Village Board to Address Policy and Procedures
(Munnsville, NY – Feb. 2013) The state Comptroller’s Office released its report on the village of Munnsville’s audit of Financial Operations. Its findings reported, “The village board has not maintained an adequate level of unassigned fund balance, limiting the village’s ability to manage emergencies and other unanticipated occurrences. The board has not exercised effective oversight of the village clerk-treasurer. Also, the clerk-treasurer has not filed the required annual financial report with the Office of State Comptroller on a timely basis.”
The objective of the audit was to determine whether the Board properly monitored the village’s ﬁnancial operations. The audit addressed the following question:
Did the Board ensure that the Village maintained adequate fund balance in the general fund, provide for an annual audit of the Clerk-Treasurer’s records, and ensure that the AUD is ﬁled in a timely manner?
The auditor examined the Board’s oversight of the Clerk-Treasurer for the period June 1, 2011 to May 31, 2012. To analyze the Village’s historical appropriation of fund balance and the Village’s ﬁnancial condition, extended was the audit period back to the 2008-09 ﬁscal year.
An inadequate level of unassigned fund balance limits the Village’s ability to manage emergencies and other unanticipated occurrences.
The Board also has not exercised effective oversight of the Clerk-Treasurer. For example, the ClerkTreasurer has not ﬁled the required annual ﬁnancial report with OSC on a timely basis. Further, the Board did not audit, or cause to be audited, the records and reports of the Clerk-Treasurer.
As a result of these oversight weaknesses, the risk is increased that errors or irregularities could occur and remain undetected and uncorrected.
The Village’s general fund is its sole operating fund. However, the Clerk-Treasurer included a HOME grant of $15,200 and a bond anticipation note (BAN) of $57,000 in the 2011-12 ﬁscal year general fund cash balance.
These moneys should have been accounted for in separate funds: the HOME grant moneys in a special revenue fund and the BAN in the capital projects fund.
Village ofﬁcials’ appropriated more fund balance than was actually available. For the 2009-10 ﬁscal year the Board appropriated $14,000 of fund balance to help fund the budget, but had only $12,126 of unassigned fund balance in the general fund. As a result, Village ofﬁcials’ appropriated $1,874 of fund balance that they did not have.
For the 2011-12 ﬁscal year, Village ofﬁcials appropriated $999 more in fund balance than they actually had on hand.
Although the Village had operating surpluses in the past two ﬁscal years, ofﬁcials told auditors it is the Board’s practice to appropriate as much fund balance as it can toward the ensuing year’s budget. This practice leaves very little fund balance as a ﬁnancial cushion for emergencies or unforeseen circumstances.
Additionally, the Board does not have a fund balance policy, which is important to help ensure financial stability, manage ﬁnancial resources, and ensure fund balance on hand is reasonable. The failure to maintain a reasonable amount of unexpended surplus funds places the Village at risk of potential ﬁscal stress that could jeopardize the delivery of services.
Village Law requires that the Board annually audit, or have a Village ofﬁcer, employee, or an independent public accountant audit, the records and reports maintained by the Clerk-Treasurer on the Village’s behalf.
The Board did not audit, or contract with an independent auditor to audit, the Clerk-Treasurer’s records for the 2009-10, 2010-11, and 2011-12 ﬁscal years.
While the Mayor was aware that the ClerkTreasurer’s records should be audited annually, he did not believe there was a need for an audit because he had trust in her abilities.
Further, Board members we interviewed said they were not aware of the annual audit requirement. Without an annual audit, the Board cannot have assurance that the Clerk-Treasurer properly accounted for all the Village’s ﬁnancial resources, and there is an increased risk that errors or irregularities could occur and remain undetected and uncorrected.
*The Board should adopt a fund balance policy and develop procedures governing the level of unexpended surplus fund balance to be maintained for the Village’s general fund.
*The Clerk-Treasurer should account for the HOME grant and capital project in the proper funds.
*The Board should ensure that the Clerk-Treasurer ﬁles the Village’s annual ﬁnancial reports within the prescribed statutory period.
*The Board should perform annual audits of the Clerk-Treasurer’s records and reports, or have an ofﬁcer, employee, or independent public accountant do so.
In a letter to the state Comptroller’s office dated Jan. 24, 2013 and signed by Mayor Richard Snider, it stated that at the Jan. 14, 2013 board meeting, the village Board of Trustees agreed to formulate policy and procedures addressing fund balance at the February 2013 meeting, conduct a draft review of policy at its regularly scheduled meeting March 2013 with a targeted date of formal adoption at its April 2013 meeting.
As for recommendations on the HOME grant and capital project, the letter stated the clerk/treasurer will make corrections so that funds are properly reflected in the village accounting records filed with the comptroller’s office.
Also stated was the board will on a yearly basis request monthly progress updates from the clerk/treasurer a regular scheduled board meetings in June, July and August and documented in the those meeting minutes.
As for the recommendation that the board perform annual audits of the clerk/treasurer records and reports, the board’s action stated, after the close of each fiscal year, the Board of Trustees would review the clerk’s reports using the OSC’s Local Government Management Guide. An internal audit review is scheduled for June 10.