Division of LocaL Government & schooL accountabiLity
o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r
report of ExaminationPeriod Covered:
January 1, 2015 — July 31, 2016
2016M-432
Town of Lake PleasantCredit Cards
thomas p. Dinapoli
Page
AUTHORITY LETTER 1
INTRODUCTION 2 Background 2 Objective 2 Scope and Methodology 2 CommentsofLocalOfficialsandCorrectiveAction 2
CREDIT CARDS 4 Recommendations 5
APPENDIX A ResponseFromLocalOfficials 6APPENDIX B AuditMethodologyandStandards 9APPENDIX C HowtoObtainAdditionalCopiesoftheReport 10APPENDIX D LocalRegionalOfficeListing 11
Table of Contents
11Division of LocaL Government anD schooL accountabiLity
State of New YorkOffice of the State Comptroller
Division of Local Governmentand School Accountability April2017
DearTownOfficials:
A toppriorityof theOfficeof theStateComptroller is tohelp localgovernmentofficialsmanagegovernment resources efficiently and effectively and, by so doing, provide accountability for taxdollarsspenttosupportgovernmentoperations.TheComptrolleroverseesthefiscalaffairsoflocalgovernmentsstatewide,aswellascompliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversightisaccomplished,inpart,throughouraudits,whichidentifyopportunitiesforimprovingoperationsandTownBoardgovernance.Auditsalsocanidentifystrategiestoreducecosts and to strengthen controls intended to safeguard local government assets.
Following is a reportofourauditof theTownofLakePleasant, entitledCreditCards.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’sauthorityassetforthinArticle3oftheNewYorkStateGeneralMunicipalLaw.
This audit’s results and recommendations are resources for local government officials to use ineffectivelymanagingoperationsand inmeeting theexpectationsof their constituents. Ifyouhavequestionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedat the end of this report.
Respectfullysubmitted,
Office of the State ComptrollerDivision of Local Governmentand School Accountability
State of New YorkOffice of the State Comptroller
2 Office Of the New YOrk State cOmptrOller2
Background
Introduction
Objective
Scope and Methodology
Comments of Local Officials and Corrective Action
The Town of Lake Pleasant (Town) is located in Hamilton County and hasapopulationofapproximately780.TheTownisgovernedbyanelectedfive-memberTownBoard(Board),whichiscomposedoftheTown Supervisor (Supervisor) and four Board members. The Board isresponsibleforthegeneraloversightoftheTown’soperationsandfinances. The Supervisor, as chief fiscal officer, is responsible forthereceipt,disbursementandcustodyofTownmoneys,maintainingaccountingrecords,andprovidingfinancialreportstotheBoard.
The Town provides various services to its residents, includingmaintaining and improving Town roads, snow removal, publicimprovements, cultural activities and general government support.TheTown’s budgeted appropriations for the 2016fiscal yearwereapproximately $2.5 million, funded primarily with real propertytaxes.
The objective of our auditwas to examine theTown’s credit cardpurchases to determine whether the cards were used for appropriate purposes and in compliance with the Town’s policies. Our auditaddressedthefollowingrelatedquestion:
• Did the Board establish adequate internal controls over Town credit cards?
WeexaminedtheTown’screditcardpurchasesfortheperiodJanuary1,2015throughJuly31,2016.
We conducted our audit in accordance with generally accepted governmentauditingstandards(GAGAS).Moreinformationonsuchstandards and the methodology used in performing this audit are includedinAppendixBofthisreport.Unlessotherwiseindicatedinthisreport,samplesfortestingwereselectedbasedonprofessionaljudgment,asitwasnottheintenttoprojecttheresultsontotheentirepopulation.Where applicable, information is presented concerningthe value and/or size of the relevant population and the sample selectedforexamination. The results of our audit and recommendations have been discussed withTownofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report. Town officialsgenerally agreedwith our recommendations and have initiated, orindicatedtheyplannedtoinitiate,correctiveaction.
33Division of LocaL Government anD schooL accountabiLity
The Board has the responsibility to initiate corrective action. Awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendations in this report should be prepared and forwarded to ourofficewithin90days,pursuanttoSection35ofGeneralMunicipalLaw.FormoreinformationonpreparingandfilingyourCAP,pleaserefertoourbrochure,Responding to an OSC Audit Report,whichyoureceived with the draft audit report. We encourage the Town Board to makethisplanavailableforpublicreviewintheTownClerk’soffice.
4 Office Of the New YOrk State cOmptrOller4
Credit Cards
Because credit cards can be used almost as easily as cash, it iscriticalthatTownofficialsestablisheffectivepoliciesandproceduresgoverningtheuseof thecards.Asoundcreditcardpolicyrequiresofficialstoimplementeffectivecreditcardproceduresbeforemakingcards available to employees. The policy should identify individuals authorizedtoopenaccountsandtheapprovedcreditcardusers,definecreditlimits,describethetypesofpurchasesallowedandspecifytheprior approval and documentation required to support each purchase. Additionally,thenumberofcreditcardsshouldbelimitedtominimizethe risks associated with unauthorized use of the cards and enhance the accountability over the cards. The policy also should address the methods to recover money in the event of improper card use and include procedures over card custody and use to ensure accountability andresponsibility.Adequatecreditcardcontrolshelpensurethatcarduseismonitored,unnecessarycosts(e.g.,financeorlatecharges)areavoided and established purchasing procedures are followed.
TownofficialsdidnotestablishpoliciesandproceduresovertheuseoftheTown’screditcards.TheTownhadatotalof24creditcardsduringourauditperiodwithtotalcreditlimitsexceeding$101,000.The credit limits on the individual cards ranged from $1,000 to$20,000.Fourof thesecreditcardshadcredit limitsof$10,000ormore.Theselargecreditlimitsincreasetheriskofsignificantinvalidpurchases being made and going undetected. Even though Town officialsreviewthecreditcardstatementsonamonthlybasis,anon-Town purchase would have already occurred.
TheTownpaid75creditcardclaimstotaling$41,967duringtheauditperiod.ThenumberofcreditcardsandcreditlimitsareexcessiveincomparisontothenumberofTownemployees,whichis31includingelectedofficialsandeightseasonalpart-timeemployees.Forexample,theHighwaySuperintendenthadacreditcardwithalimitof$20,000.However, his monthly purchases ranged from $2,000 to $4,000,indicating that his credit limit could be lowered.
Nineofficialsandfouremployeeshadatotalof20Towncreditcardsissued to them. The remaining four cards were issued in the name of theTown;onecreditcardisinaBoardmember’spossessionandtheotherthreecardsarekeptintheTownClerk’s(Clerk’s)office.TheClerk was responsible for opening and closing credit card accounts with thebank.However, theClerkandotherofficialswereable toopen store credit card accounts without obtaining approval from the Board. Because the Board did not establish policies and procedures
55Division of LocaL Government anD schooL accountabiLity
over the Town’s credit cards, officials and employees could opencredit card accounts and make credit card purchases without prior approval.
Wereviewed23creditcardstatementscomprisedof116purchasestotaling $30,935 paid during our audit period.We found 19 creditcardpurchases totaling$1,696werenotsupportedwithreceiptsorother supporting documentation. From our review of the credit card statements, theassociatedclaimsandourconversationswithTownofficials,wewereabletodeterminecertaininformationrelatedtothepurchases(e.g.,vendornames,briefdescriptionofitemspurchased)anddeterminewhatsomeofthepurchaseswerefor(e.g.,gas,food,books).Wefoundthat16ofthe19purchases,totaling$1,443,werefor appropriate Town business. For example, the Town purchased$739worth of books for the library and purchased office suppliestotaling$56.Theremainingthreepurchasestotaling$254weremadefor purposes that were not permissible by statute. These purchases included cups to give to individuals who donated money to the library($193),flowersforanemployeeretiring($35)andpizzaforaretirementluncheon($26).Althoughwewereabletoidentifywhatwaspurchased,withoutreceiptsorothersupportingdocuments,theBoardshouldnothaveapprovedpaymentforthese19purchases. Although we did not find any material discrepancies, the lack ofwritten policies and procedures to govern the use of credit cards,the excessive number of cards and the lack of receipts to supportall credit card purchases increase the risk of the cards not being adequately accounted for and the possibility that cards could be used for unauthorized purchases.
TheBoardshould:
1. Adoptwrittencreditcardpoliciesandprocedures.
2. Limit the number of Town credit cards to a more reasonable numberandreducethecreditlimitstonomorethan$5,000per card.
3. Perform a thorough audit of claims to ensure that the useof credit cards were followed and that the claims packages include appropriate documentation ofwhatwas purchased,theTown’spurposeanddocumentationthatgoodsorserviceswere received by the Town.
4. Ensurethatallcreditcardchargesareactual,necessaryandsupported by itemized receipts.
Recommendations
6 Office Of the New YOrk State cOmptrOller6
APPENDIX A
RESPONSE FROM TOWN OFFICIALS
TheTownofficials’responsetothisauditcanbefoundonthefollowingpages.
77Division of LocaL Government anD schooL accountabiLity
8 Office Of the New YOrk State cOmptrOller8
99Division of LocaL Government anD schooL accountabiLity
APPENDIX B
AUDIT METHODOLOGY AND STANDARDS
Toachieveourauditobjectiveandobtainvalidevidence,weperformedthefollowingprocedures:
• WeinterviewedtheSupervisor,Clerk,HighwaySuperintendentandtheprincipalaccountclerkto determine if the Board had adopted a credit card policy.
• Wereviewedallclaimsforcreditcardpaymentsforthe2015fiscalyearandtheperiodJanuary1,2016throughJuly31,2016todeterminethetotalnumberandamountofpaymentsmadeforcredit card charges.
• We selected a judgmental sample of the 12 largest dollar amounts of credit card claims paid during2015todetermineiftheBoardrequiresproperdocumentationforuseofcreditcards(receipts and other documentation). We also determined whether the credit card statements are reconciled to receipts prior to payment approval and whether purchases made with credit cards followapplicable laws, statutes,policiesandproceduresandare for legitimateTownpurchases.
• We selected a judgmental sample of three disbursements to credit card companies based on thehighestdollarvalue for theperiodJanuary1,2016 throughJuly31,2016 todetermineif the Board requires proper documentation for use of the credit card (receipts and other documentation). We also determined whether the credit card statement is reconciled to receipts priortopaymentapproval,andthatpurchasesmadewithcreditcardsfollowapplicablelaws,statutes,policiesandproceduresandareforlegitimateTownpurchases.
• Wereviewedallcreditcardpaymentsfor2015andtheperiodJanuary1,2016throughJuly31,2016todeterminewhethertheTownpaidlatefeesorfinancecharges.
WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.
10 Office Of the New YOrk State cOmptrOller10
APPENDIX C
HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT
OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/
Toobtaincopiesofthisreport,writeorvisitourwebpage:
1111Division of LocaL Government anD schooL accountabiLity
APPENDIX DOFFICE OF THE STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller
GabrielF.Deyo,DeputyComptrollerTraceyHitchenBoyd,AssistantComptroller
LOCAL REGIONAL OFFICE LISTING
BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Suite170244 Hawley StreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:[email protected]
Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties
BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:[email protected]
Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties
GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOne Broad Street PlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:[email protected]
Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties
HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:[email protected]
Serving:NassauandSuffolkCounties
NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:[email protected]
Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties
ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThe Powers Building16WestMainStreet,Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:[email protected]
Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties
SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333E.WashingtonStreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]
Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties
STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding,Suite170244 Hawley Street Binghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313
