Professional Documents
Culture Documents
OF THE
Town of Rochester
Financial Condition and
Highway Department Payroll
Report of Examination
Period Covered:
January 1, 2010 July 31, 2015
2015M-324
Thomas P. DiNapoli
Table of Contents
Page
AUTHORITY LETTER
EXECUTIVE SUMMARY
INTRODUCTION
Background
Objectives
Scope and Methodology
Comments of Local Officials and Corrective Action
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4
4
4
5
FINANCIAL CONDITION
Budgeting
Operating Results
Recommendations
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6
7
9
10
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11
14
16
17
APPENDIX
APPENDIX
APPENDIX
APPENDIX
APPENDIX
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22
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A
B
C
D
E
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EXECUTIVE SUMMARY
The Town of Rochester (Town) is located in Ulster County and has a population of approximately
7,300 residents. The Town provides various services to its residents, including street maintenance and
improvements, snow removal and general government support. The Town is governed by an elected
five-member Town Board (Board), composed of four Board members and a Supervisor, responsible for
the general management and control of Town financial affairs. The Supervisor, as chief fiscal officer
and budget officer, is responsible for maintaining accounting records, providing financial reports to
the Board and preparing the tentative budget for Board approval. The Town has an elected Highway
Superintendent who is responsible for overseeing all highway operations.
For 2015, the Towns general fund budgeted appropriations were $1.9 million and highway fund
budgeted appropriations were $1.4 million.
Scope and Objectives
The objectives of our audit were to determine if Town officials established effective internal controls
over Town finances and Highway Department (Department) payroll. We examined the Towns
financial records for the period January 1, 2010 through July 31, 2015. We limited our scope for the
examination of Department payroll records to the period January 1, 2014 through June 30, 2015. Our
audit addressed the following related questions:
Did the Board adopt realistic budgets that were structurally balanced and take appropriate
actions to maintain the Towns fiscal stability?
Are internal controls over payroll and the maintenance of leave records for Department
employees adequately designed and operating effectively?
Audit Results
The Board did not adopt structurally balance budgets from 2010 through 2014, resulting in a $1 million
(91 percent) decline in general fund balance to $95,000. In addition, highway fund balance declined
by $359,000 (96 percent) over these years, resulting in an ending fund balance about of $15,000. In
2015, the Board budgeted to appropriate $150,000 of general fund balance to finance operations.
However, there was only approximately $95,000 available, resulting in the general fund beginning
2015 with a budgetary deficit of $55,500. In 2015, the general fund will likely have an operating deficit
of approximately $46,000, reducing the general fund balance to less than $50,000.
Further, tentative 2015 highway fund operating results show a deficit of approximately $17,000. As a
result, the highway fund may have problems funding operating costs.
Town officials also need to establish comprehensive policies and procedures for preparing payroll
and maintaining leave time accruals for Department employees and improve their oversight of this
process. As a result of these weaknesses, we question whether certain overtime should have been paid.
In addition, we found that some employees leave accrual records were not accurately maintained,
resulting in four employees leave accruals being overstated by 148.85 hours valued at $3,957, while
five employees leave accruals were potentially understated by a total of 54.1 hours valued at $1,351.
Finally, a seasonal employee was paid $1,350 for 54.4 hours to which he may not have been entitled.
Comments of Town Officials
The results of our audit and recommendations have been discussed with Town officials, and their
comments, which appear in Appendix A, have been considered in preparing this report. Except as
specified in Appendix A, Town officials generally agreed with our recommendations and indicated
they planned to initiate corrective action. Appendix B includes our comment on an issue raised in the
Towns response letter
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Introduction
Background
Objectives
Scope and
Methodology
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Financial Condition
The Board is responsible for making sound financial decisions that
are in the best interests of the Town and the taxpayers who fund its
operations. A towns financial condition reflects its ability to provide
and finance services on a continuing basis. A town is considered to
have sound financial health when it can consistently generate sufficient
revenues to finance anticipated expenditures and maintain sufficient
cash flow to pay bills and other obligations when due without relying
on short-term borrowing. It is essential for the Board to establish
detailed budget policies that help ensure the adoption of realistic and
structurally balanced budgets and establish goals for fund balance
levels so that recurring revenues finance recurring expenditures.
The Board did not adopt structurally balanced budgets over the
five years from 2010 through 2014. Over that period, the Board
appropriated $1.4 million of fund balance, which resulted in planned
operating deficits totaling approximately $1.3 million. This led to a
$1 million (91 percent) decline in general fund balance to $95,000
as of December 31, 2014. Similarly, the highway fund experienced
operating deficits of $648,000 over these same years as a result of
spending more than the amounts budgeted each year. This led to a 96
percent decline in highway fund balance to approximately $15,000 as
of December 31, 2014.
For 2015, the Board appropriated $150,000 of general fund balance
to finance operations. However, there was only about $95,000 of
available fund balance to appropriate, resulting in the general fund
beginning 2015 with a budget deficit of approximately $55,000.
Tentative operating results for 2015 indicate that the general fund
experienced an operating deficit of approximately $46,000, reducing
the general fund balance to less than $50,000. For 2015, the highway
fund incurred a tentative operating deficit of $17,000, which will
result in a highway fund balance deficit of approximately $2,000.
Budgeting
2011
2012
2013
Estimated Revenues
$1,678,200
$1,725,115
$1,817,166
$1,745,364
$1,805,029
$8,770,874
Actual Revenues
$1,573,977
$1,648,458
$1,524,731
$1,534,508
$1,583,602
$7,865,276
Revenue Shortfall
($104,223)
($76,657)
($292,435)
($210,856)
($221,427)
($905,598)
6%
4%
16%
12%
12%
10%
Percentage
2014
Totals
As with the general fund, the highway fund budget was not based
on operating results of previous years. Rather, the Superintendent
carried forward the previous years budget, making adjustments
for contractual payroll increases. As a result, appropriations were
overspent each year from 2010 through 2014, ranging from 13 percent
to 25 percent, as shown in Figure 2.
2011
2012
2013
2014
Totals
Appropriations
$1,315,543
$1,302,318
$1,383,327
$1,371,159
$1,419,474
$6,791,821
Actual Expenditures
$1,643,954
$1,562,054
$1,649,940
$1,669,794
$1,603,426
$8,129,168
$328,411
$259,736
$266,613
$298,635
$183,952
$1,337,347
25%
20%
19%
22%
13%
20%
Overspending
Percentage
77
2011
$1,389,203
$1,096,588
$969,563
$730,527
$313,255
Operating Deficit
($292,615)
($127,025)
($239,036)
($417,272)
($218,115)
$1,096,588
$969,563
$730,527
$313,255
$95,141
2012
2013
2014
$663,668
2011
2012
2013
2014
$375,180
$504,874
$370,593
$143,213
($288,488)
$129,691
($134,280)
($227,381)
($128,023)
$375,180
$504,874
$370,594
$143,213
$15,190
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This includes the $2,906 for the 76 hours of on-call overtime pay.
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____________________
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14
The Town employed two secretaries during the audit period. The first secretary
left Town service in March 2015, and the second was employed from March
2015 through the end of our fieldwork.
The CBA also provides that new employees are not allowed to
use vacation leave prior to six months of continuous service.
The above employee was allowed to use 54.5 hours of
vacation prior to six months of continuous service, beginning
in his fifth week of employment.
____________________
5
These errors covered all Department employees and all leave types (i.e., sick,
vacation and personal leave).
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APPENDIX A
RESPONSE FROM LOCAL OFFICIALS
The Local officials response to this audit can be found on the following pages.
The officials response letter refers to an attachment that supports the response letter. Because the
Towns response letter provides sufficient detail of its actions, we did not include the attachment in
Appendix A.
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See
Note 1
Page 22
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APPENDIX B
OSC COMMENT ON THE TOWNS RESPONSE
Note 1
A structurally balanced budget is based on historical or known trends, in which recurring revenues
finance recurring expenditures and reasonable levels of fund balance are maintained. An appropriation
of fund balance is the use of unexpended resources from prior years to finance budget appropriations and
is considered a one-time financing source. The Board did not adopt structurally balance budgets over
the past five years (2010 through 2014), which resulted in planned operating deficits and diminished
fund balances.
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APPENDIX C
AUDIT METHODOLOGY AND STANDARDS
To achieve our audit objectives and obtain valid evidence, we performed the following procedures:
We interviewed Town officials and reviewed Board minutes to gain an understanding of the
Towns budget process.
We reviewed the results of operations and analyzed changes in fund balance for the general
fund and highway fund for the period January 1, 2010 through June 30, 2015.
We compared the adopted budgets to actual operating results to determine if the budget
assumptions were reasonable.
We reviewed revenues and expenditures to identify significant variances and analyze trends
and projected 2015 general and highway fund operating results.
We tested the reliability of the accounting records by reviewing bank statements and canceled
checks and compared them to Towns financial records.
We traced the payroll hours of Department employees to supporting timecard and time sheets
for to determine if payroll reflected the hours worked and followed the CBA.
We traced the overtime hours from payrolls to approved timecards and time sheets and to
supporting documentation to determine if overtime was appropriate, approved and followed
the CBA.
We traced leave time charged from timecards to time and attendance records to verify the
accuracy of records and to determine if the leave accruals followed the CBA.
We traced the payroll checks to the bank statements and canceled check images to determine
payroll accuracy.
We conducted this performance audit in accordance with GAGAS. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe that the evidence obtained
provides a reasonable basis for our findings and conclusions based on our audit objectives.
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APPENDIX D
HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT
To obtain copies of this report, write or visit our web page:
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APPENDIX E
OFFICE OF THE STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENT
AND SCHOOL ACCOUNTABILITY
Andrew A. SanFilippo, Executive Deputy Comptroller
Gabriel F. Deyo, Deputy Comptroller
Tracey Hitchen Boyd, Assistant Comptroller
STATEWIDE AUDITS
Ann C. Singer, Chief Examiner
State Office Building, Suite 1702
44 Hawley Street
Binghamton, New York 13901-4417
(607) 721-8306 Fax (607) 721-8313
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