n.y. comptroller report on wilton fire district budget practices

8/9/2019 N.Y. Comptroller report on Wilton Fire District budget practices

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11DIVISIONOF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITY

Page

AUTHORITY LETTER 2

INTRODUCTION 3

Background 3

Objective 3

Scope and Methodology 3

Comments of Local Of!cials and Corrective Action 3

BUDGETING PRACTICES 5

Recommendations 9

APPENDIX A Response From Local Of!cials 10

APPENDIX B OSC Comments on the Local Of!cialsG Response 14

APPENDIX C Audit Methodology and Standards 15

APPENDIX D How to Obtain Additional Copies of the Report 16

APPENDIX E Local Regional Of!ce Listing 17

Table of Contents


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2 OFFICEOFTHE NEW YORK STATE COMPTROLLER2

State of New York

Office of the State Comptroller

Division of Local Government

and School Accountability

April 2010

Dear Fire District Of!cials:

A top priority of the Of!ce of the State Comptroller is to help local government of!cials manage

government resources ef!ciently and effectively and, by so doing, provide accountability for

tax dollars spent to support government operations. The Comptroller oversees the !scal affairs of

local governments statewide, as well as compliance with relevant statutes and observance of good

business practices. This !scal oversight is accomplished, in part, through our audits, which identify

opportunities for improving operations and Board of Fire Commissioners governance. Audits also can

identify strategies to reduce costs and to strengthen controls intended to safeguard local government

assets.

Following is a report of our audit of the Wilton Fire District, entitled Budgeting Practices. This audit

was conducted pursuant to Article V, Section 1 of the State Constitution and the State ComptrollerGs

Authority as set forth in Article 3 of the eneral Municipal Law.

This auditGs results and recommendations are resources for local government of!cials to use in

effectively managing operations and in meeting the expectations of their constituents. If you have

Xuestions about this report, please feel free to contact the local regional of!ce for your county, as listed

at the end of this report.

Respectfully submitted,

Office of the State Comptroller

Division of Local Government

and School Accountability


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Background

Introduction

Objective

Scope and

Methodology

The Wilton Fire District YDistrictZ is located in the Town of Wilton

YTownZ in Saratoga County, covering approximately 31.5 sXuare

miles and servicing about 12,000 residents. The District is a district

corporation of the State, distinct and separate from the Town and isgoverned by an elected !ve-member Board of Fire Commissioners

YBoardZ. The Wilton Volunteer Fire Company, all of whose members

are volunteers, constitutes the District !re department. The Board

is responsible for preparing and adopting an annual budget which

includes detailed estimates of expected revenues and expenditures

and an estimate and breakdown of fund balance, both reserved and

unreserved. The Board has the power to levy taxes on real property

located in the District and to issue debt.

The District Treasurer YTreasurerZ is appointed annually. TheTreasurer is responsible for the receipt, custody, disbursement,

and accounting of District funds and for preparing monthly and

annual !nancial reports, including the annual report to the Of!ce

of the State Comptroller YOSCZ and the annual report of receipts

and disbursements to the Town Clerk. The District Secretary is

responsible for recording the proceedings of Board meetings and

for retaining custody of all the DistrictGs records, books, and papers.

The DistrictGs budgets for 2008 and 2009 were $1,032,751 and

$1,206,917, respectively.

The objective of our audit was to examine the DistrictGs budgetprocess. Our audit addressed the following related Xuestion:

^ Do District of!cials exercise proper budgeting practices in the

preparation, adoption and execution of the DistrictGs annual

budget_

During this audit, we interviewed District of!cials about their

budgeting practices and examined available records and reports used

in the preparation of the DistrictGs 2008 and 2009 budgets.

We conducted our audit in accordance with generally accepted

government auditing standards YAASZ. More information on such

standards and the methodology used in performing this audit are

included in Appendix C of this report.

The results of our audit and recommendations have been discussed

with District of!cials and their comments, which appear in

Appendix A, have been considered in preparing this report. Except

Comments of

Local Officials and

Corrective Action


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as speci!ed in Appendix A, District of!cials generally agreed with

our recommendations and indicated they planned to take corrective

action. Appendix B includes our comments on issues raised in the

DistrictGs response letter.

The Board has the responsibility to initiate corrective action. Pursuant

to Section 181-b of the Town Law, a written corrective action plan

YCAPZ that addresses the !ndings and recommendations in this report

must be prepared and forwarded to our of!ce within 90 days. To the

extent practicable, implementation of the CAP must begin by the end

of the next !scal year. For more information on preparing and !ling

your CAP, please refer to our brochure,Responding to an OSC Audit

Report, which you received with the draft audit report. The Board

should make the CAP available for public review in the District

ClerkGs of!ce.


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Budgeting Practices

An annual budget, sometimes referred to as the operating budget,

details the Fire DistrictGs !nancial plan for a !scal year. The Board

of Commissioners is responsible for the overall management and

control of the DistrictGs !nancial operations. In accordance with theTown Law, the Board is reXuired to prepare and adopt an annual

budget within a prescribed timetable and, in doing so, determine the

amount of real property taxes to be raised by the District. The budget

should include detailed estimates of the revenues to be received and

expenditures to be made during the !scal year and an estimate and

breakdown of fund balance, both reserved and unreserved. When

adopting the budget, the Board must stay within the DistrictGs

statutory spending limitation. The District must hold a public

hearing before adopting the !nal budget. After the public hearing

and adoption of the!

nal budget, the Board submits the budget tothe Town to be attached to the annual Town budget and sent to the

County to levy the taxes. The Town may not make changes to the Fire

DistrictGs budget.

We found that the District has in"ated its budget and has

unnecessarily burdened District residents with excess taxes. The

District has generated operating surpluses in 2007 and 2008 totaling

over $290,000 with no justi!cation for these excess amounts. Despite

these signi!cant operating surpluses, the District increased the annual

tax levy in 2009.

Budgets Higher Than Necessary ! Annually, the Saratoga County

Of!ce of Real Property Tax Services provides the District with a

summary computation of what is presumed to be the DistrictGs annual

spending limit. The spending limit is the maximum that the District

could spend District budgets could be no more than, and presumably

less than, this amount without voter approval. In each of the past

three years, the District has routinely adopted a budget with total

appropriations eXualing the maximum amount of the spending limit

computation provided by the County, as follows:


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2007 2008 2009

Spending1

Limit $862,096 $1,032,751 $1,206,917

Budgeted

Amount of

Appropriations $862,096 $1,032,751 $1,206,917

ActualExpenditures $593,986 $1,010,617

Variance $268,110 $22,134

Tax Levy $862,097 $1,032,751 $1,206,917

It is improper for District of!cials to simply establish the DistrictGs

budgeted appropriations at the maximum amount of its estimated

spending limit. Rather, the District should be budgeting for realistic

estimates of the amount needed to operate and meet its obligations.

However, the Board minutes document the BoardGs discussion of

the impact on the District if the full amount is not taken. As aresult of the DistrictGs inappropriate budgeting practices, the District

realized a signi!cant operating surplus in 2007 and levied taxes far

in excess of what was needed to fund District operations. From 2007

through 2009, the tax levy adopted in the budget exactly matched

the spending limit computation provided by Saratoga County Real

Property Tax Services. However, for 2007, the District reported an

operating surplus totaling $315,908. This surplus was primarily due

to the DistrictGs overestimating expenditures actual expenditures in

2007 were less than budgeted by $268,110. Despite the signi!cant

operating surplus, District of!cials continued to base their budgets on

the spending limit computation provided by the County.

District of!cials chose to transfer most of the resulting surplus from

District operations to the DistrictGs two reserve funds, even though

these transfers were not included in the budget for 2007. The District

appropriately budgeted a $300,000 transfer to its reserves in the 2008

budget. For 2009, the District increased its budget by $174,166

Y16.8 percentZ over 2008 by basing its budget on the spending limit

calculation provided by the County.

The District has legally established its Station II reserve fund toconstruct a new !re sub-station at December 31, 2008, this fund

had a balance of $456,054. The District also legally established its

apparatus reserve fund to purchase !re apparatus this fund had a

balance of $614,556 at December 31, 2008. District of!cials advised

that they plan to use this fund to purchase a new !re truck for

1 The DistrictGs statutory spending limit is the maximum amount which may be

expended by the District, without voter approval, on items chargeable to the

spending limitation.


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$589,000. The 2009 budget included an appropriation to transfer

$200,000 to the Station II reserve the District did not appropriate a

transfer to the apparatus reserve. While the balances in these funds

seem reasonable and the District plans to use them for their intended

purposes, it is essential that the District be publicly accountable

by funding the reserves in a transparent manner through budget

appropriations rather than just transferring surpluses at the end of the

year. The practice of over-budgeting for District operations puts an

unnecessary !nancial burden on District taxpayers.

Budget Format ! In accordance with Town Law, the budget must be

in the form prescribed by the Of!ce of the State Comptroller YOSCZ.

The budget must show the proposed appropriations and estimated

revenues, estimated fund balances including amounts appropriated

for the ensuing yearGs budget, amounts reserved for stated purposes

pursuant to law, such as legally-established reserve funds, and the

remaining estimated unreserved, unappropriated fund balance. The

budget must also include the amount of taxes to be levied and anysalaries of elected of!cials. District of!cials should use account

codes for revenues and expenditures from OSCGs niform System

of Accounts. Also, the budget should be comprised of four columns:

column one showing the !nancial activity from the most recently

completed !scal year column two showing the current yearGs budget

including all amendments to date column three showing the ensuing

yearGs preliminary budget and column four showing the ensuing

yearGs adopted budget.

The DistrictGs budgets for 2008 and 2009 were not in OSCGs

prescribed format. The budgets listed only the appropriations and didnot include the estimated revenues. Furthermore, District of!cials

did not use account codes as prescribed by the niform System

of Accounts codes when preparing the budgets. The budgets did

not include the reXuired columns comparing the previous yearGs

completed !nancial activity with the current yearGs modi!ed budget

and the ensuing yearGs preliminary budget. They also did not show

computation of the tax levy.

By not preparing the preliminary budget using OSCGs prescribed

format, the District failed to provide taxpayers with complete andconsistent budget information. Moreover, the District failed to

provide for the use of fund balance to reduce the tax levy. As a result,

Board members over-taxed District residents.

Accounting Records ! A good annual budget begins with sound

estimates and well-supported budgetary assumptions. District

of!cials should base their assumptions on reasonable estimates of

the ensuing yearGs expenditures. A reasonable estimate can be based


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on historical trends andor actual estimates of known purchases and

or repairs for the ensuing year. To develop sound estimates, Board

members should consult as much pertinent data as possible. While

valuable information is available from a number of sources, the Board

should work closely with the District Treasurer and other District

and !re department of!cers to develop a realistic annual budget. The

Treasurer is responsible for providing accurate and timely !nancial

information to the Board, and other of!cers should provide the Board

with accurate estimates relevant to their individual operations.

District of!cials did not maintain adeXuate accounting records and

detailed !nancial reports prior to January 1, 2008. The lack of records

inhibited the BoardGs ability to have accurate historical information

to assist in the budget adoption process. Because the District lacked

detailed records prior to 2008, District of!cials could not provide us

with meaningful budget comparisons showing 2007 expenditures for

use during our audit.

In 2008, the District began using accounting software that provides

users with a detailed report of revenues and expenditures. We

compared the !ve appropriation categories from the 2009 adopted

budget Ypersonal services, eXuipmentcapital outlay, contractual

expenditures, employee bene!ts and debt serviceZ to the actual

expenditures made in 2008. We found two signi!cant increases in

appropriations included in the 2009 budget. While actual personal

service expenditures in 2008 were $39,532, District of!cials

increased the 2009 appropriation by 128 percent to $90,000. District

of!cials explained that they increased the salary appropriation to

hire a part-time station keeper. The District subseXuently decidednot to create this position and did not amend the budget to re"ect

the unneeded appropriation, which essentially in"ated the budget by

approximately $50,000 and contributed to the substantial operating

surplus.

Additionally, total contractual expenditures were $295,565 in 2008

however, District of!cials increased the 2009 appropriation for

contractual expenditures by 69 percent to $498,500. District of!cials

could not explain the signi!cant increase in appropriations for the

contractual expenditures. Board minutes did not contain notes orestimates indicating that the District was expecting to make any large

purchases or expensive repairs in the ensuing year. The minutes from

a budget workshop stated that one commissioner and the Chairman

each provided suggested dollar amounts for the individual expense

categories. However, there were no schedules or other support for

amounts budgeted.


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The DistrictGs lack of adeXuate accounting records or!nancial reports

prevented the Board from making informed !nancial decisions.

Further, increasing appropriations unnecessarily puts needless

!nancial burden on District taxpayers.

1. The Board of Commissioners should base the estimates in their

budgets on reasonable assumptions using historical trends andor

actual estimates.

2. The Board of Commissioners should use the correct budget

format prescribed by the Of!ce of the State Comptroller.

Recommendations


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APPENDIX A

RESPONSE FROM LOCAL OFFICIALS

The local of!cialsG response to this audit can be found on the following pages.


12/18


See

Note 1

Page 14


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See

Note 2Page 14


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APPENDIX B

OSC COMMENTS ON THE LOCAL OFFICIALS RESPONSE

Note 1

The report does not criticize the District for establishing and funding reserves. The report criticizes the

past practice of developing budgets based on the DistrictGs tax limit and transferring any unexpended

amounts to reserves at the end of the year. Funding for capital planning should be planned through

budgeted transfers to reserve funds, not as an afterthought at the end of each !scal year. The report

noted that the District corrected this practice and appropriately budgeted a $300,000 transfer to its

reserves in the 2008 budget.

Note 2

Budgets are reXuired to be presented in the format prescribed by the State Comptroller, not the

independent accountantGs preferred format. As stated in the report, the DistrictGs budget formats did

not include the information that is reXuired by Town Law.


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APPENDIX C

AUDIT METHODOLOGY AND STANDARDS

During this audit, we examined the Wilton Fire DistrictGs policies and procedures relating to budgeting

practices for the period January 1, 2008 to May 31, 2009. To accomplish the objective of this audit,

and to obtain relevant audit evidence, our procedures included the following:

^ We conducted interviews with District of!cers and personnel to gain an understanding of the

DistrictGs budgeting practices.

^ We reviewed available District !nancial records and reports.

^ We reviewed District minutes and available budgeting documentation and back-up.

We conducted this performance audit in accordance with generally accepted government auditing

standards YAASZ. Those standards reXuire that we plan and perform the audit to obtain suf!cient,appropriate evidence to provide a reasonable basis for our!ndings and conclusions based on our audit

objective. We believe that the evidence obtained provides a reasonable basis for our!ndings and

conclusions based on our audit objective.


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APPENDIX D

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

Of!ce of the State Comptroller

Public Information Of!ce

110 State Street, 15th Floor

Albany, New ork 12236

Y518Z 474-4015

http:www.osc.state.ny.uslocalgov

To obtain copies of this report, write or visit our web page:


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1717DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY

APPENDIX E

OFFICE OF THE STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENT

AND SCHOOL ACCOUNTABILITY

Steven J. Hancox, Deputy Comptroller

John C. Traylor, Assistant Comptroller

LOCAL REGIONAL OFFICE LISTING

BUFFALO REGIONAL OFFICE

Robert Meller, Chief Examiner


295 Main Street, Suite 1032

Buffalo, New ork 14203-2510

Y716Z 847-3647 Fax Y716Z 847-3643

Email: Muni-Buffaloosc.state.ny.us

Serving: Allegany, Cattaraugus, ChautauXua, Erie,

enesee, Niagara, Orleans, Wyoming counties

ROCHESTER REGIONAL OFFICE

Edward V. rant, Jr., Chief Examiner


The Powers Building

16 West Main Street Suite 522

Rochester, New ork 14614-1608

Y585Z 454-2460 Fax Y585Z 454-3545

Email: Muni-Rochesterosc.state.ny.us

Serving: Cayuga, Chemung, Livingston, Monroe,

Ontario, Schuyler, Seneca, Steuben, Wayne, ates

counties

SYRACUSE REGIONAL OFFICE

Eugene A. Camp, Chief Examiner


State Of!ce Building, Room 409

333 E. Washington Street

Syracuse, New ork 13202-1428

Y315Z 428-4192 Fax Y315Z 426-2119

Email: Muni-Syracuseosc.state.ny.us

Serving: Herkimer, Jefferson, Lewis, Madison,

Oneida, Onondaga, Oswego, St. Lawrence counties

BINGHAMTON REGIONAL OFFICE

Patrick Carbone, Chief ExaminerOf!ce of the State Comptroller

State Of!ce Building, Room 1702

44 Hawley Street

Binghamton, New ork 13901-4417

Y607Z 721-8306 Fax Y607Z 721-8313

Email: Muni-Binghamtonosc.state.ny.us

Serving: Broome, Chenango, Cortland, Delaware,

Otsego, Schoharie, Sullivan, Tioga, Tompkins

counties

GLENS FALLS REGIONAL OFFICE

Karl Smoczynski, Chief Examiner


One Broad Street Plaza

lens Falls, New ork 12801-4396

Y518Z 793-0057 Fax Y518Z 793-5797

Email: Muni-lensFallsosc.state.ny.us

Serving: Clinton, Essex, Franklin, Fulton, Hamilton,

Montgomery, Rensselaer, Saratoga, Warren, Washington

counties

ALBANY REGIONAL OFFICE

Kenneth Madej, Chief Examiner


22 Computer Drive West

Albany, New ork 12205-1695

Y518Z 438-0093 Fax Y518Z 438-0367

Email: Muni-Albanyosc.state.ny.us

Serving: Albany, Columbia, Dutchess, reene,

Schenectady, lster counties

HAUPPAUGE REGIONAL OFFICEIra McCracken, Chief Examiner


NS Of!ce Building, Room 3A10

Veterans Memorial Highway

Hauppauge, New ork 11788-5533

Y631Z 952-6534 Fax Y631Z 952-6530

Email: Muni-Hauppaugeosc.state.ny.us

Serving: Nassau, Suffolk counties

NEWBURGH REGIONAL OFFICEChristopher Ellis, Chief Examiner


33 Airport Center Drive, Suite 103

New Windsor, New ork 12553-4725

Y845Z 567-0858 Fax Y845Z 567-0080

Email: Muni-Newburghosc.state.ny.us

Serving: Orange, Putnam, Rockland, Westchester

counties

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