Loading...
Findings and Recommendations f II. .. II. Ii. .. .. '- TOWN OF WAPPINGER, NEW YORK FINDINGS AND RECOMMENDATIONS DECEMBER 31. 2005 i.. .. .. ... II .. ... .. ill ... ... .. .. II .. .. TOWN OF WAPPINGER, NEW YORK TABLE OF CONTENTS DECEMBER 31. 2005 .. DESCRIPTION PAGE(S) .. Independent Auditors' Report ...... ............. ............... ....... ........................................ ........... ......... .....1 .. Schedule of Findings and Recommendations ................ ........................... .......... ......... ........ ........ 2-5 .. Town of Wappinger Responses to Audit Findings and Recommendations ....................................6 .. .. ... .. II ... ... ill - 1M .. III ~~ Beechwood Office Park SEDORE & COMPANY 2678 South Road, Suire 101 Poughkeepsie, NY 12601 [,I 845,485,5510 t,,, 845,485.5547 h,M!ii 845,897,1040 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 I/!!!cs /, ,\,'t/I>i", /1:, ('I'I M,!!i: S oS!!!!i''''!I, (1~.1 j./!!!i" r !.l'l!crio, /1:, (P.l l.!1J{!,1 ;\1. l!dllll!~dll, (}~.1 A~n/..'ll r /i";/.I'{,lI, C/~"I .. i.. Hill/I'!!, cr., (hlldc., R. fI"I', II', U:J .. .. In planning and performing our audit of the financial statements of the Town of Wappinger, New York for the year ended December 31,2005, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. III III During our audit we became aware of matters that are opportunities for strengthening internal controls and operating efficiency. The schedule that accompanies this letter summarizes our findings and recommendations regarding those matters. .. 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. .. Ii. ~~ ~ ~fdl cfft'!:, Poughkeepsie, New York December 7, 2006 III .. .. III .. .. Large Firm Expertise,.- Local Firm Service 1 .. { iii II TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS FOR THE YEAR ENDED DECEMBER 31.2005 " iii .. OTHER MATTERS: CURRENT YEAR FINDINGS Findinf! 1 - Escrow Record keepinf! II. Findinf!: During the audit we reviewed the escrow subsidiary ledgers and our test work revealed the following; i. .. . Escrow subsidiary ledgers indicated that the Town held $622,325 at year end and the general ledger indicated that Town only had $551,766 for a difference of$70,559. . 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; . Funds for road inspection accounts and escrow accounts were intermingled; . Several escrows indicated debit/negative balances (as noted in prior year finding number 1). iii iii Cause: There existed a lack of communication between the Planning Department and the Comptrollers Office regarding fees charged to individual escrows. Individual schedules were not updated. Some invoices were coded incorrectly. II .. Effect: The Town is paying for fees that should be taken from escrow accounts. If not reconciled the Town may not be able to recover these fees from the rightful applicant. III III Recommendation: Escrows schedules need to be updated and 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. .. Findinf! 2 - Over Expended Budf!et ... Findinf!: In the General Fund, all governmental function categories were over expended. In the Highway Fund, total appropriations were over expended, and the resulting deficit exceeded the amount of fund balance appropriated for 2005. One district in the Water Fund incurred a deficit of $79,701, due to an unanticipated increase in expenditures, however only $33,000 of fund balance was appropriated, when over $150,000 was available to be appropriated. One Lighting District was over expended $6,642, creating a deficit fund balance of $(2,582). iii .. .. 2 ... .. .. TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31. 2005 ilia OTHER MATTERS: .. CURRENT YEAR FINDINGS Findin22 - Over Expended Bud2et (Cont'd) .. .. Cause: Budgets were not adhered to during the year. Although, in most cases, additional revenue or fund balance was available to offset increases in expenditures, such budget modifications were not made during the year. ill Effect: Over expended budgets and deficit fund balances could cause significant cash shortages in the future. }; .. 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. .. iii .. The Town should consider implementing a purchase order system to control the flow of contemplated expenditures and ensure that budget limits are not exceeded. III OTHER MATTERS: PRIOR YEAR FINDINGS - CONTINUING: 1M Findin2 1 - Buildin2 Department Procedures i .. Findin2: During the audit we tested revenue recording and collection in the Building department. Our test work revealed the following: ill . The clerks cannot enter receipts simultaneously; . Ifreceipts are received after 3pm, cash is stored in unlocked file cabinet until the following day, which are then given to Town Clerk; . Daily receipts are not reconciled with the system-generated monthly report; .. .. .. 3 .. .. It. TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31. 2005 III OTHER MATTERS: ... PRIOR YEAR FINDINGS - CONTINUING: Findin2 1 - Buildin2 Department Procedures - Cont'd .. Cause: The system does not allow for does not allow for more than one person to be using it at a time. Monthly cash receipts report are difficult to reconcile due to timing of deposits and re-entering of receipts. , .. ill. Effect: The system is not being used to develop the monthly reports which are used to document receipts transferred from the Town Clerk's office to the Accounting Department. Therefore fee collections as recorded in the Building Department software could be different with that shown on the monthly reports. III III 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. iiIIIIl .. .. Findin2 2 - Escrow Funds .. Findin2: Payments have been made in excess of escrow amounts collected resulting in excess payments to individual proj ect owners/developers. 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 some cases the disbursements exceeded the escrow collected. .. ill ... Effect: Unanticipated liabilities could be incurred by the Town for which no revenues/funds had been provided. ... .. 4 .. III III TOWN OF WAPPINGER, NEW YORK SCHEDULE OF FINDINGS AND RECOMMENDATIONS, CONT'D FOR THE YEAR ENDED DECEMBER 31. 2005 III III OTHER MATTERS: PRIOR YEAR FINDINGS - CONTINUING: Findin22 - Escrow Funds. Cont'd .. III Recommendation: We note that the Town Board authorized legislation during 2002 which provided for policies and procedures to ensure that the Town does not subsidize applicant review costs. However we continue to note that as of December 31, 2005 some debit balances remain, amounting to $82,950. We recommend that the Town continue to review the projects involved, determining collectibility of these amounts and make adjustments as necessary. .. ... Status of Prior Year Findin2S: SatisfiedIN 0 Lon2er Applicable: - Prior Year Findin2. Vacation Time #1 .. III .. ill .. .. .. II. .. ilia 5 ilia ~t" ~~ SEDORE & COMPANY POBox918 62 East Main Street Certified Public Accountants, pc. Wappingers Falls, NY 12590 t"1 845.297.1111 Fax 845.297.1432 Poughkeepsie 845.485.5510 Bet/roil 845.831.0542 www.sedoreco.com August 2, 2005 Joseph Ruggiero, Supervisor Town of Wappinger 20 Middlebush Road Wappingers Falls, New York 12590 R\"'":r' C,\",' SLP' >j H 'lnn~ r.:.. t,J.~ L.vv.J SUPEF, TOWN Or JtlIlln L Sedore, Jr, CPA Mark S. O'S,,!!il'rlll, CPA Jaflles F Lmerio, JI:, C1'l1 Linel, />d. HtlIwig'lIl, CPA KareJl T HilIlsm, Cf;4 We are pleased to confirm our understanding of the services we are to provide the Town of Wappinger, New York for the year ended December 31, 2004. We will audit the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information, which collectively comprise the entity's basic financial statements, of the Town of Wappinger as of and for the year ended December 31,2004. The document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audit of the financial statements upon which we will provide an opinion in relation to the basic financial statements 1. Combining Balance Sheet - Non-Major Governmental Funds 2. Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Non-Major Governmental Funds Additionally, the document we submit to you will include the following supplementary information required by generally accepted accounting principles that will be subjected to certain limited procedures, but will not be audited: 1. Management's Discussion and Analysis 2. Budgetary Comparison In'formation Audit Objectives The objective of our audit is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with U. S generally accepted accounting principles and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the financial statements taken as a whole. Large Firm Expertise"" Local Firm Service Our audit will be conducted in accordance with U.S. generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of accounting records of the Town of Wappinger and other procedures we consider necessary to enable us to express such an opinion. If our opinion on the financial statements is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. We will also provide a report (that does not include an opinion) on internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. This report will include a statement that the report is intended solely for the information and use of the audit committee, management, and specific legislative or regulatory bodies and is not intended to be and should not be used by anyone other than these specified parties. Management Responsibilities Management is responsible for establishing and maintaining internal control and for compliance with laws, regulations, contracts, and agreements. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Management is responsible for making all financial records and related information available to us. We understand that you will provide us with such information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will advise in the preparation of your financial statements, but the responsibility for the financial statements remains with you. As part of our engagement, we may propose standard, adjusting, or correcting journal entries to your financial statements. You are responsible for reviewing the entries and understanding the nature of any proposed entries and the impact they have on the financial statements. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting, the selection and application of accounting principles, and the safeguarding of assets. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period 2 presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud, or illegal acts affecting the government involving (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud or illegal acts could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud or illegal acts affecting the government received in communications from employees, former employees, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws and regulations and for taking timely and appropriate steps to remedy any fraud, illegal acts, violations of contracts or grant agreements, or abuse that we may report. As part of the audit, we will prepare a draft of your financial statements and related notes. In accordance with Government Auditing Standards, you will be required to review and approve those financial statements prior to their issuance and have a responsibility to be in a position in fact and appearance to make an informed judgment on those financial statements. Further, you are required to designate a qualified management-level individual to be responsible and accountable for overseeing our services. Audit Procedures-General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors, fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. 3 Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also require certain written representations from you about the financial statements and related matters. Identifying and ensuring that the Town of Wappinger complies with laws, regulations, contracts, and agreements is the responsibility of management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the Town of Wappinger' s compliance with applicable laws and regulations and the provisions of contracts and agreements. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion. Audit Procedures-Internal Controls In planning and performing our audit, we will consider the internal control sufficient to plan the audit in order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing our opinions on Town of Wappinger' s financial statements. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Tests of controls are required only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we will inform the governing body or audit committee of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by Government Auditing Standard'!. 4 Audit Administration, Fees, and Other We understand that your employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any invoices selected by us for testing. The audit documentation for this engagement are the property of Sedore & Company C.P.A.'s P.C. and constitute confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to the New York State Comptroller's Office or its designee, a state agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. certain government regulators pursuant to authority given to it by law or regulation. If requested, access to such workpapers audit documentation will be provided under the supervision of Sedore & Company personnel. Furthermore, upon request, we may provide photocopies of selected workpapers audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. We expect to begin the fieldwork portion of the audit on or about August 15, 2005 and have a draft report available on or about September 30, 2005. Our fee for these services will be according to our proposal dated December 11, 200 I sent to you under separate cover. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports and letters of comment received during the period of the contract. Our July 31, 2003 peer review report, letter of comment and response to letter of comment accompanies this letter. We appreciate the opportunity to be of service to Town of Wappinger and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. V ~1=Y truly yours, I . ..: Jr~I!(L )J/~ \~j~ Lmda HannIgan, c.P.A. I", SEDORE & COMPANY C.P.A's, P.c. 5 . ' ... RESPONSE: This letter correctly sets forth the understanding of the Town of Wappinger. By: Title: Date: o~ 6 ~~ SEDORE & COMPANY Beechwood Office Park Certified Public Accountants, pc. 2678 Sourh Road Poughkeepsie, NY 12601 tel 845.485.5510 fax 845.485.5547 BNIIOII 845.831.0542 www.sedoreco.com September 8, 2005 jallles L Sedore,}i:, CPA Mark S. (X51/lli""'I, C!~'l To the Supervisor and Members of the Town Board Town of Wappinger 20 Middlebush Road Wappingers Falls, New York 12590 .fiunes F Lellerio,}i:, C/yj Linda M. /-/allf/ig"'z. C1Y1 Karen T Hawen, C/yj We have audited the financial statements of the Town of Wappinger for the year ended December 31, 2004, and have issued our report thereon dated September 8, 2005. Professional standards require that we provide you with the following information related to our audit. Our Responsibility Under U.S. Generally Accepted Accounting Standards and Government Auditing Standards As stated in our engagement letter for the year ended December 31, 2004, our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute assurance about whether the financial statements are free of material misstatement. Because an audit is designed to provide reasonable, but not absolute, assurance and because we did not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. As part of our audit, we considered the internal control of the Town of Wappinger. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the Town of Wappinger's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provISIons. Large Firm Expertise'"' Local Firm Service Significant Accounting Policies Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the Town are described in Note A to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2004. We noted no transactions entered into by the Town during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were the estimated property tax refunds pertaining to tax certiorari cases and the estimated useful lives of capitalized assets. Management's estimate ofthe refunds of property taxes is generally based on information provided to management by the Town's tax certiorari attorney who handles defense of such cases. The estimated useful lives of capitalized assets were determined through the use of published guides and periods described in NYS finance law. We believe that the use of these bases is reasonable in relation to the financial statements taken as a whole. Audit Adiustments For purposes of this letter, professional standards define an audit adjustment as a correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment mayor may not indicate matters that could have a significant effect on the Town's financial reporting process (that is, cause future financial statements to be materially misstated). In our judgment, none of the adjustments we proposed, whether recorded or unrecorded by the Town, either individually or in the aggregate, indicate matters that could have a significant effect on the Town's financial reporting process. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. 2 . Consultation with Other Indeoendent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Town's financial statements or a determination ofthe type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Issues Discussed Prior to Retention of Independent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Town's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our relationship. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. This information is intended solely for the use of the Town of Wappinger, and management of the Town of Wappinger and is not intended to be and should not be used by anyone other than those specified parties. Very truly yours, ! -1 ! . Jf/( tLU v \_ C'?7'/'OC.'L.-""/1 I /7 .7.1 - > v r L . I 'H :.., - ~ v Sedore and Company, C.P.A.'s, P.C. .., -'