OFFICE OF THE NEW YORK STATE COMPTROLLER
D IVISION OF LOCAL GOVERNMENT
& SCHOOL ACCOUNTABILITY
Town of Ramapo
Internal Controls Over
Selected Financial Activities
Report of Examination
January 1, 2009 — November 17, 2010
Thomas P. DiNapoli
Table of Contents
AUTHORITY LETTER 3
EXECUTIVE SUMMARY 4
Scope and Methodology 7
Comments of Town Ofﬁcials and Corrective Action 7
BOARD OVERSIGHT 8
BASEBALL STADIUM CAPITAL PROJECT 10
Stadium Financing 10
Feasibility Analysis 13
FINANCIAL CONDITION 15
Budget Estimates 15
Operating Deﬁcits and Fund Balance 16
Exceeding Appropriations 18
Inter-Fund Advances 19
INFORMATION TECHNOLOGY 21
Breach Notiﬁcation 21
Disaster Recovery 22
Auto Complete Setting 22
User Accounts 23
Inappropriate Computer Use 24
Information Security Awareness Training 24
Banking Policy 25
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11
APPENDIX A Response From Town Ofﬁcials 26
APPENDIX B OSC Comments on the Town Ofﬁcials’ Response 50
APPENDIX C Audit Methodology and Standards 58
APPENDIX D How to Obtain Additional Copies of the Report 60
APPENDIX E Local Regional Ofﬁce Listing 61
2 OFFICE OF THE NEW YORK STATE COMPTROLLER
State of New York
Ofﬁce of the State Comptroller
Division of Local Government
and School Accountability
Dear Town 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 Town of Ramapo 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 Town of Ramapo, entitled Internal Controls Over Selected
Financial Activities. This audit was conducted pursuant to Article V, Section 1 of the State
Constitution and the State Comptroller’s authority as set forth in Article 3 of the General Municipal
This audit’s 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.
Ofﬁce of the State Comptroller
Division of Local Government
and School Accountability
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 33
State of New York
Ofﬁce of the State Comptroller
The Town of Ramapo (Town) is located in Rockland County and has 12 villages, including Airmont,
Chestnut Ridge, Hillburn, Kaser, Montebello, New Hempstead, New Square, Pomona, Sloatsburg,
Spring Valley, Suffern and Wesley Hills. The Town Board (Board) is the governing and legislative
body of the Town. It determines policy and appropriates funds for various governmental functions and
services. The Board has the rights to adopt and manage the budget, control and have custody of Town
property, and oversee the Town’s various Departments.
The Town provides various services to its residents, including maintaining and improving Town
roads, snow removal, public improvements, recreation and cultural activities, water, and general
governmental support. Budgeted appropriations for the ﬁscal years 2009 and 2010 were $71.4 million
and $74.9 million, respectively.
Scope and Objective
The objective of our audit was to assess the Town’s internal controls over selected ﬁnancial activities
for the period January 1, 2009, to November 17, 2010. We expanded the scope of our audit to include
January 1, 2008, to May 18, 2011, to review the trends associated with the Town’s ﬁnances and to
include the Town’s actions related to the baseball stadium construction project. Our audit addressed
the following related questions:
• Did Town ofﬁcials properly oversee and monitor the planning and construction of the baseball
• Are internal controls over the Town’s ﬁnances appropriately designed to safeguard Town
• Are internal controls over the Town’s information technology (IT) system appropriately
designed to protect electronic data?
Town ofﬁcials have inappropriately mingled the activities of the Town and the Ramapo Local
Development Corporation (RLDC) in the construction of a minor league baseball stadium. These
actions allowed Town ofﬁcials to circumvent laws the Town is required to abide by for the
approval and construction of such projects, and has resulted in the Town paying over $35.4 million in
improvement costs and being liable for at least $25 million in bonds issued for debt on property that
4 OFFICE OF THE NEW YORK STATE COMPTROLLER
the Town no longer owns. In addition, there is little likelihood that the project will generate sufﬁcient
revenue to help the Town pay for this outstanding liability.
The Town will pay approximately $27.5 million1 in principal and interest payments on these bonds
over the next ﬁve years. This is signiﬁcantly more than the approximately $7 million a feasibility
consultant projected the baseball stadium would generate in net revenues available for debt service
during the same time frame. The Town does not have a written agreement with the RLDC outlining
how the RLDC will reimburse the Town for the principal and interest on these bonds. Supposedly,
the RLDC is relying on revenues that will be generated from the sale of affordable housing units to
reimburse the Town. However, the RLDC obtained loans of approximately $29.9 million that were
also guaranteed by the Town to build these units. These loans must be repaid before any revenues
generated from the sale of the units can be made available to reimburse the Town for payments related
to the $25 million bonds. As a result, it is unlikely that the RLDC will be able to reimburse the Town
for the full principal and interest payments made on the $25 million bonds.
We found that the Board has not exercised effective oversight of the Town. Board members told us that
they received no ﬁnancial reports, such as detailed project cost reports for Town projects (including
the baseball stadium), budget versus actual reports, and generally did not receive or review contracts.
Additionally, Board members told us that they did not know how much the baseball stadium would
cost the taxpayers or how it would be paid for.
We also found that, in 2010, the Town had depleted its fund balances in three major operating funds
because of unrealistic revenue estimates and the Board’s failure to monitor and adjust the budget
when it became clear that the Town would not achieve anticipated results. During 2009 and 2010, the
Town advanced approximately $3.3 million and $3.9 million, respectively, among funds with differing
tax bases, but failed to pay back those funds by the close of the ﬁscal year as required by law. The
advancing funds lost $17,243 in interest because they were not paid back with a comparable rate of
The Board did not establish adequate information technology policies, including a breach notiﬁcation
policy, online banking policy or policies for assigning or deactivating user accounts. Further, the
Board has not adopted an entity-wide disaster recovery plan; therefore, in the event of a disaster, Town
personnel have no guidelines or plan to follow to resume mission-critical functions. In addition, the
auto-complete setting was enabled on the online banking computer. We also found multiple instances
of non-work-related computer usage. As a result, the Town’s computer system and electronic data may
be susceptible to loss, unauthorized use, or improper disclosure.
Comments of Town 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. Town ofﬁcials
disagreed with our ﬁndings. Appendix B includes our comments on issues that Town ofﬁcials raised
in their response letter.
This includes $25 million in principal + $2.5 million in interest.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 55
Background The Town of Ramapo (Town) is located in Rockland County and
has 12 villages, including Airmont, Chestnut Ridge, Hillburn, Kaser,
Montebello, New Hempstead, New Square, Pomona, Sloatsburg,
Spring Valley, Suffern and Wesley Hills. The Town provides various
services to its residents, including maintaining and improving Town
roads, snow removal, public improvements, recreation and cultural
activities, water, and general governmental support.
The Town Board (Board) is the governing and legislative body of
the Town. It determines policy and appropriates funds for various
governmental functions and services. The Board comprises the Town
Supervisor (Supervisor) and four councilpersons. Councilpersons
are elected at large in odd-numbered years for four-year terms; these
terms are staggered so that two councilpersons are elected each
The Supervisor is the chief executive ofﬁcer of the Town and is
responsible, along with other administrative staff, for the day-to-
day management of the Town under the direction of the Board. The
Supervisor, who also is a voting member of the Board and Director
of Finance, is responsible for oversight of the Town’s ongoing capital
projects and general Town ﬁnances. Budgeted appropriations for the
ﬁscal years 2009 and 2010 were $71.4 million and $74.9 million,
The Director of Automated Systems (Director) is responsible for
the day-to-day operations of the Information Technology (IT)
Department, which is overseen by the Supervisor and the Board. The
Department comprises two IT personnel who report to the Director.
The IT Department is responsible for the Town’s 41 laptops, 179
desktop computers, and 26 servers. The Town contracts with various
outside vendors for IT-related services.
Objective The objective of our audit was to assess the internal controls over
selected ﬁnancial activities including the construction of a baseball
stadium, ﬁnancial condition and information technology. Our audit
addressed the following related questions:
• Did Town ofﬁcials properly oversee and monitor the planning
and construction of the baseball stadium?
• Are internal controls over the Town’s ﬁnances appropriately
designed to safeguard Town assets?
6 OFFICE OF THE NEW YORK STATE COMPTROLLER
• Are internal controls over the Town’s IT system appropriately
designed to protect electronic data?
Scope and We examined the Town’s internal controls over selected ﬁnancial
Methodology activities, including the baseball stadium, ﬁnancial condition and IT
for the period January 1, 2009, to November 17, 2010. We expanded
the scope of our audit to include January 1, 2008, to May 18, 2011, to
review the trends associated with the Town’s ﬁnances and to include
the Town’s actions related to the baseball stadium.
Our audit disclosed areas in need of improvement concerning some
IT controls. Because of the sensitivity of this information, certain
vulnerabilities relating to passwords are not discussed in this report
but have been communicated conﬁdentially to Town ofﬁcials so they
could take corrective action.
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 is
included in Appendix C of this report.
Comments of The results of our audit and recommendations have been discussed
Town Ofﬁcials and with Town ofﬁcials and their comments, which appear in Appendix
Corrective Action A, have been considered in preparing this report. Town ofﬁcials
disagreed with our ﬁndings. Appendix B includes our comments on
issues that Town ofﬁcials raised in their 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 Clerk’s
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 77
The Board has a ﬁduciary responsibility for Town assets and ﬁnances,
and an obligation to serve the community, protect taxpayers’
interests, and exercise good faith and due diligence. The Board, along
with Town ofﬁcials, is responsible for managing and overseeing
the Town’s overall ﬁscal affairs and safeguarding its resources.
This responsibility includes establishing a sound internal control
An important component of any system of internal controls is the
control environment or “the tone at the top.” The control environment
is the foundation of a good internal control system, providing
discipline and structure upon which the other components are
based. It reﬂects management’s attitude about internal controls and
includes the integrity, ethical values, and competence of the entity’s
personnel, and management’s philosophy and operating style. When
this foundation is not strong or the control environment is not positive,
the overall system of internal controls will not be as effective as it
should be. The Board and Town ofﬁcials must act with the highest
ethical standards and carry out their oversight responsibilities in
conformance with applicable laws, rules and guidelines that they
expect their employees to follow. The Board and Town ofﬁcials must
be leaders in diligently protecting Town resources that are entrusted
As the legislative body, the Board should establish and oversee much
of the policy, ﬁnancial, and ethical framework within which the Town
operates. Through its actions and policies, the Board should chart
the course for the Town’s activities. The Board is responsible for
monitoring the results of operations. Local governments routinely
participate in construction projects that span several years and cost
millions of dollars. It is important that the Board monitor the status of
these substantial projects. The most common disclosures are project-
based ﬁnancial statements providing selected details of each project,
such as total cost-to-date compared to budget or authorization.
The Board has not exercised effective oversight of the Town. The
Board neither established policies nor oversaw the Town’s ﬁnancial
operations. Board members told us that they received no ﬁnancial
reports, such as detailed project cost reports for Town projects
(including the baseball stadium discussed in the next section),
budget versus actual reports, and generally did not receive or review
contracts. The Board made its decisions based upon representations
from the Town Attorney and Supervisor. Additionally, although Board
8 OFFICE OF THE NEW YORK STATE COMPTROLLER
members should ensure they receive all necessary information, for
the most part, they have not requested the information or ensured that
they received requested information. In fact, Board members told us
that they did not know how much the baseball stadium would cost the
taxpayers or how it would be paid for. Without proper information,
there is a risk that inappropriate decisions may be made which could
result in further costs to taxpayers.
Recommendations 1. The Board should establish and maintain a control environment
that fosters a commitment to compliance with relevant laws and
Town policies. The Board also should routinely monitor the
implementation and effectiveness of the internal control system.
2. The Board should ensure that ﬁnancial decisions are based upon
3. The Board should require the Supervisor to provide project-based
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 99
Baseball Stadium Capital Project
Capital projects are usually long-term projects which require
relatively large sums of money to acquire, develop, improve, or
maintain. The Board is responsible for oversight and management of
the Town’s capital projects, including establishing internal controls to
help ensure that capital projects are properly and adequately planned
and managed. Effective controls help ensure that projects are
properly planned, funding is authorized, and project costs are kept
within their approved budget.
Local Development Corporations (LDCs) are private, not-for-proﬁt
corporations often created by, or for the beneﬁt of, local governments
for economic development or other public purposes. Although created
by, or for the beneﬁt of a local government, an LDC is a separate
private corporation, distinct from the local government, having its
own set of powers under the governing statutes. In exercising these
powers, LDCs generally are not subject to the same requirements
and procedures as local governments with respect to borrowing,
procurements and certain other matters that relate to implementing
a capital project. These requirements and procedures applicable to
local governments are intended for the protection of taxpayers.
In September 2008, the Board formed the Ramapo Local
Development Corporation (RLDC). According to the RLDC’s
Certiﬁcate of Incorporation, the RLDC’s mission and objective is to
"lessen the burdens of government by undertaking and promoting
urban redevelopment initiatives in the Town…that will include
real estate acquisition, development and management, real estate
project ﬁnance, and other [permissible] community-based economic
development activities…” The Supervisor, who is a voting member
of the Board, serves as the President and a voting member of the
Stadium Financing In June 2009, the Board purchased approximately 61 acres of property
located at Fireman’s Memorial Drive and Pomona Road for a cost
of $8.4 million for general municipal purposes. Subsequent to the
purchase, the Board decided to build a baseball stadium, as part of an
urban renewal plan, which would serve as the home ﬁeld for a minor
league baseball team with approximate seating capacity of 3,500 and
parking for 900 vehicles. In February 2010, the Board entered into an
agreement with the RLDC to assist the Town with the development
of the baseball stadium.
10 OFFICE OF THE NEW YORK STATE COMPTROLLER
Board members indicated that they believed that the RLDC could
build the stadium at a lesser cost because the RLDC does not have
to comply with the Wicks Law. The Wicks Law generally requires
multiple prime contracts for public works projects for the construction
of buildings. When the Wicks Law applies, municipalities must
award separate prime contracts for three major components of the
work: electrical, plumbing, and HVAC (heating, ventilating and air
conditioning). One or more contracts generally are awarded to general
contractors for the remainder of the project scope. Furthermore,
General Municipal Law (GML) requires that local governments
competitively bid contracts for public work that involve expenditures
in excess of $35,000. By using the RLDC to construct the stadium,
the Board, in effect, circumvented the procurement laws that would
have applied if the Town directly pursued the project.
In May 2010, the Board, by resolution, agreed to guarantee $16.5
million in ﬁnancing to be obtained by the RLDC. Generally, with
several exceptions, the State’s Constitution (article VIII, §1) prohibits
a town from loaning its credit (e.g., guaranteeing loans) to or in aid of
any public or private corporation or association.
Town taxpayers ﬁled a petition for a special election on the
resolution. The petition sought to directly protest the Board’s
resolution which authorized and agreed to provide a ﬁnancial
guarantee of the ﬁnancing to be obtained by the RLDC for the
development of the baseball stadium. In August 2010, the Board’s
resolution was defeated, with 71 percent of the votes cast against it.
According to published reports, the Supervisor subsequently stated
that the stadium would be built with private and not taxpayer funding.
Following the vote, the Board continued to expend Town funds on
improvements to the property. In November 2010, with knowledge
that the RLDC was unable to obtain or generate the necessary
funds to complete the project, the Board, by resolution, transferred
the property to the RLDC. Although the Town transferred the
property, it retained responsibility to pay for the $8.4 million in debt
associated with the original purchase of the property and subsequent
improvements, which are estimated to be an additional $27 million.
As a result of this decision, Town taxpayers have liability, or potential
liability, for as much as $35.4 million2 in costs associated with a
property the Town no longer owns.
In February 2011, the Board passed a resolution agreeing to serve as
“guarantor” of $25 million in short term obligations to be issued
The cost shown above represents unaudited amounts as of June 8, 2011, and is not
the total cost, as the project was ongoing as of this date.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 11
by the RLDC with a maturity date not to exceed ﬁve years.
Taxpayers had previously indicated that they were opposed to the
guarantee of 30-year bonds; in an apparent attempt to avoid the
voters’ opposition and guarantee the RLDC bonds, bonds with ﬁve-
year terms were agreed upon. Under the “guarantee,” the Town has
agreed to be obligated to pay the principal and interest payments
directly, with reimbursement from the RLDC. The Town agreed
to a risky guarantee whereby revenues were pledged to pay these
liabilities before any other Town payments were made. This could
affect payments such as salaries and could impact essential services
provided by the Town. Further, this may give RLDC bondholders a
prior right to be paid over those holding obligations issued directly
by the Town.3
The Town does not have a written agreement with the RLDC
outlining how the RLDC will reimburse the Town for the principal
and interest on the $25 million bonds that the Town is obligated
to pay. To demonstrate the RLDC’s ability to reimburse the Town,
the bond prospectus indicates that the RLDC is relying on revenues
that will be generated from the sale of affordable housing units
to reimburse the Town for the principal and interest payments.
However, the RLDC obtained loans of approximately $29.9 million
that were guaranteed by the Town to build the affordable housing
units. These loans must be repaid before any revenues generated
from the sale of the units are made available to reimburse the Town
for payments related to the $25 million bonds. Further, due to the
economic downturn in the housing market, the sale of the housing
units may not occur within the anticipated timeframe and estimated
sales revenues may not be realized by the RLDC. As a result, the
RLDC may be unable to reimburse the Town for the principal and
interest payments made on the $25 million bonds.
We understand that several issues related to the stadium’s ﬁnancing remain in
litigation. Therefore, we have not made ﬁndings on underlying legal issues relating
to the ﬁnancing. Nonetheless, we ﬁnd that the transaction raises signiﬁcant legal
issues, including: 1) The New York State (NYS) Constitution generally prohibits
towns from loaning their credit (e.g., guaranteeing loans) to or in aid of any
private or public corporation or association; 2) A local government may not submit
a proposition to referendum, even upon petition of the voters, unless expressly
authorized or required by statute. It is not clear under what statute the resolution
was made subject to permissive referendum; 3) The NYS Constitution prohibits
towns from making gifts or loans of property to or in aid of private entities.
Although characterized by the Town and the RLDC as a “Purchase and Sale,” the
Town received no cash consideration for transfer of property. The “purchase price”
under the transfer agreement was stated as “RLDC’s development and construction
of the Project…and the resulting community beneﬁts to be derived therefrom…” It
is unclear whether the purchase and sale is for adequate consideration so as not to
constitute an unconstitutional gift by the Town.
12 OFFICE OF THE NEW YORK STATE COMPTROLLER
While there is no written agreement, the RLDC has committed to
provide the revenues generated from the sale of affordable housing
units to reimburse the Town for the principal and interest payments
on the short term obligations issued in connection with the baseball
stadium. These excess funds could have been used to fund other
RLDC initiatives. This commitment will signiﬁcantly impact the
ability of the RLDC to further its mission and achieve its stated goals
of lessening the burdens of government by undertaking and promoting
urban redevelopment initiatives in the Town.
As a result of the decisions the Board made, Town taxpayers are
now potentially responsible for approximately $35.4 million in
expenditures for a property not owned by the Town. Furthermore, the
Town has agreed to guarantee an additional $25 million in short-term,
ﬁve-year bonds issued by the RLDC, after taxpayers had previously
voted against a resolution that guaranteed ﬁnancing of 30-year bonds
that were to be issued by the RLDC.
Feasibility Analysis When implementing a capital project, Board members should ensure
that there is a well-deﬁned plan, which evaluates the cost of a project
and the potential costs to taxpayers.
In an effort to determine the feasibility of the baseball stadium, the
RLDC contracted with an outside vendor to perform a feasibility
analysis. We reviewed this analysis and found that it was inadequate.
We found that the consultant only considered the costs of the structure
to be built; it did not consider the total cost of the project. Speciﬁcally,
we found the following:
• The consultant did not incorporate the cost of the land or necessary
property improvements to erect the structure.
• The consultant chose facilities that were built in 2002 and prior,
which resulted in a cost per capacity4 of $3,581.
• We found projects from 2005 to 2010 with cost per capacity
ranging from $3,900 to $6,788.
• The ﬁgures used within the report were not consistent from one
section to the next, and ﬁgures such as cost per capacity could not
be recomputed based upon the information provided.
Capacity is the total amount of seating available; therefore, the cost per capacity
represents the amount of money it costs per seat. It is calculated by taking the total
cost to build and dividing it by the number of seats.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 13
The consultant’s report also included revenue estimates from the
operation of the baseball stadium. The consultant estimated that the
baseball stadium would generate approximately $1.2 million in its
ﬁrst year of operation that would be available to pay debt service.
The consultant projected this amount would increase gradually to
approximately $1.7 million in year 10.
The consultant concluded that $20 million for vertical construction
was the maximum amount that could be supported by the projected
revenues. In making this assumption, the consultant anticipated that
the RLDC would issue 32-year bonds to ﬁnance the project.
Further, only one of the four Board members stated that he received
and reviewed the report; the remaining members did not receive the
report at all. The Supervisor, who is also the President of the RLDC,
relied upon this analysis to support his decision to construct and
operate a baseball stadium. The analysis did not contain sufﬁcient
information to substantiate the decision to build the baseball stadium.
When the RLDC was unable to obtain ﬁnancing consistent with the
terms used in the consultant’s feasibility analysis, the Board chose
to move forward with the $25 million bonds described above. The
feasibility analysis was not updated to reﬂect the change in ﬁnancing.
The Town will pay approximately $27.5 million5 in principal and
interest payments for these bonds over the next ﬁve years. This is
signiﬁcantly more than the approximately $7 million the consultant
determined the baseball stadium would generate in revenues available
for debt service during the same time frame. Therefore, it appears
that the RLDC has placed more ﬁnancial burden on the Town and
taxpayers via these ﬁnancial transactions, and the Board moved
forward with the project, whose feasibility is questionable.
Recommendations 4. The Board should not use the RLDC to, in effect, circumvent
procurement and ﬁnancing laws that would have applied if the
Town directly pursued a capital project.
5. The Board should perform feasibility analyses for future capital
projects to determine all costs that will be associated with them.
The Board should review these analyses prior to committing to
This includes $25 million in principal and $2.5 million in interest.
14 OFFICE OF THE NEW YORK STATE COMPTROLLER
A local government’s ﬁnancial condition reﬂects its ability to provide
and ﬁnance services on a continuing basis. A local government is
considered to have sound ﬁnancial health when it can consistently
generate sufﬁcient revenues to ﬁnance anticipated expenditures, and
maintain sufﬁcient cash ﬂow to pay bills and other obligations when
due, without relying on short-term borrowings. Conversely, local
governments in poor ﬁnancial condition often experience recurring
unplanned operating deﬁcits. Persistent unplanned operating deﬁcits
are usually indicative of poor budgeting and can result in cash ﬂow
problems and/or deﬁcit fund balances. Cash ﬂow problems often
result in the need to borrow monies to ﬁnance day-to-day operations.
The Town has experienced a series of unplanned operating deﬁcits
in its general, town-outside village, and part-town highway funds
over the last several years. These deﬁcits were caused by inaccurate
budget estimates and the Board’s insufﬁcient monitoring of ﬁnancial
operations throughout the year. The resulting decline in fund balances
has, in turn, caused the Town to experience cash ﬂow problems. The
Town has addressed its need for cash in the short-term by using inter-
fund advances. However, the Board has not adequately monitored the
funds, which resulted in funds not being paid back prior to the end of
the ﬁscal year at a comparable interest rate. Unless these budgetary
and cash ﬂow problems are addressed, future Town operations could
be adversely impacted.
Budget Estimates Board members must ensure that there is an adequate process in place
to prepare, adopt and amend budgets based upon reasonably accurate
assessments of resources that can be used to fund appropriations.
When estimating budgeted revenues, the Board and Town ofﬁcials
must have current and accurate information. They also should use
historical data, such as prior years’ actual results of operations, to
guide them in determining whether revenues and expenditures are
As illustrated in the table below, the Town has experienced revenue
shortfalls in the general fund during ﬁscal years 2009 and 2010.
While we found that actual expenditures were within budget, Town
ofﬁcials overestimated revenues for the past two years.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 15
Table 1: General Fund Revenue Shortfalls
Description 2009 2010
Budgeted Revenues $28,501,877 $32,394,657
Actual Revenue $27,999,302 $28,867,620
Revenue Above/ ($502,575) ($3,527,037)
In particular, Town ofﬁcials adopted an unrealistic budget for 2010
that resulted in $3.5 million in revenue shortfalls. For example, Town
ofﬁcials overestimated mortgage taxes by $1.4 million, overestimated
golf fees by $342,207 and overestimated sales of real property by
$586,000. Town ofﬁcials continued to budget unrealistically when
adopting the 2011 budget. We reviewed the 76 budgeted revenue
lines in the general fund and found that 34 appeared unreasonable
based upon historical trend data. For example, the Town budgeted
for $510,000 in tennis revenue although it had only received actual
revenue of $18,000 in 2010. Town ofﬁcials budgeted for $1,850,000
in golf fees although the Town received only $1,507,793 in 2010.
Further, Town ofﬁcials continued to overestimate mortgage taxes; the
2011 budget includes $2,200,000 for this revenue even though 2010
actual revenue was $1,321,126. Estimating a 67 percent growth in
mortgage tax revenue is unrealistic.
Town ofﬁcials indicated that they review historical data when
preparing the budget; however, they did not estimate revenues to
reasonably respond to a clear and obvious downward trend or adjust
estimates in accordance with the revenue shortfalls in prior years.
In addition, we found no indication that the Board monitored actual
results compared to the budget during the year. Further, the Supervisor
could not provide any explanations for the budget estimates for
2011. Without realistic estimates, there is a risk that the Town will
experience further revenue shortfalls and therefore, operating deﬁcits.
Operating Deﬁcits and Budgets are meant to balance revenues and expenditures, so that
Fund Balance the local government is able to provide needed services with the
resources available. However, the reality is that budgets will rarely
work out precisely as planned, which can lead to operating deﬁcits
if expenditures exceed revenues. An operating deﬁcit can be planned
for and ﬁnanced by appropriating fund balance. An unplanned
operating deﬁcit results from over-expending appropriations, not
receiving budgeted revenues, or a combination of the two. Although
operating deﬁcits can be planned as a means of prudently using
excess accumulated fund balance to ﬁnance operations, persistent
and recurring operating deﬁcits are usually indicative of structurally
imbalanced budgets and ﬁnancial stress.
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Fund balance is the difference between revenues and expenditures
accumulated over a period of time. The unreserved, unappropriated
amount is the portion of fund balance that can be used to manage
unexpected occurrences such as emergency repairs, cost and
demand ﬂuctuations in commodities such as utilities and gasoline,
and unanticipated shortfalls in estimated revenues. Inadequate
unreserved, unappropriated fund balance limits Town ofﬁcials’
ability to manage emergencies and other unanticipated occurrences.
The Town incurred unplanned operating deﬁcits in the general,
town-outside village, and part-town highway funds for the ﬁscal
year ending December 31, 2010. The deﬁcits occurred because of
unrealistic revenue estimates and Town ofﬁcials’ failure to monitor
and adjust the budget when it became clear that anticipated results
would not be achieved. A three-year history of the operating surplus
or deﬁcit for each of the operating funds is shown in the tables below.
Table 2: General Fund Balance
Description 2008 2009 2010
Operating $45,941 ($391,081) ($2,103,899)
Ending Fund $4,501,665 $4,110,584 $2,006,685
The general fund had operating deﬁcits of $391,081 and $2,103,899
in 2009 and 2010. The deﬁcits occurred because of the Board’s
unrealistic budgeting practices, as previously discussed, which
created revenue shortfalls and decreased fund balance. As a result of
the operating deﬁcits incurred, the fund balance has declined from
$4.5 million to $2.0 million.
Table 3: Town-Outside-Village Fund Balance
Description 2008 2009 2010
Operating ($109,385) ($503,027) ($107,606)
Ending Fund $676,651 $173,624 $66,018
The town-outside-village fund’s operating deﬁcits stemmed from
revenue shortfalls caused by overestimating revenues. For example,
in 2010 Town ofﬁcials had revenue shortfalls for building permits
totaling $240,807 and for for departmental income totaling $316,374.
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Table 4: Part-Town Highway Fund Balance
Description 2008 2009 2010
Operating ($169,168) ($110,450) ($215,068)
Ending Fund $371,553 $261,103 $46,035
For the part-town highway fund, Town ofﬁcials caused these deﬁcits
by overestimating revenues and by over-expending budget line items.
For example, Town ofﬁcials over-expended the salaries budget line
item by $223,305 in 2010. In addition, Town ofﬁcials did not realize
revenue totaling $97,674 in the transportation services to other
government budget line item.
The Town has depleted its fund balances and has limited ﬁnancial
cushions in the event of an emergency. Further, if the Town continues
to experience operating deﬁcits, there is a risk that it may need
to borrow funds to ﬁnance the deﬁcit and to ﬁnance day-to-day
Exceeding Appropriations Formal budgetary accounting is a management control technique used
to assist in controlling expenditures. Budgetary accounting techniques
are important because the annual budget is a legal compliance standard
against which the Town’s operations are evaluated. The law requires
the Town to maintain separate accounts for each appropriation. The
law does not permit the Town to overdraw an appropriation or use
a fund or appropriation to pay a claim chargeable to another fund
or appropriation. Town ofﬁcials must obtain Board approval before
exceeding any appropriation. In ﬁscal year 2010, the Town over-
expended $6.8 million in individual accounts in the Town's ﬁve
major funds. While total expenditures were within the budget, many
individual account lines were exceeded, as shown below.
Table 5: Over-Expended Appropriations as of December 31, 2010
Total Over- Dollar Amount
Fund Total Accounts Accounts Over-
General Fund 684 314 46% $3,716,581
Police Fund 116 58 50% $2,252,264
Town Outside Village 59 28 47% $102,529
Highway Town-Wide 34 21 62% $414,328
Highway Part Town 42 15 36% $332,145
Totals 935 436 47% $6,817,847
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These over-expenditures occurred for several reasons. First, the
ﬁnance software used by the Town has settings that would prohibit
the creation of requisitions if funds are unavailable; however,
these settings are currently disabled, which allows users to create
requisitions against funds that are not available. In addition, during
the purchasing process, when requisitions become formal purchase
orders, there is no control in place to identify requisitions that do not
have sufﬁcient funds available. Further, Town ofﬁcials do not provide
the Board with regular budget reports for monitoring purposes.
However, the Board does approve a year end budget transfer to
rectify the over-expenditures and, therefore, should be aware of the
issue. Without proper controls, there is a risk that the Town’s already
declining ﬁnancial position may worsen.
Inter-Fund Advances General Municipal Law (GML) allows municipalities to temporarily
advance monies from one fund to another (with certain restrictions).
Towns generally are not authorized to make budgetary transfers
between funds that have different tax bases. When Town ofﬁcials
advance monies between funds that have different tax bases, they
must repay the advance, with a comparable amount of interest, by the
end of the ﬁscal year in which the advance was made.
As a result of the Town’s declining ﬁnancial position, the Town has
depended on inter-fund advances from the other Town operating
funds to help ﬁnance operations. At ﬁscal years ended December 31,
2009 and December 31, 2010, the Town advanced approximately
$3.3 million and $3.9 million, respectively, between funds with
differing tax bases. Town ofﬁcials did not pay back these funds prior
to the end of the ﬁscal year. Town ofﬁcials were not aware that the
advanced funds were required to be paid back by the end of the ﬁscal
Further, Town ofﬁcials did not repay these interfund advances with a
comparable amount of interest. For example, in 2009, the police fund
loaned $3.3 million to the general fund. These funds were originally
invested in CDs earning 1.45 percent; if these funds had remained
in the CDs, they would have earned interest totaling $19,973. Town
ofﬁcials only paid the police fund $2,730 in interest. Therefore, the
police fund lost $17,243 in interest because it was not paid back with
a comparable rate of interest.
The Board is responsible for approving all inter-fund advances, and
must ensure that all temporary inter-fund advances are repaid by
ﬁscal year end with interest at a comparable rate to what the fund
would have earned if the monies had not been advanced. If repayment
does not occur at a comparable interest rate, taxpayer inequities will
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 19
Recommendations 6. The Supervisor should develop reasonable budget estimates.
7. The Board should monitor its budget continuously and make
necessary adjustments to avoid operating deﬁcits and continued
decline in fund balance.
8. The Board should activate the control feature in the ﬁnancial
system that prevents requisitions from being created without
9. The Board should ensure that funds advanced are paid back in a
timely manner and with a comparable rate of interest.
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Computerized data is a valuable resource that Town ofﬁcials rely
on to make ﬁnancial decisions. The Town’s information technology
(IT) system is an essential part of operations used for accessing the
Internet, email communication, processing and storing data, and
reporting to State and Federal agencies. If the IT system fails, or
the data is lost or altered, either intentionally or unintentionally, the
resulting problems could range from inconvenient to severe; even
small disruptions in electronic data systems can require extensive
effort to evaluate and repair. An effective system of internal controls
to safeguard computerized data includes policies and procedures that
address key aspects of computer use and data security, including
system security and the protection of data from loss due to threats or
accidents (disasters). The Board and Town ofﬁcials are responsible for
establishing, designing, and implementing a comprehensive system
of internal controls over the Town’s IT system and data to protect
these assets against the risk of loss, misuse, or improper disclosure
of sensitive data.
The Board has not established policies and procedures related to
breach notiﬁcation, disaster recovery planning, and online banking.
We also found weaknesses in the Town’s internal controls relating to
the auto complete function, deactivating terminated user accounts,
and limiting personal computer use. Further, the Board has not
provided Town employees with security awareness training. These
control weaknesses increase the risk that the Town’s IT system and
electronic data may be susceptible to loss, unauthorized use, or
Breach Notiﬁcation The law requires local governments to establish an information
breach notiﬁcation policy. The policy should detail how employees
would notify residents whose personal, private or sensitive
information was, or is reasonably believed to have been, acquired
by a person without valid authorization. The disclosure should be
made in the most expedient time possible and without unreasonable
delay, consistent with the legitimate needs of law enforcement or any
measures necessary to determine the scope of the breach and restore
the reasonable integrity of the data system.
Town personnel in several departments collect social security
numbers, driver’s license numbers and bank account information
for business purposes; however, the Town neither adopted a formal
breach notiﬁcation policy, nor classiﬁed its data according to risk.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 21
The Director indicated that the she was unaware of the requirement
to establish a breach notiﬁcation policy. Since we made the Director
aware, she has begun to identify what personal, private or sensitive
data is collected and stored by Town departments and is creating
a breach notiﬁcation policy. Without a formal breach notiﬁcation
policy, the Town may not be able to fulﬁll its legal obligation to
notify affected individuals in the event that sensitive information is
Disaster Recovery Town ofﬁcials are responsible for developing and documenting a
disaster recovery plan. A good disaster recovery plan addresses
a range of potential disruptions. These may include relatively
minor disruptions, such as temporary power failures, as well as
major disasters such as ﬁre or natural disasters that would require
reestablishing operations at a remote location. If controls are
not adequate, even relatively minor disruptions can result in lost
or incorrectly processed data, which can cause ﬁnancial losses,
expensive recovery efforts, and inaccurate or incomplete ﬁnancial
or management information. Further, the plan should set forth
procedures to ensure Town personnel can either maintain, or quickly
resume, mission-critical functions.
Town ofﬁcials have not developed and documented a formal disaster
recovery plan. We discussed this issue with the Director, who has
begun to investigate several different approaches to protect the data.
When she determines the most cost-effective plan for the Town, she
will meet with the disaster preparedness committee. If the Town
experiences a major disruption, without a formal disaster recovery
plan, Town personnel have no guidelines or plan to follow to resume
Auto Complete Setting The auto complete feature in Internet Explorer can save web
addresses, form data, and login information such as usernames and
passwords. Typically, web browsers and applications store the login
credentials if the auto complete option is enabled. Work stations store
the user names and passwords in locations that are easy to access.
A user name and password provides access to applications that are
solely for that user’s purpose; this information will be automatically
entered every time the employee visits the website. The employee’s
information also will be automatically entered for anyone else who
uses the employee’s computer and accesses the same web sites. When
a user’s name and password can be accessed, there is a risk that
someone other than the user who gains access to the work station can
comprise the login credentials in a matter of seconds.
The auto complete setting was enabled on the Town’s online banking
computer. This setting automatically populated the user name and
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password when the ﬁrst letter of the user’s name and password was
entered. As a result, the Town is at risk that unauthorized users can
sign on, access banking information, and compromise ﬁnancial data.
When we notiﬁed the Director, she immediately disabled the auto
User Accounts Good internal controls include policies and procedures designed to
limit access to data. Town employees are assigned user accounts that
enable them to access the network. All changes to user accounts,
including additions, deletions, and modiﬁcations, should be
authorized and approved in writing by an appropriate Town ofﬁcial.
It also is important for user accounts to be deactivated as soon as
employees leave Town service.
The Town does not have written policies for deactivating user
accounts. The process used by the Town for terminating access to
the Town’s network and ﬁnancial system is inadequate. The Human
Resources Department does not formally notify the IT Department
when an employee leaves Town service, so the IT Department must
contact Human Resources to conﬁrm the employee has left. An IT
staff member must disable the account on the day the employee is
terminated. In addition, the Director indicated that, once a year, the
Department requests a list of all terminations for the year from
Human Resources and deactivates terminated employees from the
We reviewed the list of 496 network user accounts on the Town’s
active directory and 66 user accounts on the Town’s ﬁnancial
software to determine if employees who had left Town service were
still on the list of active users. We found three users on the active
directory and 12 users on the ﬁnancial software whose accounts had
not been disabled after they left Town service. The duration of time
these employees have remained active on active directory was 30 to
827 days; one employee who left Town service 15 years ago was still
active on the ﬁnancial software. In addition, we found that two users
out of 12 who had left Town service remained on the ﬁnancial system
following the Department’s year-end review. Therefore, the yearly
review was inadequate, and the Town did not have another procedure
in place to periodically evaluate the user accounts on the active
directory or the ﬁnancial system. When we informed the Director of
our ﬁndings, she immediately deactivated these users.
Failure to promptly remove the access rights of inactive employees
increases the risk that unauthorized users could inappropriately gain
access to a system and change, destroy, or manipulate conﬁdential
and/or critical data.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 23
Inappropriate Computer To help protect the Town’s computing environment, the Board
Use adopted an acceptable-use policy governing employees’ use of Town
computers. This policy restricts the use of the Town’s computer
systems to business use only; personal use of the system is
prohibited. Generally, Town-owned resources, such as computers,
must be used primarily for Town purposes. However, as with the
use of a telephone, occasionally it may be necessary for Town
personnel to use computers, e-mail or an Internet connection during
the business day for personal matters. Sound business practice
requires Town personnel to keep the frequency and duration of such
occasional personal use to a minimum to avoid interfering with their
The Town owns approximately 220 computers and has Internet
content ﬁlters on its network servers to block access to certain
websites. The Town’s Internet content ﬁltering software logs
information relating to users and the domains visited. We selected
domains that did not appear to be job-related, which included dating
websites, porn websites and social media websites from the usage
report. We identiﬁed 161 computers that were used to access all or
most of these web sites. We selected six of the 161 computers with the
most activity for additional testing, and found that these computers
were used to access domains such as youtube.com, facebook.com,
ebay.com, match.com, hsn.com, turbo tax.com and craiglist.com
during work hours. Without proper monitoring and control over
Internet content ﬁlters, there is an increased risk that Internet usage
will be more than incidental or occasional.
Based upon our ﬁnding, in October 2010, the Director made changes
to the Internet content ﬁlter to deny access to certain websites.
Further, we compared two dates in September 2010 to two dates in
November 2010 and found that the percentage of time that the six
computers tested spent accessing web sites decreased by 46 percent
as a result of the changes implemented by the Director.
Information Security Security Awareness Training is designed to educate users on the
Awareness Training appropriate use, protection and security of information, individual
user responsibilities, and ongoing maintenance necessary to protect
the conﬁdentiality, integrity, and availability of information assets,
resources, and systems from unauthorized access, use, misuse,
disclosure, destruction, modiﬁcation, or disruption.
The Board has not provided employees with information security
awareness training. We interviewed eight of the 13 employees using
online banking to determine if they have been provided with security
awareness training. All eight employees indicated that the Town had
not provided them with training. In addition, users were accessing
24 OFFICE OF THE NEW YORK STATE COMPTROLLER
the online banking with desktop shortcuts and were not cleaning out
their temporary Internet ﬁles or web browser cache after completing
an online banking session, which increases the risk of unauthorized
access. By failing to provide security awareness training, there is an
increased risk that employees will not understand their responsibilities
on how to appropriately protect the computer system. As a result, the
data and computer resources they have been entrusted with will be at
greater risk for unauthorized access, misuse or abuse.
Banking Policy Effective internal controls over online banking include policies
and procedures to properly monitor and control online banking
transactions. A comprehensive online banking policy clearly
describes the online banking activities the Town will engage in,
speciﬁes which employees have the authority to process transactions,
establishes a detailed approval process to verify the accuracy and
legitimacy of transfer requests, and requires a monthly report of
all online banking transactions. It is important that someone
independent of the online banking process review this report
and reconcile it with the monthly bank statement to verify that all
transactions were properly approved and appropriate. The Town has
not adopted an online banking policy. Without proper controls over
online banking processes, Town funds will be at increased risk of
being stolen through cyber fraud activities.
Recommendations 10. The Board should develop and adopt a formal breach notiﬁcation
11. The Board should implement a formal disaster recovery plan to
address the possible loss of data in the event of a disaster.
12. The Director of Automated Systems should ensure that the auto
complete setting is disabled on all computers.
13. The Board should establish formal policies and procedures for
the addition and deletion of user accounts.
14. The Director of Automated Systems should monitor Internet
usage for inappropriate content.
15. The Board should provide ofﬁcers and employees with
information security awareness training.
16. The Board should adopt an online banking policy.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 25
RESPONSE FROM TOWN OFFICIALS
The Town ofﬁcials’ response to this audit can be found on the following pages.
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OSC COMMENTS ON THE TOWN OFFICALS’ RESPONSE
In response to concerns raised and observations made about our audit in the Town ofﬁcials’ letter, we
provide the following information.
Our transmittal letter does not state that the report may be inaccurate or incomplete, as stated in
the Town’s response. The transmittal letter states, “If you believe anything in the preliminary draft
ﬁndings may be inaccurate or incomplete, please feel free to contact me.” Further, in accordance with
our policy, the report was disseminated to only Town ofﬁcials, not to the general public. The report
provides an accurate representation of the Town’s ﬁnancial transactions and condition; it does not
contain faulty conclusions and misrepresentations. Appendix C includes our audit methodology and
standards used in determining our audit ﬁndings.
We removed from the objective “to ensure compliance with taxpayer wishes,” as a result of Judge
Linda S. Jamieson’s September 22, 2011 decision. The remaining notes to the response provide
evidence that our audit results are accurate and properly summarize the ﬁndings cited in the report.
The Town’s response does not speciﬁcally address the Board’s knowledge about the baseball stadium.
When we met with Board members, they indicated that they did not know how much the baseball
stadium would cost the taxpayers or how it would be paid for. Further, Board members stated that
they did not receive the ﬁnancial information, including contracts necessary to make sound decisions,
even when requested.
Town Board Resolution 2010-149 states the Town “has proposed the construction of a ballﬁeld …
known as Project Grand Slam.” It further states that the RLDC “will assist the Town of Ramapo in the
development of Project Grand Slam,” indicating that this is clearly a Town project. Further, comments
in the audit report clearly represent statements made by Board members.
By using the RLDC to construct the stadium, the Supervisor and Board, in effect, circumvented the
procurement laws that would have applied if the Town directly pursued the project. The report does
not address whether the RLDC acted in accordance with its own procurement policies.
50 OFFICE OF THE NEW YORK STATE COMPTROLLER
The paragraph does not imply that the Town manipulated the RLDC; it states that, by using the RLDC,
Town ofﬁcials, in effect, circumvented the procurement laws that would have applied if the Town
directly pursued the project. Moreover, our reference to the Wicks Law was based on statements made
to us by Board members to the effect that the stadium could be built at a lower cost by the RLDC,
which did not have to comply with the Wicks Law. Also, while it is true that the separate speciﬁcation
requirement of the Wicks Law does not apply to local governments that provide for a project labor
agreement in accordance with the requirements of Labor Law §222, other statutory procurement
requirements would still apply to the local government.
Judge Jamieson’s statement on the “broad” powers of LDCs relates to whether the purpose for which
the land was transferred to the RLDC fell within the powers of an LDC under the Not-For-Proﬁt
Corporation Law. It did not relate to the propriety of the procurement process used to construct
the stadium. In fact, the court did not address any such procurement issue. Further, the paragraph
referenced in no way implies that the RLDC acted improperly, but rather is directed at actions of Town
The reference to the State Constitution is merely a generic statement of the general prohibition against
loans of credit by towns. With respect to the exception for urban renewal projects, article 18, §2 of
the State Constitution does not provide a blanket exception for town loans of credit for urban renewal
purposes. Rather, it provides that the State Legislature may authorize towns to guarantee principal
and interest on indebtedness contracted by “public corporations” for urban renewal purposes. The
State Legislature has implemented this grant of authority by authorizing towns, subject to referendum
requirements, to guarantee loans of municipal urban renewal agencies established pursuant to article
15-A of the General Municipal Law, which are public beneﬁt corporations (General Municipal Law
§§ 503-a, 553, 559).
Board members indicated that the Town Supervisor did not provide them with evidence that other
ﬁnancing was available. The Town transferred the property in November 2010, after the taxpayers
voted down the proposal for a 30-year guarantee of the RLDC ﬁnancing. Given that, in February
2011, the Board once again voted to guarantee the ﬁnancing with a shortened, more risky term. This
action indicates that more favorable terms were not available, as stated.
The statement in the report that “Town taxpayers have liability or potential liability for as much as
$35.4 million in costs associated with property the Town no longer owns” has nothing to do with
the $25 million of bonds issued by the RLDC and “guaranteed” by the Town. The $35.4 million is
comprised of the $8.4 million that the Town spent to acquire the stadium property plus the additional
$27 million of Town moneys that were spent to improve the property.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 51
The report states that Town taxpayers have a potential liability associated with property the Town does
not currently own, but we did not address whether Town taxpayers may receive a “beneﬁt” from the
property transfer. Moreover, Judge Jamieson’s decision did not address whether taxpayers, in fact,
are receiving tangible beneﬁts from the stadium project. Rather, the context of her decision addressed
whether the project fell within the powers of an LDC under the Not-For-Proﬁt Corporation Law, and
stated that providing for additional employment is one of things that the stadium project “was intended
The word “guarantor” is a direct quote from the Board resolution itself. The role of a guarantor typically
is to become liable only in the event of a default by the principal. To the extent the use of quotation
marks around the word “guarantor” could be construed to imply that the Town is the party principally
liable to bondholders, as we understand the Town Guaranty, the Town has agreed to pay debt service
in the ﬁrst instance. The ofﬁcial bond statement speciﬁes that the interest payment due September 15,
2011 will be paid with interest from the bond proceeds. Therefore, we question whether actual RLDC
funds were used to make the ﬁrst payment as indicated. With no agreement between the Town and
RLDC outlining how the RLDC will reimburse the Town for the principal and interest payments it
will make on behalf of the RLDC, the short-term nature of the bonds, and questionable revenue stream
slated to make the payments, it seems to us that the Town effectively is principally liable.
The report does not make ﬁndings on the underlying legal issues relating to the guarantee. However,
the Town has agreed to guarantee $25 million in short-term, ﬁve-year bonds issued by the RLDC. We
view this as an apparent attempt to avoid the voters’ opposition to the guaranteed ﬁnancing of 30-year
bonds that were to be issued by the RLDC by reconﬁguring the transaction as a ﬁve-year guarantee,
which the Town believed was not subject to voter approval.
The footnote merely sets forth several legal issues raised by the transaction. Judge Jamieson’s April
4, 2011 and September 22, 2011 decisions addressed speciﬁc causes of action brought by petitioners
and, as we read these decisions, they did not address on the merits the issues raised in the footnote,
including whether there was underlying authority for the permissive referendum. In the context of a
post-audit, mentioning that these issues are raised by the transaction is appropriate.
As shown in the table below, taken from the Ofﬁcial Statement for the RLDC Bonds (Appendix H,
Anticipated Redemption of the Bonds), none of the revenues from the housing project have been
pledged to the bonds. Further, as shown below, the payment of the $29.9 million in Town-guaranteed
debt will occur during 2012 and 2013. As illustrated, the Town-guaranteed debt is deducted from
revenues to arrive at the net amount available to reimburse the Town for the payments of principal and
interest. Further, the revenues illustrated are estimates and may not be realized as anticipated.
52 OFFICE OF THE NEW YORK STATE COMPTROLLER
The audit report represents an audit of the Town, not the RLDC. Therefore, there is no guarantee as
to whether the revenues anticipated will be realized. The Town had the opportunity during the audit
and accompanying this response to provide actual documentation of such sales, and failed to do so.
The report is factual. If the funds were not being used to pay for the stadium, they would be available
for other RLDC initiatives. Therefore, the commitment of these funds to pay for principal and interest
payments on the bonds issued for the baseball stadium impacts the RLDC’s ability to further its
mission. Further, the paragraph properly represents the results of the actions taken by Town ofﬁcials.
The report states that Town taxpayers are “potentially” responsible for approximately $35.4 million
in expenditures on the stadium property and that Town also guaranteed $25 million in bonds issued
by the RLDC. The $35.4 million is comprised of the $8.4 million that the Town spent to acquire
the stadium property plus an additional $27 million of Town moneys that were spent to improve the
property. By “guaranteeing” the RLDC’s bonds, the Town is as least “potentially” liable for another
$25 million in stadium costs. Therefore, based just on these facts, Town taxpayers are responsible, or
potentially responsible, for a minimum of $60.4 million in connection with the stadium. Moreover,
whether the RLDC has the intent or the means to pay the debt service on its bonds relates to the
likelihood that the Town will have to honor its “guarantee,” not to the existence of the Town’s
“potential” liability on those bonds.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 53
Only one of the four Board members stated that he received and reviewed the consultant’s report;
the remaining members did not receive the report at all. Further, Town ofﬁcials did not provide us
with any evidence, such as plans, analysis or other documentation that further review or analysis was
As stated in the Ofﬁcial Statement on the RLDC bonds, none of the revenues from the housing
project have been pledged to the bonds. In addition, there is no agreement between the Town and
RLDC outlining how the RLDC will reimburse the Town. Further, revenues may not be realized as
anticipated. Appendix H of the Ofﬁcial Statement, which sets forth the anticipated redemption of the
bonds, expressly states that “[t]here is no assurance that the schedule of Anticipated Redemption will
occur as expected” and, in fact, shows a shortfall in RLDC revenues to reimburse the Town for 2016.
Therefore, it does appear that the RLDC has placed a ﬁnancial burden or, at the very least, a potential
ﬁnancial burden, on the Town and taxpayers, greater than that initially envisioned in the feasibility
As stated in the report, the Town has experienced a series of unplanned operating deﬁcits in its
general, town-outside-village, and part-town highway funds over the last several years. An operating
deﬁcit results when expenditures exceed revenues during the ﬁscal year, and is different than a fund
balance deﬁcit. Fund balance is the difference between revenues and expenditures accumulated over
a period of time. When an operating deﬁcit exceeds available fund balance, a fund balance deﬁcit
occurs. Further, inter-fund transfers were not repaid at a comparable interest rate. For example, as
stated in the report, in 2009, the police fund lost $17,243 in interest because it was not paid back with
a comparable rate of interest for its inter-fund transfer to the general fund.
The Town’s required pension contributions are a factor of the national economic recession and
individual Town decisions, such as salary levels, stafﬁng levels, and speciﬁc pension options it has
The 2010 amounts referred to in the draft report were based on unaudited amounts obtained from the
Town’s ﬁnancial system. These amounts represented the most current information available to us and
Town ofﬁcials at the time of our ﬁeldwork, and were the information that Town ofﬁcials had available
to them upon which they based decisions. The independent audit of the Town's ﬁnancial statements for
the year ended December 31, 2010 referred to in the Town's response were not received by the Town
until after we had completed our ﬁeldwork. Town ofﬁcials subsequently provided us with the audited
ﬁnancial statements that they referred to in their response. The ﬁnancial statements report that the
Town depleted its fund balance in 2010, resulting in a net change of ($15,544,380) in fund balance.
We reviewed the statements and included the audited numbers in the ﬁnal report. Following is our
response to the Town’s comments:
54 OFFICE OF THE NEW YORK STATE COMPTROLLER
Town Comments 2 and 3 in the Financial Condition Section:
The audited ﬁnancial statements (page 60) report a shortfall of $3,527,037, not $1,226,687. We
changed the report to reﬂect the audited numbers.
Town Comment 3 in the Financial Condition Section:
The draft report indicated that $1.85 million was budgeted for golf revenues and only $1.5 million was
received. We revised the report to reﬂect the difference of $342,207.
The audited ﬁnancial statements indicate a sale of real property of $314,000; therefore, we changed the
$900,000 reported in the draft report to $586,000.
Town Comment 5 in the Financial Condition Section:
The Town incurred operating deﬁcits in these three funds. Page 19 of the audited ﬁnancial statements
reports that the general and town-outside village funds had operating deﬁcits in 2010, and page 73
reports the part-town highway fund had a deﬁcit. Prior year fund balance was applied to render
positive fund balance in these funds in 2010. We deleted the statement that “these funds now have
deﬁcit fund balances” from the report.
Town Comments 6 and 7 in the Financial Condition Section:
Page 60 of the audited ﬁnancial statements reports revenues, not fund balance. Page 16 of the ﬁnancial
statements reports a negative change in fund balance of $2,103,899. Therefore, the fund balance was
reduced from over $4 million to $2 million in 2010. The report is changed to reﬂect the $2 million
fund balance amount.
Town Comment 8 in the Financial Condition Section:
Page 19 of the audited ﬁnancial statements reports a deﬁcit of $107,606, not a surplus. The deﬁcit of
$107,606 was applied to the $173,624 fund balance. Therefore, the fund balance was reduced to only
$66,018 in 2010. These numbers are incorporated into the report.
Town Comment 9 in the Financial Condition Section:
We revised the building permit ﬁgures in the ﬁnal report to reﬂect the ﬁgures reported in the audited
ﬁnancial statements. We also deleted our discussion of the sales tax ﬁgures from the ﬁnal report.
However, while the audited ﬁnancial statements report that the sales tax ﬁgures exceeded the budget,
the Town had a revenue shortfall for departmental revenue totaling $316,374. We included this
departmental revenue shortfall in the ﬁnal report.
Town Comment 10 in the Financial Condition Section:
Page 73 of the audited ﬁnancial statements reports a net negative change in fund balance of $215,068,
not $251,068. Therefore, the fund balance was decreased from $261,103 in 2009 to only $46,035 in
2010. We revised the report to reﬂect these numbers.
Town Comment 12 in the Financial Condition Section:
The Town has depleted its fund balance, as illustrated in the audited ﬁnancial statement. The word
“negative” is removed from the report.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 55
We emailed the Supervisor on April 19, 2011 and requested that he provide explanations for the
2011 budget estimates in question. Neither the Supervisor nor the Finance Department provided any
The numbers in the report were not changed, as this number was not supported by the audited ﬁnancial
statements. In addition, the $97,674 in revenue that was not realized is listed in the Town’s ﬁnancial
system as account 2221003, transportation services to other governments, speciﬁcally the Village of
The signiﬁcance of the budget lines being over budget is that the law does not permit the Town to
overdraw an appropriation or use a fund or appropriation to pay a claim chargeable to another fund
or appropriation. Town ofﬁcials must obtain Board approval before exceeding any appropriation.
This demonstrates the Supervisor’s failure to obtain Board approval prior to overspending individual
There is no “effective review process in place,” as depicted in the report. In addition, the fact that
the Town over-expended $6.8 million in 935 individual accounts in the Town's ﬁve major funds
demonstrates a lack of controls over the Town’s ﬁnances.
When Town ofﬁcials advance monies between funds that have different tax bases, they must repay the
advance, with a comparable amount of interest, by the end of the ﬁscal year in which the advance was
made. Repayments of advances were made in February of the following year, which is not within the
ﬁscal year the advances were made. With regard to the interest, the funds were taken from a CD to be
made available for use by the other funds; therefore, the advancing fund should have been repaid with
the rate of interest of the CD.
Town ofﬁcials did not comply with the law and pay back the funds prior to the end of the ﬁscal year
with a comparable amount of interest.
Town ofﬁcials have not developed and documented a formal disaster recovery plan pertaining to
information technology. The plan mentioned in the Town’s response does not address information
56 OFFICE OF THE NEW YORK STATE COMPTROLLER
During the audit, we observed that the room where the designated computer was located was left open
and unlocked. Further, while observing the wire transfers being performed, we observed that the
online banking password automatically populated; therefore, there is a risk that unauthorized users can
sign on, access banking information and compromise ﬁnancial data.
The Town does not have written policies for deactivating user accounts, and the process used by
the Town for terminating access is inadequate, as evidenced by the excessive number of active user
accounts left remaining after Town ofﬁcials’ year-end review. Further, failure to promptly remove the
access rights of inactive employees increases the risk that unauthorized users could inappropriately
gain access to a system and change, destroy, or manipulate conﬁdential and/or critical data.
During the audit, we obtained the Town’s user activity report, which listed all the websites visited by
Town employees. We advised Town ofﬁcials of inappropriate computer use by Town employees and
recommended that the web content ﬁlter be further restricted. After Town ofﬁcials implemented our
recommendation, we found a decrease in the employees visits to these sites. We acknowledge that web
ﬁlters can exaggerate time spent on sites; therefore, we did not report the total time spent visiting these
sites. In addition, the pornographic sites visited were not limited to Town police; Town employees also
visited these sites.
Town employees were not provided security awareness training; therefore, the data and computer
resources they have been entrusted with will be at greater risk for unauthorized access, misuse or
The Town should adopt policies and procedures to guide staff in areas of operations (such as online
banking) where there is high inherent risk of fraud, waste or abuse, or where staff would beneﬁt from
speciﬁc guidance to perform their duties. This helps to ensure that public funds are used prudently and
in the best interest of the taxpayers.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 57
AUDIT METHODOLOGY AND STANDARDS
Our overall goal was to assess the adequacy of the internal controls put in place by ofﬁcials to
safeguard Town assets and monitor ﬁnancial activities. To accomplish this, we performed an initial
assessment of the internal controls so that we could design our audit to focus on those areas most at
During the initial assessment, we interviewed Town ofﬁcials, performed limited tests of transactions,
and reviewed pertinent documents such as Town policies, Board minutes, and ﬁnancial records and
reports. After reviewing the information gathered during our initial risk assessment, we determined
where weaknesses existed, and evaluated those weaknesses for the risk of potential fraud, theft and/or
professional misconduct. We focused our audit testing on those areas most at risk, which included the
ball stadium, ﬁnancial condition and information technology.
To accomplish our audit objective and obtain relevant audit evidence, our procedures included the
• We reviewed Board minutes to determine the timing and nature of events.
• We reviewed all contracts associated with the initial purchase of the ball stadium and
subsequent transfer to the RLDC, RLDC articles of incorporation and by-laws, memorandum
of understanding between RLDC and Bottom 9 baseball, feasibility analysis provided to the
RLDC, pertinent Board resolutions, lawsuit ﬁled by taxpayers and corresponding decision and
order, RLDC ofﬁcial bond statement.
• We interviewed the Town Supervisor, Town Attorney and Town Board members.
• We obtained and reviewed information pertaining to the expenditures made by the RLDC and
• We obtained revenue and expenditure comparison reports for the ﬁscal years ending 2008
through 2011 and analyzed the budgets when compared to actual, operating surplus/deﬁcits,
and 2011 budget estimates and trend for those years.
• We analyzed fund balance for the ﬁscal years ending 2008 through 2010.
• We examined the inter-fund advances and reviewed Board resolutions authorizing them. We
further examined bank statements for affected funds.
• We interviewed the Director of Automated Systems and other appropriate Town ofﬁcials. We
interviewed and observed employees who use online banking.
• We obtained and reviewed Town policies and procedures related to information technology.
58 OFFICE OF THE NEW YORK STATE COMPTROLLER
• We reviewed the conﬁguration of the Town’s Internet content ﬁlter and obtained reports
summarizing usage. We further reviewed additional logs related to usage, as well as, the
Town’s default domain policy and other applicable computer policies setup. We reviewed a
usage report produced by the ﬁltering program.
• We compared Internet content ﬁlter conﬁguration from risk assessment to current settings of
Internet content ﬁlter.
• We obtained the list of user accounts setup in the active directory and compared them to the
current staff list.
• We audited multiple computers, consisting of running win audit software, examining
temporary Internet ﬁles, cookies, and Internet history.
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
objectives. We believe that the evidence obtained provides a reasonable basis for our ﬁndings and
conclusions based on our audit objectives.
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 59
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
60 OFFICE OF THE NEW YORK STATE COMPTROLLER
OFFICE OF THE STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENT
AND SCHOOL ACCOUNTABILITY
Steven J. Hancox, Deputy Comptroller
Nathaalie N. Carey, Assistant Comptroller
LOCAL REGIONAL OFFICE LISTING
BINGHAMTON REGIONAL OFFICE NEWBURGH REGIONAL OFFICE
H. Todd Eames, Chief Examiner Christopher Ellis, Chief Examiner
Ofﬁce of the State Comptroller Ofﬁce of the State Comptroller
State Ofﬁce Building - Suite 1702 33 Airport Center Drive, Suite 103
44 Hawley Street New Windsor, New York 12553-4725
Binghamton, New York 13901-4417 (845) 567-0858 Fax (845) 567-0080
(607) 721-8306 Fax (607) 721-8313 Email: Muni-Newburgh@osc.state.ny.us
Serving: Columbia, Dutchess, Greene, Orange,
Serving: Broome, Chenango, Cortland, Delaware, Putnam, Rockland, Ulster, Westchester Counties
Otsego, Schoharie, Sullivan, Tioga, Tompkins Counties
ROCHESTER REGIONAL OFFICE
BUFFALO REGIONAL OFFICE Edward V. Grant, Jr., Chief Examiner
Robert Meller, Chief Examiner Ofﬁce of the State Comptroller
Ofﬁce of the State Comptroller The Powers Building
295 Main Street, Suite 1032 16 West Main Street – Suite 522
Buffalo, New York 14203-2510 Rochester, New York 14614-1608
(716) 847-3647 Fax (716) 847-3643 (585) 454-2460 Fax (585) 454-3545
Email: Muni-Buffalo@osc.state.ny.us Email: Muni-Rochester@osc.state.ny.us
Serving: Allegany, Cattaraugus, Chautauqua, Erie, Serving: Cayuga, Chemung, Livingston, Monroe,
Genesee, Niagara, Orleans, Wyoming Counties Ontario, Schuyler, Seneca, Steuben, Wayne, Yates Counties
GLENS FALLS REGIONAL OFFICE SYRACUSE REGIONAL OFFICE
Jeffrey P. Leonard, Chief Examiner Rebecca Wilcox, Chief Examiner
Ofﬁce of the State Comptroller Ofﬁce of the State Comptroller
One Broad Street Plaza State Ofﬁce Building, Room 409
Glens Falls, New York 12801-4396 333 E. Washington Street
(518) 793-0057 Fax (518) 793-5797 Syracuse, New York 13202-1428
Email: Muni-GlensFalls@osc.state.ny.us (315) 428-4192 Fax (315) 426-2119
Serving: Albany, Clinton, Essex, Franklin,
Fulton, Hamilton, Montgomery, Rensselaer, Serving: Herkimer, Jefferson, Lewis, Madison,
Saratoga, Schenectady, Warren, Washington Counties Oneida, Onondaga, Oswego, St. Lawrence Counties
HAUPPAUGE REGIONAL OFFICE STATEWIDE AND REGIONAL PROJECTS
Ira McCracken, Chief Examiner Ann C. Singer, Chief Examiner
Ofﬁce of the State Comptroller State Ofﬁce Building - Suite 1702
NYS Ofﬁce Building, Room 3A10 44 Hawley Street
Veterans Memorial Highway Binghamton, New York 13901-4417
Hauppauge, New York 11788-5533 (607) 721-8306 Fax (607) 721-8313
(631) 952-6534 Fax (631) 952-6530
Serving: Nassau and Suffolk Counties
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY 61