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.eport of -xamination
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0homas 8. !i&apoli
 Table of Contents

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

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11

 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 General 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

2 OFFICE OF THE NEW YORK STATE COMPTROLLER

 Introduction

Background 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 is
governed 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. The

Treasurer 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.

Objective The objective of our audit was to examine the DistrictGs budget
process. 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_

Scope and During this audit, we interviewed District of!cials about their
Methodology 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 YGAGASZ. 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 District of!cials and their comments, which appear in
Corrective Action Appendix A, have been considered in preparing this report. Except

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 33

 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.

4 OFFICE OF THE NEW YORK STATE COMPTROLLER

 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 the
Town 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 to
the 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 spendb 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:

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 55

 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
Actual
Expenditures $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 cif the full amount is not taken.d As a
result 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 expendituresb 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 to

construct a new !re sub-stationb at December 31, 2008, this fund
had a balance of $456,054. The District also legally established its
apparatus reserve fund to purchase !re apparatusb 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.

6 OFFICE OF THE NEW YORK STATE COMPTROLLER

 $589,000. The 2009 budget included an appropriation to transfer
$200,000 to the Station II reserveb 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 any
salaries of elected of!cials. District of!cials should use account
codes for revenues and expenditures from OSCGs fniform System
of Accounts. Also, the budget should be comprised of four columns:
column one showing the !nancial activity from the most recently
completed !scal yearb column two showing the current yearGs budget
including all amendments to dateb column three showing the ensuing
yearGs preliminary budgetb 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 did
not include the estimated revenues. Furthermore, District of!cials
did not use account codes as prescribed by the fniform 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 and
consistent 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

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 77

 on historical trends andgor actual estimates of known purchases andg
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, eXuipmentgcapital 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 decided
not 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 2008b

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 or
estimates 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
ceach provided suggested dollar amounts for the individual expense
categories.d However, there were no schedules or other support for
amounts budgeted.

8 OFFICE OF THE NEW YORK STATE COMPTROLLER

 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.

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

budgets on reasonable assumptions using historical trends andgor
actual estimates.

2. The Board of Commissioners should use the correct budget

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

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 99

 APPENDIX A

RESPONSE FROM LOCAL OFFICIALS

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

10 OFFICE OF THE NEW YORK STATE COMPTROLLER

 See
Note 1
Page 14

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11

11
 See
Note 2
Page 14

12 OFFICE OF THE NEW YORK STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 13
13
 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 cappropriately budgeted a $300,000 transfer to its
reserves in the 2008 budget.d

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.

14 OFFICE OF THE NEW YORK STATE COMPTROLLER

 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 YGAGASZ. 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.

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 15

15
 APPENDIX D

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

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

Of!ce of the State Comptroller

Public Information Of!ce
110 State Street, 15th Floor
Albany, New iork 12236
Y518Z 474-4015
http:ggwww.osc.state.ny.usglocalgovg

16 OFFICE OF THE NEW YORK STATE COMPTROLLER

 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 GLENS FALLS REGIONAL OFFICE
Robert Meller, Chief Examiner Karl Smoczynski, Chief Examiner
Of!ce of the State Comptroller Of!ce of the State Comptroller
295 Main Street, Suite 1032 One Broad Street Plaza
Buffalo, New iork 14203-2510 Glens Falls, New iork 12801-4396
Y716Z 847-3647 Fax Y716Z 847-3643 Y518Z 793-0057 Fax Y518Z 793-5797
Email: Muni-Buffalojosc.state.ny.us Email: Muni-GlensFallsjosc.state.ny.us

Serving: Allegany, Cattaraugus, ChautauXua, Erie, Serving: Clinton, Essex, Franklin, Fulton, Hamilton,
Genesee, Niagara, Orleans, Wyoming counties Montgomery, Rensselaer, Saratoga, Warren, Washington
counties

ROCHESTER REGIONAL OFFICE ALBANY REGIONAL OFFICE

Edward V. Grant, Jr., Chief Examiner Kenneth Madej, Chief Examiner
Of!ce of the State Comptroller Of!ce of the State Comptroller
The Powers Building 22 Computer Drive West
16 West Main Street k Suite 522 Albany, New iork 12205-1695
Rochester, New iork 14614-1608 Y518Z 438-0093 Fax Y518Z 438-0367
Y585Z 454-2460 Fax Y585Z 454-3545 Email: Muni-Albanyjosc.state.ny.us
Email: Muni-Rochesterjosc.state.ny.us
Serving: Albany, Columbia, Dutchess, Greene,
Serving: Cayuga, Chemung, Livingston, Monroe, Schenectady, flster counties
Ontario, Schuyler, Seneca, Steuben, Wayne, iates
counties

SYRACUSE REGIONAL OFFICE HAUPPAUGE REGIONAL OFFICE

Eugene A. Camp, Chief Examiner Ira McCracken, Chief Examiner
Of!ce of the State Comptroller Of!ce of the State Comptroller
State Of!ce Building, Room 409 NiS Of!ce Building, Room 3A10
333 E. Washington Street Veterans Memorial Highway
Syracuse, New iork 13202-1428 Hauppauge, New iork 11788-5533
Y315Z 428-4192 Fax Y315Z 426-2119 Y631Z 952-6534 Fax Y631Z 952-6530
Email: Muni-Syracusejosc.state.ny.us Email: Muni-Hauppaugejosc.state.ny.us

Serving: Herkimer, Jefferson, Lewis, Madison, Serving: Nassau, Suffolk counties

Oneida, Onondaga, Oswego, St. Lawrence counties

BINGHAMTON REGIONAL OFFICE

Patrick Carbone, Chief Examiner
Of!ce of the State Comptroller
State Of!ce Building, Room 1702
44 Hawley Street
Binghamton, New iork 13901-4417
Y607Z 721-8306 Fax Y607Z 721-8313
Email: Muni-Binghamtonjosc.state.ny.us
NEWBURGH REGIONAL OFFICE
Christopher Ellis, Chief Examiner
Of!ce of the State Comptroller
33 Airport Center Drive, Suite 103
New Windsor, New iork 12553-4725
Y845Z 567-0858 Fax Y845Z 567-0080
Email: Muni-Newburghjosc.state.ny.us

Serving: Broome, Chenango, Cortland, Delaware, Serving: Orange, Putnam, Rockland, Westchester
Otsego, Schoharie, Sullivan, Tioga, Tompkins counties
counties

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 17

17