OFFICE OF THE NEW YORK STATE COMPTROLLER

D IVISION OF LOCAL GOVERNMENT

& SCHOOL ACCOUNTABILITY

Town of
West Seneca
Misuse of Town
Credit Cards and
Resources
Report of Examination
Period Covered:
January 1, 2006 January 21, 2010
2010M-22

Thomas P. DiNapoli
 Table of Contents

Page

AUTHORITY LETTER 2

EXECUTIVE SUMMARY 3

INTRODUCTION 5
Background 5
Objective 7
Scope and Methodology 7
Comments of Local Officials and Corrective Action 7

MISUSE OF TOWN CREDIT CARDS AND RESOURCES 8

Failure to Establish Policies 8
Town Comptroller Duties 8
Town Board Oversight 13
Misuse of Town Credit Cards 14
Recommendations 18

APPENDIX A Response From Local Officials 20

APPENDIX B OSC Comments on the Towns Response 31
APPENDIX C Audit Methodology and Standards 32
APPENDIX D How to Obtain Additional Copies of the Report 33
APPENDIX E Local Regional Office Listing 34

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11

 State of New York
Office of the State Comptroller

Division of Local Government

and School Accountability

September 2010

Dear Local Officials:

A top priority of the Office of the State Comptroller is to help local government officials manage
government resources efficiently and effectively and, by so doing, provide accountability for
tax dollars spent to support government operations. The Comptroller oversees the fiscal affairs of
local governments statewide, as well as compliance with relevant statutes and observance of good
business practices. This fiscal oversight is accomplished, in part, through our audits, which identify
opportunities for improving operations and Board 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 Town of West Seneca entitled Misuse of Town Credit Cards
and Resources. This audit was conducted pursuant to Article V, Section 1 of the State Constitution and
the State Comptrollers authority as set forth in Article 3 of the General Municipal Law.

This audits results and recommendations are resources for local government officials to use in
effectively managing operations and in meeting the expectations of their constituents. If you have
questions about this report, please feel free to contact the local regional office 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

2 OFFICE OF THE NEW YORK STATE COMPTROLLER

 State of New York
Office of the State Comptroller
EXECUTIVE SUMMARY

The Town of West Seneca is located in Erie County, and has a population of approximately 45,000
residents. The Town provides various governmental services to its residents. For the fiscal year ending
December 31, 2008, the Towns general fund expenditures totaled approximately $23 million and the
special grant fund expenditures totaled $2.2 million.

Since at least 1991 the Town has entered into various grant agreements with Federal and State
agencies. The Towns Youth Bureau Executive Director was affiliated with a not-for-profit corporation
named Western New York AmeriCorps (WNY AmeriCorps). This entitys purpose is to solicit and
maintain funds for charitable endeavors.

Scope and Objective

The objective of our audit was to evaluate the Towns internal controls over certain financial activity
for the period January 1, 2006 to January 21, 2010. Our audit addressed the following related
questions:

Does the Town Comptroller properly account for financial activity and audit payments?

Does the Town Board ensure that internal controls over credit card usage are appropriately
designed and operating effectively?

Audit Results

Town officials did not take the proper steps to control WNY AmeriCorps activities and as a result the
Town has suffered financial losses. The Town has already lost over $400,000 and could potentially
lose another $2.4 million because of poor oversight by the Board and the improper activities of the
Executive Director and the functions that he managed within the Towns Youth Bureau and the WNY
AmeriCorps program.

The Town Board failed to establish policies for how the Town would handle WNY AmeriCorps
financial transactions and policies for governing WNY AmeriCorps activities when performed by
Town employees. The Board also did not properly monitor the activities of the Town Comptroller. In
the absence of such guidance and oversight, the Town Comptroller has inappropriately handled WNY
AmeriCorps transactions.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 33

The Comptroller did not perform certain fundamental duties of his office. The Comptroller failed to
properly audit claims and prepare abstracts, and did not properly record all financial activity. He also
did not provide monthly financial reports to the Board, annually audit departments as required, and
failed to provide Board members the results of the Towns external audits.

The Comptroller did not properly record inter-fund activity associated with cash advances made to the
special grant fund from other Town funds. As a result, the Towns 2008 audited financial statements
report a liability referred to as a cash overdraft totaling $2.4 million in the special grant fund. If future
grant receipts do not materialize, moneys will not be available to liquidate some or all of the $2.4
million liability in the special grant fund. If and when that occurs, it is not clear how the Town will
allocate this shortfall among the operating funds that presently report inappropriately inflated cash
positions. Moreover, the operating fund(s) selected by the Town to bear the cost of this shortfall will
also sustain a corresponding decrease in fund balance to reflect this loss.

The Towns Youth Bureau Executive Director and employees under his supervision improperly
used Town credit cards and resources. This misuse occurred over a period of time because the Town
Comptroller consistently failed to properly audit claims, safeguard credit cards and record certain
financial activity and the Town Board did not establish appropriate controls over credit card usage and
did not provide appropriate oversight of the Town Comptroller. We have referred this matter to law
enforcement for investigation.

The Youth Bureau charged over 8,000 transactions totaling approximately $1 million during the
period we reviewed. We analyzed 200 transactions totaling $142,188 on credit cards that were under
the supervision of the Executive Director and found exceptions with 194 of them. These exceptions
included improper and unsupported cash advances, purchases of gift cards and alcoholic beverages,
and payments that personally benefited the Executive Director. We also reviewed 20 claims, totaling
approximately $94,000, and found insufficient information to demonstrate they represented proper,
Town charges.

The Boards and the Comptrollers failure to adequately fulfill their duties allowed the Youth Bureau
Executive Director and other employees to improperly use taxpayer money.

Comments of Local 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. As
specified in Appendix A, Town officials generally disagreed with certain aspects of our findings and
recommendations in our report. Appendix B includes our comments on issues raised in the Towns
response letter.

4 OFFICE OF THE NEW YORK STATE COMPTROLLER

 Introduction

Background The Town of West Seneca is located in Erie County and has a
population of approximately 45,000 residents. The Town provides
various governmental services to its residents and also administers
certain grant programs. For the fiscal year ending December 31, 2008,
the Towns general fund expenditures totaled approximately $23
million and the special grant fund expenditures totaled $2.2 million.

Since at least 1991 the Town entered into various grant agreements
with Federal and State agencies. The Towns Youth Bureau Executive
Director (Executive Director),1 and those under his supervision,
generally fulfilled the grantee responsibilities of the Town. This
included raising local matching share through grant related program
income,2 donations and other grants, as well as administering the
grant programs. They submitted claim forms to the respective Federal
and State agencies for reimbursement of grant eligible expenditures.

The Executive Director was affiliated with a not-for-profit

corporation3 named Western New York AmeriCorps (WNY
AmeriCorps). This entitys purpose is to solicit and maintain funds
for charitable endeavors. The majority of Town employees working
in the Youth Bureau were also affiliated with WNY AmeriCorps
as members. From 1991 until August of 2008, the Towns Youth
Bureau and WNY AmeriCorps were essentially one and the same,
functioning as a department of the Town.

The history of AmeriCorps can be found in earlier service organizations

and initiatives, dating back to President Roosevelts Civilian
Conservation Corps, President Kennedys creation of the Peace
Corps, and President Johnsons Volunteers In Service To America Act
(VISTA). In 1990 President Bush signed the National Service Act into
law, authorizing grants to schools to support service-learning, and
demonstration grants for national service programs to youth corps,
nonprofits, and colleges and universities. In 1993, President Clinton
signed the National and Community Service Trust Act formally
creating the AmeriCorps organization, and establishing expanded
grant awarding opportunities for, among others, nonprofits. In 2002,
President Bush expanded the AmeriCorps program by 50 percent.
One of the expansions resulted from a series of Federal grants from

1
The Towns Youth Bureau Executive Director was hired in 1991.
2
Program income is restricted revenue received for services performed. Other
grants are also considered restricted revenue to comply with specific program
requirements. Donations are considered unrestricted revenue.
3
Formed under Section 402 of Not-For-Profit Corporation Law

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 55

 Homeland Security to provide funding towards projects engaging
citizens in public health, safety, disaster relief and preparedness.

In August 2003, shortly after this expansion of grant and service

availability, the Board minutes include a statement of support for the
WNY AmeriCorps program and a request for adequate funding for
the current and future fiscal years of its operations.

The scope of WNY AmeriCorps operations expanded over time to

include areas outside of the Town and even outside the state, as far
away as Mississippi. While WNY AmeriCorps expanded its reach, it
continued operating as if it was a Town department. In 2008, WNY
AmeriCorps began to employ paid members. Prior to that, WNY
AmeriCorps did not have paid employees nor did it maintain its
own business processes. In effect, the financial operations of WNY
AmeriCorps were all run through the Town.

In June 2008, the Town and WNY AmeriCorps entered into a grant
administration agreement, whereby, effective August 2008, the Town
formally assigned its grantee responsibilities to WNY AmeriCorps4 to
establish its own business functions (payroll processing, bill paying,
etc.). In addition, certain Youth Bureau employees became employees
of WNY AmeriCorps. The Town provides a pre-determined monthly
cash advance to WNY AmeriCorps to sustain its grantee operations
through December 2010. The monthly cash advance amount ranges
between $288,548 in September 2008 to a projected amount of
$91,980 in December 2010.

The Towns certified public accountant issued the 2008 audited

financial statements on November 25, 2009. In these statements,
the Towns special grant fund reports a liability classified as a cash
overdraft totaling $2.4 million. This overdraft, which essentially
represents a cash advance from other Town operating funds, is
offset by $1.6 million due from other governments (Federal/State
agencies) and an $804,467 receivable from WNY AmeriCorps.5 This
is exclusive of the more than $400,000 the Town already wrote off
as uncollectible and is discussed in more detail later in this report. In
addition, this receivable will continue to fluctuate as cash advances
are made and grant claims are submitted for reimbursement.

Due to an inadequate control environment, the Town may not

receive this entire amount. The Town Board provided the Executive

4
The scope of our audit did not include making a determination as to whether the
Town had the authority to engage in these previous activities and whether the Town
could assign grantee responsibilities.
5
There is no formal agreement in place requiring WNY AmeriCorps to pay this
amount.

6 OFFICE OF THE NEW YORK STATE COMPTROLLER

 Director, and those under his supervision, with significant autonomy
and did not adequately monitor the evolution of WNY AmeriCorps
and its relationship with the Town. Also, the Board did not ensure
that adequate controls were in place to properly monitor the
related financial activity and properly safeguard Town resources.
Furthermore, the Town Comptrollers failure to adequately fulfill his
duties combined with the convoluted relationship between the Town
and WNY AmeriCorps provided Town employees affiliated with
WNY AmeriCorps with the opportunity to misuse Town resources.

Officials from a Federal Inspector Generals Office are currently

auditing WNY AmeriCorps and its use of grant moneys.

Objective The objective of our audit was to evaluate the Towns internal
controls over certain financial activity. Our audit addressed the
following related questions:

Does the Town Comptroller properly account for financial

activity and audit payments?

Does the Town Board ensure that internal controls over

credit card usage are appropriately designed and operating
effectively?

Scope and We examined the Towns internal controls over certain financial
Methodology activity for the period January 1, 2006 to January 21, 2010.

We conducted our audit in accordance with generally accepted

government auditing standards (GAGAS). More information on such
standards and the methodology used in performing this audit are
included in Appendix C of this report.

Comments of The results of our audit and recommendations have been discussed
Local Officials and with Town officials and their comments, which appear in Appendix
Corrective Action A, have been considered in preparing this report. As specified in
Appendix A, Town officials generally disagreed with certain aspects
of our findings and recommendations in our report. Appendix B
includes our comments on issues raised in the Towns response letter.

The Board has the responsibility to initiate corrective action. A

written corrective action plan (CAP) that addresses the findings and
recommendations in this report should be prepared and forwarded
to our office within 90 days, pursuant to Section 35 of the General
Municipal Law. For more information on preparing and filing your
CAP, please refer to our brochure, Responding to an OSC Audit
Report, which you received with the draft audit report. We encourage
the Board to make this plan available for public review in the Town
Clerks office.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 77
 Misuse of Town Credit Cards and Resources
The Towns operation of a not-for-profit organization is unusual,
particularly when the activities of the not-for-profit reach outside
the Towns lawful purposes. Such a situation would require clear
operating policies and strict Board oversight to ensure that the
Towns legitimate interests were protected at all times. However,
we found that Town officials did not take the proper steps to control
WNY AmeriCorps activities and as a result the Town has suffered
financial losses. The Town has already lost over $400,000 and could
potentially lose another $2.4 million because of poor oversight by the
Board and the improper activities of the Executive Director and the
functions that he managed within the Towns Youth Bureau and the
WNY AmeriCorps program.

Failure to Establish The Town Board (Board) failed to establish policies for how the
Policies Town would handle WNY AmeriCorps financial transactions and
policies for governing WNY AmeriCorps activities when performed
by Town employees. The Board also did not properly monitor the
activities of the Town Comptroller. In the absence of such guidance
and oversight, the Town Comptroller has inappropriately handled
WNY AmeriCorps transactions. In addition, Town employees have
operated WNY AmeriCorps in a manner that did not benefit the Town
and may not have contributed to the mission of AmeriCorps.

Town Comptroller The Town established the office of Town Comptroller6 (Comptroller)
Duties to assume certain accounting and financial duties of the Board, Town
Supervisor (Supervisor) and Town Clerk. The Comptrollers duties
include auditing claims, preparing an abstract of audited claims
directing the Supervisor to make payment, accounting for financial
activity, providing monthly financial reports to the Board and annually
auditing Town departments. We found that the Comptroller did not
perform certain fundamental duties of his office. The Comptroller
failed to properly audit claims submitted by the Executive Director, or
those he supervised. The Comptroller also failed to prepare abstracts,
and did not properly record all WNY AmeriCorps financial activity.
He also did not provide monthly financial reports to the Board,
annually audit departments as required, and failed to provide Board
members the results of the Towns external audits.

Audit of Claims The claims auditing process is an integral part of

the Towns internal controls because it includes procedures designed
to ensure that the Town pays only legal and proper vendor claims.
6
The Board established the office of Town Comptroller in 1988 and appoints a
Comptroller on a bi-annual basis.

8 OFFICE OF THE NEW YORK STATE COMPTROLLER

 The Comptroller must audit all claims, reviewing them for proper
approvals, verifying the accuracy and legitimacy of the claimed
amount, ensuring that all necessary documentation (e.g., signed
receiving slips and invoices) is attached to the claim, and confirming
that sufficient appropriations are available prior to payment. After
the Comptroller completes his audit of claims, he must prepare an
abstract and submit it to the Supervisor directing payment of only the
claims that are listed as having been audited and approved.

The Comptroller did not perform a proper audit of claims

submitted by the Executive Director, or those he supervised, for
WNY AmeriCorps or Youth Bureau activity. Such claims generally
lacked any supporting documentation, such as invoices or receipts
to identify the nature of the charges. The Comptroller stated that
the financial activity and account coding is based on the Executive
Directors judgment. He also stated that he did not require any
Town departments to submit documentation supporting credit card
claims. Instead he relies, without any verification, on the respective
department heads to retain this documentation for review, even
though it is the responsibility of the Comptroller to audit and approve
these claims. We found no evidence that any review of supporting
documentation had been performed by the Comptroller.

The Comptroller also did not prepare an abstract of audited claims

for the Town Supervisor; therefore, proper authorization was not
obtained prior to printing and disbursing the checks for payment.
Although the Comptroller initials the claims indicating his audit, he
stated that, in some cases, checks are printed and signed prior to his
audit, which could result in a circumvention of the audit of claims
requirement.

Accounting Properly accounting for all of the Towns financial

activity is one of the Comptrollers primary responsibilities. The
Comptroller must maintain complete, accurate and timely records to
properly account for all of the Towns financial activities. There are
specific funds that a Town must use to properly account for financial
activity. For example:

The general fund is the principal operational fund of the

Town and includes all receipts, disbursements and other
transactions not required to be recorded in other funds.
General fund operations are largely supported by the levy of
real property taxes.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 99

 A special grant fund7 is used to account for State and Federal
grant activity including expenditures, reimbursements, local
matching share, program income and donations. These
moneys are typically restricted for the specific purpose of the
grant and, therefore, cannot be used for other purposes. For
grant programs where State and Federal revenue is paid on
a reimbursement basis, other town funds, such as the general
fund, advance cash to the special grant fund. This inter-fund
activity is recorded as an asset in the general fund (due from
special grant fund) and a liability in the special grant fund
(due to general fund) until the reimbursement is received.

The trust and agency fund is used to account for assets held
by the Town as an agent for individuals, private organizations
or other governments. Agency funds are custodial in nature.
Transactions such as payroll withholdings are accounted
for in the agency fund because they are withheld, pending
transmittal at a later date.

Financial activity for the Towns Youth Bureau, WNY AmeriCorps

and grant programs was improperly accounted for in the general,
special grant and trust and agency funds. During our audit period,
the Comptroller recorded related expenditures of $862,9008 in the
general fund and $7.6 million9 in the special grant fund. In addition
he recorded disbursements related to these programs totaling $2.8
million10 in the trust and agency fund. The Towns external auditor
subsequently analyzed and reclassified cash receipt and disbursement
activity recorded in the trust and agency fund as revenues and
expenditures in other Town funds. However, the Comptroller did
not adjust the Towns accounting records to reflect these significant
reclassifications. Therefore, the Towns accounting records are
inaccurate and do not agree with the audited financial statements.
Moreover, the Board cannot rely on the Comptrollers accounting
records to make informed financial decisions.

The Executive Director and employees under his supervision

deposited restricted (e.g., matching funds and grants) and unrestricted
moneys (e.g., donations) into the Towns trust and agency fund bank
account. However, the Comptroller did not determine the source of
these moneys to properly account for this activity as it occurred.
7
The accounting basis is the same as the general fund, including the use of
budgetary accounts. However the original authorization does not lapse since it is
based on an application approved by local officials and the Federal government.
8
Actual expenditures reported on the Towns Annual Financial Report for the
Youth Bureau from 2006 through 2008 totaled $772,102, 2009 expenditures
totaling $90,799 are through September 4, 2009.
9
Data as of December 31, 2008
10
Data as of August 14, 2009

10 OFFICE OF THE NEW YORK STATE COMPTROLLER

 Rather, after the deposits were made, the Executive Director or
other employees under his supervision provided a deposit slip to the
Comptroller and indicated what fund (e.g., special grant fund or trust
and agency fund) to record the activity in. During our audit period
approximately $2.5 million was recorded as cash receipts in the
trust and agency fund for this activity. This was composed of program
income, donations, proceeds from fundraising, other grants and a
transfer of $283,796 from the general fund. The transfer11 in effect
is the amount borne by Town taxpayers to address salary and other
cost allocation errors that presumably occurred in previous years
between the Town Youth Bureau and WNY AmeriCorps. Because
these transactions were recorded in the trust and agency fund, no
revenues or expenditures were recognized to properly account for
grant activity at the time these transactions occurred.

The Comptroller also improperly approved claims, generally without

any supporting documentation, which were disbursed from the trust
and agency fund. These disbursements totaled $1.1 million for the
period January 1, 2006 through August 14, 2009. The Executive
Director and certain other employees under his supervision stated
that they decided where disbursements should be charged by the
Comptroller in the Towns accounting records. If they believed the
disbursement was grant related and would be allowed,12 they would
have the Comptroller account for it in the special grant fund. If they
believed the disbursement was related to Town operations, they
would have the Comptroller charge it to Youth Bureau appropriations
in the general fund. If neither of these conditions could be met, they
had the Comptroller account for the disbursement in the trust and
agency fund. As such, the Comptroller allowed employees to dictate
the use of this money and how it should be recorded.

The Comptroller did not properly record inter-fund activity

associated with transfers made to the special grant fund from other
Town funds. The accounting records only reflected the cash amounts
used by the special grant fund. There was no recognition of the
amount due from the special grant fund to the funds that loaned the
cash (e.g., general, highway and special district funds). The Towns
2008 audited financial statements13 reported a liability referred to
as a cash overdraft totaling $2.4 million in the special grant fund.
This approach does not appropriately reflect the financial position
of the other Town operating funds, which effectively have less cash
11
The Town Board approved this transfer in October 2008. However, the Town
accounting records and the audited financial statements reflected this transaction as
having occurred in 2007.
12
Federal grant awards are subject to Federal audit. If the Federal auditors identify
disallowances (expenditures that are not chargeable to the grant) the Grantee (in
this case the Town) will not be reimbursed.
13
Completed November 25, 2009

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11

11
 available to discharge liabilities than is reflected on their respective
balance sheets. The cash overdraft liability in the special grant fund is,
in essence, expected to be liquidated by the receipt of grant moneys in
the future, as reimbursement claims are submitted and paid. However,
in the event that any of these future grant receipts do not materialize,
moneys will not be available to liquidate some or all of the $2.4
million liability in the special grant fund. If and when that occurs, it
is not clear how the Town will allocate this shortfall among the operating
funds that presently report inappropriately inflated cash positions.
Moreover, when that occurs, the operating fund(s) selected by the
Town to bear the cost of this shortfall will also report a corresponding
decrease in fund balance to reflect this loss.

The Towns external auditor also analyzes the various grant programs
and, with assistance from WNY AmeriCorps members, establishes
the amount expected to be received in reimbursements from the
Federal and State agencies funding the grant programs. This analysis
by the external auditor cannot be performed until he reclassifies all
of the cash activity from the trust and agency fund as revenues and
expenditures. At that point, he establishes which expenditures are
eligible for reimbursement.

The reported receivable on December 31, 2008 included two

components: 1) a receivable from WNY AmeriCorps of $804,467
and 2) a State and Federal receivable of $1.6 million. The $804,467
receivable from WNY AmeriCorps represents the disbursement of
Town funds for activities that will not be reimbursed by the State or
Federal government and are unbudgeted expenditures of Town funds.
The $1.6 million receivable consists of 12 grant programs across
various grant periods. The requests for reimbursement from State and
Federal agencies are typically reviewed by the agencies and an initial
determination is made whether the claimed expenditures are eligible.
In addition, State and Federal auditors may subsequently audit the
financial activity and determine whether the amounts claimed were
appropriate. As such, the amount reported as receivable at December
31, 2008, in addition to any reimbursements already received,
are subject to audit and could be adjusted down as a result. Again,
the Towns advances are ultimately at risk for any such negative
adjustments.

The Town and WNY AmeriCorps have made attempts to address the
cash overdraft liability and the receivable from WNY AmeriCorps.
In September 2009, the Town and WNY AmeriCorps amended their
grant administration agreement and formalized a plan to address their
respective roles and responsibilities with respect to grant activities.
The amended agreement is subject to approval by the New York State
Comptrollers Office and the New York State Attorney General. As

12 OFFICE OF THE NEW YORK STATE COMPTROLLER

 of January 21, 2010, this amended agreement has not been approved
by the State. Regardless, the Town, pursuant to the terms of this
agreement, already transferred $445,228 from the general fund to the
special grant fund to reduce the cash overdraft liability to its present
$2.4 million amount. The Towns general fund paid for certain
expenditures previously accounted for in the special grant fund
that were likely ineligible for reimbursement from grant programs.
This $445,228 cost to the Towns taxpayers is in addition to the
$804,467 amount referred to above that reflects additional ineligible
disbursements made.

Town Board Oversight The Supervisor and the four14 Council members of the Town Board are
responsible for overseeing the operations and finances of the Town.
The Supervisor, along with other administrative staff, is generally
responsible for the administration and supervision of day-to-day
Town operations. The Board is responsible for monitoring the Towns
financial activity and providing proper oversight of the Comptroller.
The Board can fulfill this obligation by ensuring that the Comptroller
prepare and present monthly financial reports, conduct annual audits
and present external audit reports for review. We found that the Board
has not fulfilled its oversight functions as follows:

Monthly Financial Reporting Pursuant to Town Law, the

Comptroller must provide the Board a monthly revenue and
expenditure report. We found that the Comptroller did not provide
monthly reports to the Board. The Comptroller indicated that he
was unaware of this requirement. Furthermore, we reviewed15 the
Board meeting minutes and found no indication that Board members
asked for monthly reports. As such, the Board did not have adequate
financial information with which to monitor Town finances.

Annual Audit Town Law generally requires that on or before the

20th day of January, each town officer or employee who received
or disbursed any moneys in the previous year, must provide an
accounting to the Comptroller for such moneys and produce all books,
records, receipts, vouchers, and canceled checks for audit. Such
annual accounting to, and examination by, the Comptroller provides
an added measure of assurance that financial records and reports
contain reliable information on which to base management decisions
and gives both the Board and Comptroller the opportunity to monitor
the fiscal procedures of the Town. The Comptroller did not perform
an annual audit of the records of Town officials and employees that
received or disbursed moneys on behalf of the Town during our audit

14
A public referendum was passed in June 2009 to downsize the Board by two
members, effective January 1, 2010.
15
We reviewed Town Board minutes for the period August 2008 through August
2009.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 13
13
 period. Board members were aware16 of this obligation and did not
require corrective action be taken. The failure to perform an annual
audit reduces accountability over Town assets and increases the risk
that errors and irregularities will not be detected and corrected.

Presentation of External Audit Entities, such as the Town, that

expend $500,000 or more of Federal funds in a year must have a
single audit conducted for that year. The Town must engage a public
accountant to perform this service. The Board can and should
use audits such as these to monitor the Towns financial activity.
Furthermore, the Board has a responsibility to ensure corrective
action is taken to address any findings brought to its attention by
such audits. During our audit period, the Town engaged independent
public accountants to perform a single audit. The Comptroller did
not provide, or discuss the audit results with Board members. We
reviewed the last three completed audit reports,17 which disclosed
repeat findings relating to the Comptrollers Office that were not
corrected.

Misuse of Town For the period January 1, 2006 through June 29, 2009, the Town paid
Credit Cards approximately $1 million for charges on 35 Town credit card accounts
that were used by the Town Youth Bureau and WNY AmeriCorps. The
credit cards were routinely used for a variety of purchases including,
but not limited to: cash advances ($21,000), meals and refreshments
($130,000), travel and entertainment ($250,000), gift cards and
certificates ($30,000), donations and sponsorships ($50,000), home
improvement and landscaping materials and supplies ($140,000),
apparel and sporting/outdoor supplies ($95,000), administrative and
office items ($195,000), and vehicle and equipment items ($60,000).
Some of these items, such as donations and gift cards, would generally
not be appropriate Town purchases. We have referred this matter to
law enforcement for investigation.

Written policies and procedures are necessary for establishing an

effective internal control framework for the general use of credit cards
and the related operations of WNY AmeriCorps by employees in the
Towns Youth Bureau. The Board should adopt a comprehensive
policy, which describes how the cards must be used and by whom, the
documentation needed to support credit card claims, and the Towns
recourse in the event of improper card use. The policy should, at a
minimum: set appropriate credit limits, establish custody of the cards
when not in use, require proper documentation for all transactions,

16
In the March 2, 2009 Board minutes, a Board member questioned the Comptroller
regarding annual audits. The Comptroller responded that he had not performed
them.
17
For the fiscal years ending December 31, 2006, 2007 and 2008 (completed
November 25, 2009).

14 OFFICE OF THE NEW YORK STATE COMPTROLLER

 provide for periodic monitoring by appropriate officials of the Town,
and establish a means to recoup any unauthorized expenditures. The
Comptroller is also responsible for ensuring that all claims for credit
cards are audited to verify that charges listed on the billing statements
are proper and supported by adequate documentation, including
receipts. The absence of comprehensive written guidance regarding
credit card usage and a proper claims audit process increases the
risk of fraud, waste and abuse occurring and not being detected or
corrected in a timely manner.

The Board did not establish appropriate controls over Town credit
cards and did not develop a credit card policy until November 2009.
Although the Board had a purchasing policy, it did not provide
adequate guidance to the Comptroller, department heads and staff
with respect to credit card transactions. The Board did not monitor
how the cards were distributed, controlled and used. Ten individuals
had credit card administrator functions; they had the authority to
modify credit card parameters such as credit limits, cash advance
options and provide additional cards to other individuals. Further, the
credit limit on the master account under the Executive Director was
excessive as the limit was as high as $42,000. Finally, we noted that
22 of these monthly billings were paid late, resulting in late fees that
the Town paid totaling approximately $3,000.

At its August 24, 2009 meeting, the Board directed the Comptroller
to cancel the Town credit cards under the control of the Youth
Bureau Executive Director which included cards being used by
WNY AmeriCorps members that were no longer Town employees.
While WNY AmeriCorps staff provided a bag of shredded credit
cards, Town officials should have contacted the credit card company
and proactively canceled the cards to ensure that all the credit card
accounts under the Executive Directors master account were closed.

We analyzed 200 transactions totaling $142,188 on credit cards that

were under the supervision of the Executive Director and found
exceptions with 194 of them. These exceptions included improper
and unsupported cash advances, gift cards and alcoholic beverage
purchases, and payments that personally benefited the Executive
Director. The more significant findings are as follows:

Cash Advances and Gift Cards We found cash advances18

on the credit cards that total over $20,000 between January

18
Twelve transactions totaling $2,678 were cash advances that generally lacked
any supporting documentation. During our review of credit card billing statements
we totaled cash advances and cash advance fees on the credit cards and found that
a total of $20,188 was advanced from January 2006 through December 2008 and
cash advance fees totaled $542.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 15

15
 2006 and December 2008. The Town could provide no
documentation that the cash obtained by these advances was
used for Town purposes or an explanation as to why it was
necessary to take cash advances. Moreover, cash advances
were not needed for Town purposes since the credit card
could have been used to purchase goods or services. We also
identified 30 transactions totaling $15,647 that were for the
purchase of either gift cards or certificates which, in essence,
is a means of obtaining cash through the credit card. It is
difficult to determine what these gift cards or certificates were
ultimately used for and, therefore, that this use of Town funds
was for an authorized purpose. The Town could not provide
a list of recipients or documentation to prove whether these
were proper Town expenditures.

Donations We found 12 transactions totaling $14,902 for

donations or sponsorships of other organizations, including
private organizations such as the Salvation Army, the Arts
Council, the University at Buffalo Foundation, the Food
Bank of Western New York and Baker Victory Services. The
State Constitution prohibits municipalities from making gifts
or loans of public money or property to or in aid of private
individuals, corporations, associations or undertakings.

Insufficient Documentation Seventy transactions totaling

$73,830 were insufficiently documented to indicate either
the item or service purchased. Included were 26 transactions
totaling $15,503 related to travel outside of the Western New
York area. Further, two payments for an all-terrain vehicle
totaling $6,985 were made with two different Town credit
cards, on the same day. No reason was provided regarding
why these payments were made in this manner. In addition,
while we found this vehicle, paid for with Town funds, in
a Town building, it is apparently being used exclusively by
WNY AmeriCorps.

Meals, Refreshments and Entertainment Fifty-five

transactions totaling $17,064 included meals, refreshments or
entertainment charges at locations across Western New York
and Canada. There was no documentation attached to indicate
who was in attendance or how these expenditures represented
a proper use of Town funds. In addition, 15 transactions
included alcohol purchases totaling $1,644. The Executive
Director indicated that these were generally networking
events and adults were in attendance, so alcohol is sometimes
provided. Town funds should not be used to purchase alcohol.

16 OFFICE OF THE NEW YORK STATE COMPTROLLER

 Executive Director The Executive Director personally
benefited from certain transactions. We noted that he had been
provided a Town vehicle until June 2008 at which time the
Board revoked that privilege. In July 2008, WNY AmeriCorps
entered into a lease agreement for a vehicle to be used by
the Executive Director. The down payment of $1,024 was
inappropriately charged on the Towns credit card and paid
from the Towns trust and agency fund. Payments made from a
properly used trust and agency fund are generally not required
to be audited, since the activity relates to assets held by the
Town for other governments such as payroll withholdings.
Therefore, accounting for lease activity in this manner would
likely have resulted in less scrutiny. The Executive Director
also inappropriately used the Towns credit card to pay two
parking tickets he received totaling $170.

No Supporting Documentation Thirteen transactions

totaling $12,839 did not have any supporting documentation.
For example, eight charges totaling $11,437 were from
office, technology or home improvement vendors, as noted
on the credit card billing statement. It was not clear that the
purchased items were used for Town purposes.

Due to the significant problems identified during our review of

credit cards, we also tested 20 claims submitted by the Executive
Director (or those he supervised), totaling approximately $94,000.
These claims generally had some type of documentation19 attached,
but often lacked enough information to demonstrate that they
represented proper Town charges. The most significant exceptions
were as follows:

Professional Services Six claims totaling $32,074 were for

professional services. One general fund claim for a $23,863
payment to a non-profit service organization did not indicate
the hours worked and by whom. The Executive Director
signed the claim in February 2008, for services performed
from April to December 2007. This entity provides school
intervention services throughout Western New York. No
contract or other documentation was provided for our review
from which to determine what specific services were to be
provided, to whom or where. As such, we question the
propriety of this payment and whether it furthered a purpose
for which the Town could incur the cost.

19
All 20 tested claims had some supporting documentation attached; however,
18 of the 20 were not sufficiently itemized or detailed to determine whether they
represented appropriate Town charges.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 17

17
 Another questionable claim was for $1,250 paid to a
consultant, who was also the WNY AmeriCorps Board
President at the time. In addition to this claim, we found
that the Comptroller authorized monthly payments from the
trust and agency fund to this individual as a consultant. From
December 2005 through May 2006 these payments totaled
$7,500. No contract or other documentation was provided
for our review to establish what function this individual
performed as a consultant. This was likely the reason why
the payments were inappropriately made from the trust and
agency fund (see section of the report entitled Accounting
for further discussion of the improper recording of financial
activity).

Capital Purchase One claim totaling $18,477 was for

flooring installed in a parochial school located in the City
of Buffalo. It appears that the Town initially paid for this,
expecting to be reimbursed from a grant. However, WNY
AmeriCorps (who received the grant) did not deposit the
grant proceeds into the Towns bank account upon receipt and
there was no indication the Town was ever reimbursed for the
$18,477 cost. The State Constitution prohibits municipalities
from making gifts or loans of public money or property to
or in aid of private individuals, corporations, associations or
undertakings. It also prohibits the use of public money, either
directly or indirectly, in aid or maintenance of any school or
institution of learning wholly or partly under the direction of
any religious denomination, or in which any denominational
tenet or doctrine is taught.

Meals and Refreshments Four claims totaling $13,364

were for meals and refreshments. One claim totaling $10,788
was for catering for 225 people at a fundraising event held
for WNY AmeriCorps. There was no list of attendees, or an
indication of what services were provided.

Recommendations 1. The Board should exercise appropriate oversight and ensure

that the Comptroller fulfills all of the duties and responsibilities
assigned to that office.

2. The Comptroller should perform a proper and timely audit of

claims to ensure that appropriate supporting documentation is
available with which to determine if the charges are accurate,
properly authorized and represent legitimate Town costs.

18 OFFICE OF THE NEW YORK STATE COMPTROLLER

 3. The Comptroller should prepare an abstract of audited claims,
provide it to the Supervisor prior to checks being prepared, and
only then should the Supervisor sign the checks.

4. The Comptroller should properly account for all Town financial

activity and the Towns accounting records should fully support
the amounts reported in the audited financial statements.

5. The Comptroller should provide the Board a monthly report of all

receipts and expenditures.

6. The Comptroller should perform an annual audit of all Town

officers and employees who receive or disburse moneys.

7. The Comptroller should provide the Board with the results of the
Towns external audits.

8. The Board and Comptroller should ensure that employees and

officials comply with the credit card policy and procedures.

9. The Board should restrict access to credit cards to only Board

authorized Town officials and employees. Further, the Board
should establish reasonable credit limits and periodically review
them for appropriateness and restrict the use of cash advances on
credit cards.

10. The Board should establish procedures to routinely monitor the

Comptrollers oversight of the Towns credit cards.

11. The Board should consult with the Town Attorney to determine if
there are grounds for recouping any improper payments that were
made.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 19

19
 APPENDIX A

RESPONSE FROM LOCAL OFFICIALS

The local officials response to this audit can be found on the following pages.

20 OFFICE OF THE NEW YORK STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 21
21
See
Note 1
Page 31

See
Note 1
Page 31

22 OFFICE OF THE NEW YORK STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 23
23
24 OFFICE OF THE NEW YORK STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 25
25
26 OFFICE OF THE NEW YORK STATE COMPTROLLER
 See
Note 2
Page 31

See
Note 3
Page 31

See
Note 4
Page 31

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 27

27
See
Note 2
Page 31

See
Note 5
Page 31

28 OFFICE OF THE NEW YORK STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 29
29
30 OFFICE OF THE NEW YORK STATE COMPTROLLER
 APPENDIX B

OSC COMMENTS ON THE TOWNS RESPONSE

Note 1

We identified significant control weaknesses and process deficiencies that were still occurring as of
the end of our field work. Furthermore, we reviewed and found exceptions with transactions that
occurred in 2008 and 2009.

We acknowledge that the current Board has taken significant steps to separate WNY AmeriCorps
operations from those of the Town to correct the overlapping of operations that had persisted for many
years. While actions have been taken, it is essential that the Board address the deficiencies identified
in our report. Further, the Town should take appropriate action to ensure that it receives all the
monies it is due as a result of WNY AmeriCorps activities.

Note 2

We confirmed with various department heads that the Town Comptroller did not require them to
submit supporting documentation for credit card activity.

Note 3

During our fieldwork the Town Comptroller was not properly accounting for certain financial activity
and had not made significant adjustments to the Towns financial records to ensure that they agreed
with the audited financial statements. To a great degree, the Town Comptroller is relying upon the
external auditor to properly account for certain financial activity. Because the Town Comptroller waits
for significant adjustments from the auditor, the financial records are not reliable during the year.

Note 4

The Town Comptroller failed to perform his duty to annually audit all town officers or employees who
received or disbursed any monies, as required by Town Law.

Note 5

The Town Comptroller did not provide, or discuss the external audit results with Board members. He
also did not provide the required monthly revenue and expenditure report to the Board.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 31

31
 APPENDIX C

AUDIT METHODOLOGY AND STANDARDS

During this audit, we evaluated the Towns internal controls over certain financial activity for the
period January 1, 2006 to January 21, 2010. To accomplish our audit objective and obtain relevant
audit evidence, we performed the following procedures:

We interviewed appropriate Town officials and employees, members of WNY AmeriCorps,

and the Towns external auditor to gain an understanding of the operations and the relationship
between the Town and WNY AmeriCorps.

We reviewed Town Board meeting minutes, vendor history reports, claim vouchers and
supporting documents, purchase logs, bank statements, check registers, canceled checks, bank
reconciliations, cash receipts and supporting documents, general ledger activity reports, journal
entries, financial statements, internal memos, and credit card agreements.

We reviewed records provided by the Towns external auditor to assist in determining whether
Town funds were properly used.

We used a risk based judgmental process to select credit card transactions and claims for
review, focusing on high risk transactions and payments to vendors not typically used by
municipalities.

We conducted this performance audit in accordance with generally accepted government auditing
standards (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
objective. We believe that the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objective.

32 OFFICE OF THE NEW YORK STATE COMPTROLLER

 APPENDIX D

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

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

Office of the State Comptroller

Public Information Office
110 State Street, 15th Floor
Albany, New York 12236
(518) 474-4015
http://www.osc.state.ny.us/localgov/

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 33

33
 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
ALBANY REGIONAL OFFICE
Kenneth Madej, Chief Examiner
Office of the State Comptroller
22 Computer Drive West
Albany, New York 12205-1695
(518) 438-0093 Fax (518) 438-0367
Email: Muni-Albany@osc.state.ny.us
Serving: Albany, Columbia, Dutchess, Greene,
Schenectady, Ulster counties
BINGHAMTON REGIONAL OFFICE
Patrick Carbone, Chief Examiner
Office of the State Comptroller
State Office Building, Room 1702
44 Hawley Street
Binghamton, New York 13901-4417
(607) 721-8306 Fax (607) 721-8313
Email: Muni-Binghamton@osc.state.ny.us
Serving: Broome, Chenango, Cortland, Delaware,
Otsego, Schoharie, Sullivan, Tioga, Tompkins counties
BUFFALO REGIONAL OFFICE
Robert Meller, Chief Examiner
Office of the State Comptroller
295 Main Street, Suite 1032
Buffalo, New York 14203-2510
(716) 847-3647 Fax (716) 847-3643
Email: Muni-Buffalo@osc.state.ny.us
Serving: Allegany, Cattaraugus, Chautauqua, Erie,
Genesee, Niagara, Orleans, Wyoming counties
GLENS FALLS REGIONAL OFFICE
Karl Smoczynski, Chief Examiner
Office of the State Comptroller
One Broad Street Plaza
Glens Falls, New York 12801-4396
(518) 793-0057 Fax (518) 793-5797
Email: Muni-GlensFalls@osc.state.ny.us
Serving: Clinton, Essex, Franklin, Fulton, Hamilton,
Montgomery, Rensselaer, Saratoga, Warren, Washington
counties
34 OFFICE OF THE NEW YORK STATE COMPTROLLER
HAUPPAUGE REGIONAL OFFICE
Ira McCracken, Chief Examiner
Office of the State Comptroller
NYS Office Building, Room 3A10
Veterans Memorial Highway
Hauppauge, New York 11788-5533
(631) 952-6534 Fax (631) 952-6530
Email: Muni-Hauppauge@osc.state.ny.us
Serving: Nassau, Suffolk counties
NEWBURGH REGIONAL OFFICE
Christopher Ellis, Chief Examiner
Office of the State Comptroller
33 Airport Center Drive, Suite 103
New Windsor, New York 12553-4725
(845) 567-0858 Fax (845) 567-0080
Email: Muni-Newburgh@osc.state.ny.us
Serving: Orange, Putnam, Rockland,
Westchester counties
ROCHESTER REGIONAL OFFICE
Edward V. Grant, Jr., Chief Examiner
Office of the State Comptroller
The Powers Building
16 West Main Street Suite 522
Rochester, New York 14614-1608
(585) 454-2460 Fax (585) 454-3545
Email: Muni-Rochester@osc.state.ny.us
Serving: Cayuga, Chemung, Livingston, Monroe,
Ontario, Schuyler, Seneca, Steuben, Wayne, Yates counties
SYRACUSE REGIONAL OFFICE
Rebecca Wilcox, Chief Examiner
Office of the State Comptroller
State Office Building, Room 409
333 E. Washington Street
Syracuse, New York 13202-1428
(315) 428-4192 Fax (315) 426-2119
Email: Muni-Syracuse@osc.state.ny.us
Serving: Herkimer, Jefferson, Lewis, Madison,
Oneida, Onondaga, Oswego, St. Lawrence counties