State auditors find issues with three area fire districts

Story by Dan Hust
SULLIVAN COUNTY — September 10, 2013 — Three local fire districts were the focus of NYS Comptroller’s Office audits in the past month: Claryville, Grahamsville and White Lake.
Claryville
Auditors reviewed financial records from January 1, 2012 to May 3, 2013 and found no wrongdoing.
However, they did note that Claryville Fire District’s Board of Commissioners had not adopted an investment or procurement policy, nor had it ensured proper financial reporting procedures.
“As a result,” auditors wrote, “although the treasurer did submit monthly financial reports to the board, they were not complete because the treasurer had not reconciled the cash and bank balances.”
The treasurer, too, was criticized by auditors for the lack of bank statement reconciliations. In fact, when the treasurer attempted to compile that information for the state, he found that the cash balances on the previously-filed 2012 annual financial report were too high, by about $4,700.
Auditors also discovered a dozen “missing” check numbers but later learned that those checks had been voided without being recorded.
Thirty-nine disbursements totalling nearly $30,000 were also selected for review and were found to be for proper purchases.
Auditors, however, noted that the board does not conduct an annual audit of the treasurer’s records regarding a general fund budget of just over $181,000.
Thus they recommended:
• The board should ensure formal written policies and procedures are in place for financial recording and reporting
• The board should adopt an investment and procurement policy
• The treasurer should reconcile the district’s accounting records to the bank statements on a monthly basis and follow up on any differences
• The board should perform – or contract for – an annual audit of the treasurer’s records.
Board Chairman Charles Breiner replied to the state that the commissioners agreed with its findings and will develop policies and procedures for 2014, to be reviewed annually. As of October, the treasurer will monthly reconcile bank statements, he added, and the board is investigating the cost of conducting an independent audit in 2014.
Grahamsville
Auditors faulted the Grahamsville Fire District’s Board of Commissioners for insufficiently developing the 2009-2011 budgets.
Specifically, the state found that expenditures exceeded budget estimates by 22 percent every year because during those three years, the board opted to use surplus funds to pay off debt earlier than anticipated.
While that avoided further interest payments, auditors considered the method inappropriate.
Auditors also cited the surplus itself, noting that in 2009, the board increased the tax levy by more than 24 percent to help fund a $400,000 equipment purchase.
By 2012, when expenses returned to historic norms, the tax levy nevertheless remained the same and thus generated a $57,000 surplus.
The board chose to transfer $10,000 of that into an existing reserve account, but auditors indicated no formal policies on that fund could be found.
Meanwhile, the surplus ballooned, and the reserve balance exceeded $175,000, even though in 2013 the tax levy and operational expenditures slightly increased.
They warned the board that continuing on this path will take the surplus “to unreasonably high amounts” and that the taxpayer will be unnecessarily burdened.
Auditors therefore recommended:
• The board develop accurate budgets that include all known revenues and expenditures, along with identifying future capital maintenance and acquisition needs and financing requirements
• The board use the surplus in a manner that benefits taxpayers (i.e., increasing reserves, reducing taxes, paying down debt)
• The board ensure that reserve funds are established, funded and used in accordance with law.
Board Chairman Michael Garigliano replied to the state that the board accepted the findings and is drawing up the required corrective action plan, available for review at the Neversink Town Hall in Grahamsville.
“While accepting the findings, I feel that the reserve funds were properly established, although at this time we have not found the resolutions, under the direction of counsel,” he added. “These funds were established for a specific purpose and subject to permissive referendum. There was no public opposition, and monies [were] spent accordingly.”
White Lake
Auditors said that the White Lake Fire District’s Board of Commissioners did not properly develop annual operating budgets between 2008 and 2012.
For three of those years – 2008, 2010 and 2012 – expenses exceeded income, forcing the district to utilize 54 percent of its surplus to stay in the black. As a result, the surplus (a buffer for unanticipated expenses) has declined from around $71,000 in 2008 to $32,000 in 2012.
Auditors faulted the board for not monitoring the district’s financial trends more closely, blaming in part the treasurer, who was not providing budget performance reports but just monthly bank account balances.
“Without this important information,” auditors wrote, “the board could not effectively monitor the budget and make adjustments as necessary.”
They did acknowledge that the district covered all the excess expenses, but they warned that the situation should not be allowed to continue.
As a result, they recommended:
• The board should consider historic trends, as well as identified current and future needs, when developing budget estimates that are consistent with actual revenues and expenditures
• The treasurer should provide the board with budget performance reports on a monthly basis
• The board should monitor the budget throughout the year and amend budget lines before appropriations exceed estimates.
Board Chairman Richard Hendrickson provided an unusually brief and vague reply to the state, simply noting that “the recommendations noted in your draft report have been discussed with appropriate staff, and corrective procedures have [been] implemented.”
The specific procedures were not outlined in the reply.