HomeMy WebLinkAbout1975-1980 RECEIVED
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Town r'-rid 'Southold
REPORT OF EXAMINATION
OF.
TOWN OF SOUTHOLD
OFFICE f'STROLLER
E Ec,
1.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
ALBANY,NEW YORK
C12236
81M-491
EDWARD V.REGAN January 1, 1975 - December 31, 1980
STATE COMPTROLLER Report Filed - December 21, 1981
TO THE SUPERVISOR AND MEMBERS
OF THE TOWN BOARD OF THE
TOWN OF SOUTHOLD
SUFFOLK COUNTY, NEW YORK:
Pursuant to the authority vested in the State Comptroller by Article 3
of the General Municipal Law, we have examined the records, documents and
procedures of the Town of Southold for the period January 1, 1975 through
December 31, 1980 for compliance with various statutes and regulations.
In addition, we have examined the records, documents and procedures
established by the Town of Southold to determine compliance with the
Federal Revenue Sharing and Antirecession Fiscal Assistance Act and regulations
as required by Sections II.C.3 and III.C.3 of the Audit Guide and Standards
for Revenue Sharing and Antirecession Fiscal Assistance Fund Recipients (The Guide)
issued by the U.S. Department of the Treasury. We also compared the data
furnished by the Bureau of Census with the audited records of the Town of Southold
for the period January 1, 1979 through December 31, 1979 as required by
Section II.C.4 of the Audit Guide.
The financial statements of the various funds and account groups of the
Town of Southold for the fiscal years ended December 31, 1975, 1976, 1977, 1978,
1979 and 1980 were audited by independent accountants. The independent accountant
also conducted a financial and compliance audit of federal revenue sharing
funds. Copies of their reports are on file in the town clerk's office.
We noted no instances of noncompliance with the regulations and no
material differences between the data furnished by the Bureau of Census and
the records of the Town of Southold for the year ended December 31, 1979.
Our findings with respect to other aspects of this examination are set
forth in the following pages.
Very truly yours,
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
2.
Town of Southold
C
RESULTS OF EXAMINATION
Financial Accounting and Reporting
Financial Statement Presentation
Accounts Payable
Reserve for Encumbrances
Revenue from State and Federal Aid
Debt Service Fund and Long-Term Debt Group of Accounts
Accounting and Reporting of Federally Funded Projects
Payments Charged to Wrong Fund
Internal Control
Processing of Tax Receipts - Receiver of Taxes
Cablevision Franchise Fees
Deposits not Timely - Trustees of the Freeholders
Payroll Procedures
Vacation and Sick Leave Policy for Chief of Police
C Vehicle Fuel
Fixed Assets: Book Inventory Incomplete
Physical Inventory Not Taken
Inventory of Highway Machinery, Tools and Equipment
Inventory of Repair Parts - Highway Department
Segregation of Duties - Supervisor's Office
Undertakings
Expenditures
Public Advertisement for Bids
Attendance at Conventions
Payments for Equipment Repairs
Secretarial and Office Expenses of Town Attorney
Installment Purchase of Copy Machine
Lack of Sufficient Substantiation for Claim Vouchers
Payments in Support of Local Sports Leagues
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
3.
Town of Southold
C '
Compliance
Purchases of Highway Machinery and Equipment
without Town Board Authorization
Payments of Tax Collections to Town Supervisor
Justice
Moneys not Deposited Timely
Receipt Forms
C
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
Town of Southold
RESULTS OF EXAMINATION
Financial Accounting and Reporting
Financial Statement Presentation
A review of the town's 1980 annual financial report and the records supporting
this report revealed the following:
Accounts Payable - Although none of the town's operating funds showed a
liability for accounts payable at December 31, 1980, a review of claims paid
in January and February, 1981 revealed numerous instances in which goods and
services had been provided to the town in 1980, thereby establishing a
liability at December 31, 1980 that should have been shown on the balance
sheet.
Reserve for Encumbrances - The amounts shown in the reserve for encum-
brances account of the highway and federal revenue sharing funds at Decem-
ber 31, 1980 included items that represented actual liabilities for goods and
services provided to the town in 1980 and, therefore, should have been
classified as accounts payable. Furthermore, nearly one-third of the total
amount in the reserve for encumbrances account in the federal revenue sharing
fund at December 31, 1980 improperly represented moneys appropriated by the
town, not moneys encumbered.
CThe encumbrance of appropriations should be limited to recording commit-
ments in the form of purchase orders, contracts or salary commitments, rather
than obligations represented by goods and services actually received.
Revenue From State and Federal Aid - During the fiscal years ending
December 31, 1979 and 1980, revenues from stake and federal aid were accrued
in the revenue control account when the claims were submitted. However, the
subsidiary revenue accounts from which the town prepared its annual financial
reports were kept on a cash basis, recording these revenues only when the aid
was actually received. As a result, the control and subsidiary revenue
accounts were not in agreement and the revenues appearing in the annual financial
reports were misstated.
When the expenditure of money is the prime factor in determining the
eligibility for aid, the revenues and expenditures should be recorded in the
same period. In addition, the basis of accounting for these revenues should
be the same in both the control and subsidiary accounting records.
Debt Service Fund and Long-Term Debt Group of Accounts - In the annual
financial report for the fiscal year ending December 31, 1980, the long-term
debt group of accounts included $10,000.00 classified as bonds payable and
payments of $10,000.00 of debt principal and $1,050.00 of interest which were
indicated as having been made from the debt service fund. These liabilities
and transactions actually involved bond anticipation notes, the proceeds of
which had been deposited in the general fund and expended for the installation
of street lights.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
5.
Town of Southold
CLong-term improvements financed by debt such as this installation of
street lights should be accounted for in the capital projects fund. Further-
more, the liability for the above mentioned bond anticipation note should
be accounted for in the capital projects fund. The purpose of the general
long-term debt group of accounts is to record only general long-term debt
which is not recorded in the liability accounts of other funds. The debt
service fund is provided to account for the payment of principal and interest
on serial bonds, statutory installment bonds and capital notes, where
appropriate. 07
Accounting and Reporting of Federally Funded Projects
During the year ended December 31, 1980 several programs-'and projects funded by
the federal government such as the community development program, the nutrition pro-
gram, construction of the new town hall annex and others were not accounted for and
reported in the various funds of the town,- but instead were accounted for in supple-
mental cash basis statements.
We recommend that the town establish a separate community development fund.
The other programs and projects mentioned above could be accounted for in existing
funds of the town.
Payments Charged to Wrong Fund
Claims paid from the town-wide general fund during the year ended December 31,
1980 and charged against the taxable property of the entire town, included some of
the costs of maintaining and operating the town police department, such as elec-
tricity costs, even though the town has within it an incorporated village main-
taining its own police department.
The aforementioned expenditures should have been budgeted and charged to the
taxable property of the town outside the village (Town Law, §150) .
Internal Control
Processing of Tax Receipts, Receiver of Taxes
In order to expedite the processing of property tax collections during the
busy part of the collection period, moneys received along with accompanying tax
bills were transferred by the receiver of taxes to a local bank for deposit and
receipting. The bank provided the receiver with a daily record of tax bills
received and processed by the bank; however, no independent control record of
moneys received by the receiver and turned over to the bank was prepared.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
6.
Town of Southold
CIn order to provide better control and accountability of moneys over which
he has custody, we recommend that the receiver of taxes develop a daily control
total of the -moneys received by him and transferred to the bank, and that this
total be reconciled to the deposits credited and records provided by the bank.
In addition, we note that the only individuals who are authorized by law to
accept and handle tax payments are receivers of taxes and duly appointed deputies.
Nothing was presented to indicate that any individual at the bank had been ap-
pointed deputy receiver.
Town Board
Cablevision Franchise Fees
In 1975, the town entered into a ten year contract with a cablevision company
whereby the town would receive a yearly franchise fee equal to 3% of the gross
subscriber revenues received by the company in the previous year. Although the
company has remitted payments to the town each year, no evidence was presented to
indicate that the company has provided the. town with any information as to the
amount of the gross subscriber revenues on which the payments to the town in
1979 and 1980 were based. Furthermore, while the contract allows the town access
to the company books and records reflecting its operations under this franchise,
there is no evidence that the town has availed itself of this contract provision
to verify the correctness of the fees remitted from the beginning of the contract
through December 31, 1980.
We recommend that the town verify this revenue. Future contracts should
require that the cablevision company provide an independently certified statement
of gross subscriber revenues as support for the fee remitted each year.
Deposits Not Timely - Trustees of the Freeholders
An examination of the books and records of the board of trustees of the free-
holders for the year ended December 31, 1980 revealed that fees remitted to the
board were often not deposited in the board's official bank account until several
weeks after receipt. During the period of time prior to deposit, cash and checks
were kept in an unsecured location.
We recommend that receipts be deposited promptly and that undeposited receipts
be kept in a more secure location.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
7.
Town of Southold
CPayroll Procedures
A review of the procedures used by the town for the processing of payrolls
revealed the following deficiencies in internal control:
a) Time sheets that were prepared by employees were not always
approved as evidenced by the signature of their immediate
supervisor or department head.
b) Payrolls, after being prepared by an outside contractor, were
not approved by either department heads or town officials as
required by Town Law, §120. Furthermore, the verification of
the payrolls returned by the outside contractor was left to the
same employees responsible for preparing the information used
by the outside contractor in producing the payrolls.
c) The heads of the highway department and police department picked
up their department's checks to distribute to their employees
without signing for them.
d) The monthly reconciliation of the payroll checking account was
done by an employee involved in payroll preparation and payment.
We recommend that department heads or employees' supervisors approve time
C sheets prior to the preparation of the payroll and certify the payrolls as
required by §120 of the Town Law. Furthermore, we suggest that the town invest-
igate ways to achieve a greater segregation of duties in the processing of the
payroll in order to improve internal control.
Vacation and Sick Leave Policy for Chief of Police
Although records were maintained of credits to and use of vacation time,
compensatory time, personal leave and sick leave for the chief of police, there
was no evidence that a formal policy exists as to the amount of such leave time
the chief of police is to receive each year.
The town board should establish a policy as to the amount of leave time
which may be accrued annually by the chief of police.
Vehicle Fuel
Although the police and highway departments maintained records indicating
gasoline consumption by date, vehicle and driver, no perpetual book inventory
record of gasoline in the in-ground fuel tanks was maintained. Furthermore, when
gasoline was delivered no verification was made of the amount received.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
8.
Town of Southold
We recommend that a perpetual inventory record be maintained showing gasoline
received, dispensed and amount on hand and that this record be periodically con-
firmed to amounts actually in the tanks. In addition, the amount in the tanks
should be measured immediately before and after a delivery to verify the amount
delivered as indicated on the delivery ticket.
Fixed Assets: Book Inventory Incomplete
Although the town's inventory records of fixed assets are updated annually
through the use of property acquisition and disposition sheets, an examination of
the inventory records revealed instances in which assets acquired and disposed of
since the inventory was first prepared in 1978 were not added to or deleted.
Furthermore, equipment owned by the town, but located in the private office of the
town attorney, was not listed in the inventory records.
More care should be taken in updating the inventory records so that they
reflect all additions and deletions. Furthermore, the records should be complete
and include all town owned fixed assets of significant value and having a useful
life of over one year even if not physically located on town property.
Fixed Assets: Physical Inventory Not Taken
Although a physical inventory of town owned fixed assets was taken in 1978 by
an appraisal company, and has been updated annually through the use of property
Cacquisition and disposition information prepared by each department, no physical
inventory has been taken since 1978.
We recommend that physical inventories be periodically taken and reconciled
with the inventory records.
Inventory of Highway Machinery, Tools and Equipment
A comparison of the inventory of highway machinery, tools and equipment filed
with the town board in September 1980 with that filed in September of 1979 revealed
that several items which appeared on the 1979 inventory did not appear on the 1980
inventory. We found that some of the items had been disposed of and were properly
deleted from the 1980 inventory. However, we were advised that most of the items,
consisting primarily of chain saws originally costing between $129.00 and $465.00,
were not disposed of but were not included in the 1980 inventory due to a policy
decision to exclude items with a relatively low cost and which are frequently re-
placed.
In order to properly control and account for equipment, we recommend that the
inventory include all equipment costing in excess of $100.00 and likely to have a
useful life exceeding one year. The equipment should be identified by serial
number where possible.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
9.
Town of Southold
C
Inventory of Repair Parts - Highway Department
Although perpetual inventory records for repair parts were established
approximately four years ago, the records have not been currently maintained
and reconciled with a physical inventory. We were advised that a stock clerk
is in the process of updating the inventory records. A test count of ten in-
ventory items, including some updated within the past few months, revealed
discrepancies between the records and the amount on hand in eight instances.
We recommend that procedures for recording the acquisition and use of
repair parts be reviewed. Furthermore, , the records should be periodically
confirmed to a physical inventory.
Segregation of Duties - Supervisor's Office
We noted that an employee in the town supervisor's office had access to the
books, also handles mail receipts and at times signs checks with the check signer.
In order to improve internal control, we suggest the town investigate whether
a greater segregation of duties is possible.
Undertakings
CAlthough the town clerk and town justices are covered by individual bonds,
the deputy town clerk and justice court clerks, all of whom handle cash, are not
covered by blanket position bonds.
We recommend that the town board consider the necessity of obtaining blanket
position bonds for any employees handling cash who are not covered by individual
bonds.
Expenditures
Public Advertisement for Bids
No record was found to indicate that bids were requested by public advertising
for purchases in 1980 of police uniforms, lubricants and highway signs, each type
aggregating in excess of $3,000.00.
Except as otherwise provided by law, all purchase contracts in excess of
$3,000.00 should be awarded to the lowest responsible bidder after public adver-
tisement for bids (General Municipal Law, §103) .
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
10.
Town of Southold
Attendance at Conventions
Payments were made in 1980 to several officers and employees for reim-
bursement of expenses incurred in attending the annual meeting of the Association
of Towns; however, the minutes of the board did not indicate, with the exception
of one officer, the adoption of resolutions authorizing each such individual to
attend (General Municipal Law, §77-b) .
Payments for Equipment Repairs
In 1980 approximately $140.00 was paid for repairs to telephone equipment
while at the same time the town paid $900.00 for a service contract with the same
company.
We advise the town to review the service agreement to determine whether the
repairs were covered and a refund is due.
Secretarial and Office Expenses of Town Attorney
During the year ended December 31, 1980 the town attorney received payments
totaling $15,000.00, the amount provided in the budget to cover his secretarial
and office expenses. The vouchers submitted by the attorney for these payments
were not itemized, nor were they supported by receipted bills or other documen-
tation of the actual expenses incurred.
There is no authority for a town attorney to receive a lump-sum amount to
spend for secretarial and office expenses in his discretion. A town may only
reimburse an officer or employee for actual and necessary expenses incurred in
executing the duties of his office or position. Such claim should not be paid
unless submitted to the town board on an itemized voucher sufficiently supported
to allow proper audit thereof (Op. State Compt. 78-852; Town Law, §§116(1) , 118(1)) .
Installment Purchase of Copy Machine
We noted that payments were made for a copy machine used by the town attorney
and located in his private office. This machine was purchased pursuant to a lease
purchase agreement entered into in 1977 when such installment purchases were not
authorized by law. Furthermore, the purchase was not made pursuant to competitive
bidding, despite the fact that its cost exceeded $2,300.00, at a time when all
purchase contracts exceeding $1,500.00 were subject to the competitive bidding
requirements of General Municipal Law, §103.
All public contracts should be in accordance with the applicable sections
of Article 5-A of General Municipal Law.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
' 11.
Town of Southold
c
Lack of Sufficient Substantiation for Claim Vouchers
A review of claims paid in the year ended December 31, 1980 revealed
numerous instances in which the receiving copy of the purchase order was not
attached to the claim. Also, various receiving copies of the purchase order
or invoices reviewed were not signed by the employee of the department receiving
the goods and services.
The receipt of goods and services should be verified as evidenced by the
signature or initials of the employee receiving the goods and services. In order
to properly audit claims prior to their payment, vouchers should contain
sufficient substantiation, including the receiving copy of the purchase order.
Payments In Support of Local Sports Leagues
During the year ended December 31, 1980 payments totaling over $4,500.00 were
made by the town to or on behalf of several little leagues, soccer leagues, soft-
ball leagues and slo-pitch leagues located within the town for the purchase of
equipment, supplies and insurance.
A town may not give or loan any money or property to or in aid of a private
corporation, association or private undertaking, including privately operated
little leagues (Op. State Compt. 80-204) . We would note that the town may purchase
C sports equipment in conjunction with its own recreation program which would be
under its control and would be available to all town residents, subject to
reasonable regulations (General Municipal Law, §242) .
Compliance
Purchases of Highway Machinery and Equipment Without Town Board Authorization
On January 2, 1980 the town board authorized the superintendent of highways to
purchase machinery and equipment costing up to $1,500.00 without prior approval of
the board. A review of highway department claims for the year ended December 31,
1980 revealed, however, a number of such purchases exceeding $1,500.00 which were
not submitted to the board for prior approval. Furthermore, several contracts for
the purchase of machinery and equipment costing in excess of $1,000.00 were not
submitted for approval to the Suffolk County Commissioner of Public Works.
All purchases of equipment, tools and other implements to be used for highway
maintenance, construction or reconstruction, snow plows, or other devices for re-
moving snow from the highways costing in excess of an amount fixed by the board
are to be submitted to the board for prior approval by the superintendent of high-
ways (Highway Law, §142(1(a)) .
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS
` 12.
Town of Southold
No contract for the purchase of highway machinery or equipment exceeding in price
the sum of $1,000.00 shall be valid unless the county superintendent shall have
approved thereof (Highway Law, §142(l(b)) .
Payments of Tax Collections to Town Supervisor
Payments made by the receiver to the town supervisor of 1980-81 taxes
collected were not in accordance with Section 13(a) of the Suffolk County Tax Act.
This act requires that after thirty days from the delivery of the warrant, and at
the expiration of each period of ten days thereafter, the receiver of taxes pay
over to the supervisor on account of the town, the school districts and the special
districts all moneys so collected in proportion to the balances remaining unpaid
until such balances are paid in full.
Instead of paying over the moneys in proportion to the balances remaining
unpaid, the payments made after thirty days were evenly split between school districts
and all other purposes.
Payments for all other purposes were completed on January 29, 1981. Payments
for school districts totalling $535,000.00 were not completed until April 2, 1981.
We recommend that the tax receiver adhere to the applicable provisions of the
Suffolk County Tax Act.
C �
Justice James H. Rich, Jr.
Moneys Not Deposited Timely
An examination of Justice Rich's cash receipts records for March and June 1980
disclosed numerous instances in which money received in his offical capacity was
not deposited in his official bank account within seventy-two hours after receipt
(22 NYCRR 30.7) .
Receipt Forms
Although duplicate press-numbered receipts were issued for all moneys collected,
the pre-printed numbers were crossed out and the receipts renumbered by hand.
To avoid negating the internal controls over cash provided by the use of press-
numbered receipts, we suggest that receipts not be renumbered by hand.
STATE OF NEW YORK
OFFICE OF THE STATE COMPTROLLER
DIVISION OF MUNICIPAL AFFAIRS