one child being signed up in Extended Hours and the other in Regular Hours, which may have been an error. If it was not an error, then the resident would have been overcharged by $50 for the camps. The rosters do not note the receipt number and amount/date paid associated with the camper to help further identify where the problem occurred. Additionally, controls would be further increased if the Town Clerk was receiving the payments as opposed to the Recreation Department. .. lilt III ... Cause: Current controls are not strong enough to detect incorrect fees being charged and there is no additional tracking of payment amounts on the Excel roster spreadsheets. ill Effect: Incorrect fees may be charged and the decentralized revenue collection increases the opportunity for fraud to occur. .. Recommendation: We recommend that the Excel roster spreadsheets are expanded to track the receipt numbers, amount paid, and the date paid to allow for better payment tracking. Also, we recommend that the Town Clerk be the receiver of the payments for recreation fees as opposed to the Recreation Department. The Town Clerk could issue the resident a ticket showing that the fees were paid and then could bring this to the Recreation Department to begin the registration process. lilt .. Response: The Town will review this recommendation with the departmental head with a view to implementation. .. PRIOR YEAR FINDINGS - CONTINUING: .. Findine: 7 - Over Expended Bude:et Findine:: One district in the Water Fund had a deficit fund balance of $11,999 at year-end. .. .. Cause: Budgets were not adhered to during the year. Generally, additional revenue or fund balance is available to offset increases in expenditures. In this district, fund balance was not available to cover the increased expenditures. IiIrI .. .. 7 - .. .. TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 II Findinl! 7 - Over Expended Budl!et (Continued) ... Effect: Over expended budgets and deficit fund balances could cause significant cash shortages in the future .. lilt Recommendation: The Town Board should require department heads to review revenue and expense reports monthly to ensure that their department is operating within its authorized budget and submit requests to the Comptroller's office for increases in appropriation lines when they anticipate additional expenditures. After review the Comptroller would request approval of the budget modification by the Town Board, or the expenditures would not be incurred. In addition, the Town should consider implementing a purchase order system to control the flow of contemplated expenditures and ensure that budget limits are not exceeded. .. II II Response: The Accounting office will liaise with departmental heads to review monthly revenue and expense reports to monitor spending and ensure expenditures are within the budget. Further, all expenditures exceeding the budgeted amount shall result in a letter of explanation to the Town Board as developed by the Department Head. The Town Board will receive monthly line item budget reports and shall hold quarterly budget reviews as part of a public meeting. .. .. .. Findinl! 8 - Buildin!!: Department Procedures Findinl!: During the audit we tested revenue recording and collection In the Building Department. Our test work revealed the following: .. .... . The clerks cannot enter receipts simultaneously; . Receipts were not remitted to the Town Clerk daily. Cash is stored in unlocked file cabinets. .. Cause: The system does not allow for more than one person to be using it at a time. Daily cash receipts are not remitted to the Town Clerk on a daily basis. .. .. ... 8 ... .. ... TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31.2007 .. Findin2 8 - Buildin2 Department Procedures (Continued) .. Effect: Cash reports could differ from actual receipts collected. Receipt numbers could be duplicated or voided. Receipts not remitted daily could be missappropriated. .. Recommendation: The Town should restructure where the cash is being received for the Building Department. The Building clerk could produce a fee statement which is paid at the Town Clerk's office and a receipt given. The Building Department should then use the SCA software "Cash Receipts Report" to create a monthly report and reconcile to the Town Clerk's collections as shown on his monthly report to the Supervisor. Response: The Town will implement this recommendation. .. II. .. Findin2 9 - Parkland Fund Transactions .. .. Cause: We noted that use of parkland funds were not recorded as expenditures during the year, amounting to $28,240. Use of park lands funds were charged directly to the parkland fund and not shown as expenditures in the General Fund with a corresponding recording of Other Culture and Recreation Revenue. Findin2: .. Effect: General Fund revenues and expenditures were understated for the year. III Recommendation: Staff should be advised to code all recreation disbursements to the appropriate recreation expenditure line and not directly to the parklands funds. .. Response: Controls have been put into place to ensure expenditure coding is done correctly at all times. .. .. Status of Prior Year Findin2s: None Were Satisfied OR No Lon2er Applicable .. IiIlII III. 9 ..