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					                                      STATE OF NEW YORK
THOMAS P. DiNAPOLI                                                                  STEVEN J. HANCOX
                           OFFICE OF THE STATE COMPTROLLER                        DEPUTY COMPTROLLER
   COMPTROLLER                          110 STATE STREET                    DIVISION OF LOCAL GOVERNMENT
                                     ALBANY, NEW YORK 12236                   AND SCHOOL ACCOUNTABILITY
                                                                           Tel: (518) 474-4037 Fax: (518) 486-6479

                                                     October 29, 2009

Mr. Joseph A. Maddalone, Supervisor
Members of the Town Board
Town of Sidney
21 Liberty Street
Sidney, NY 13838

Report Number: B4-9-23

Dear Supervisor Maddalone and Members of the Town Board:

Chapter 109 of the Laws of 2006 authorizes the Town of Sidney to issue debt totaling $2.5
million to liquidate a portion of the cumulative deficit incurred by the Town of Sidney due to
expenses related to the Town-owned hospital for the fiscal year ending December 31, 2005.
Local Finance Law Section 10.10 requires all local governments that have been authorized to
issue obligations to fund operating deficits to submit to the State Comptroller each year, starting
with the fiscal year during which the local government is authorized to issue obligations and for
each subsequent fiscal year during which the deficit obligations are outstanding, their proposed
budget for the next succeeding fiscal year.

The proposed budget must be submitted no later than 30 days before the date scheduled for the
governing board’s vote on the adoption of the budget or the last date on which the budget may be
finally adopted, whichever is sooner. The State Comptroller must examine the proposed budget
and make recommendations for any changes that are needed to bring the proposed budget into
balance. Such recommendations are made after the examination into the estimates of revenues
and expenditures of the Town prior to the approval of the budget.

The Town Board (Board), no later than five days prior to the adoption of the budget, must review
all recommendations made by the State Comptroller and may make adjustments to its proposed
budget consistent with those recommendations contained in this report. All recommendations
that the Board rejects must be explained in writing to our office.

Our Office has recently completed an audit of the Town’s proposed budget for the 2010 fiscal
year. The objective of the audit was to provide an independent evaluation of the proposed
budget. Our audit addressed the following questions related to the Town’s budget for the 2010
fiscal year:
      Are the significant revenue and expenditure projections in the Town’s proposed budget

      Did the Town take appropriate action to implement or resolve the recommendation
       contained in the budget review audit report issued on October 29, 2008?

We conducted this performance audit in accordance with generally accepted government
auditing standards (GAGAS), with the exception of reporting views of responsible officials.
Officials’ views were not solicited for this report due to the necessity of providing the Town with
this time-sensitive information. However, the results of this audit have been discussed with
Town’s officials and their comments have been considered in preparing this report. GAGAS
requires that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our finding and conclusion based on our audit objective. We believe that the
evidence obtained provides a reasonable basis for our finding and conclusion regarding the
estimates in the proposed budget.

To accomplish our objective in this audit, we requested your proposed budget along with other
pertinent information. We analyzed the composition of revenues and expenditures in order to
determine if the revenue and expenditure estimates are reasonable. We do not offer comments on
public policy decisions, such as the type and level of services to be provided.

The proposed budget package submitted for audit for the fiscal year ended December 31, 2010
consisted of the following:

            2010 Proposed Budget
            Supplementary Information

The proposed budget submitted to our office is summarized as follows:

                                    Appropriations                                          Real
                                                    Estimated         Appropriated
             Fund                   and Provisions                                        Property
                                                    Revenues          Fund Balance
                                    for Other Uses                                         Taxes
General (Town-wide)                        $854,710 $207,000                 $60,000       $587,710
General (Town outside village)              $17,900     $3,550                $3,000        $11,350
Highway (Town-wide)                        $501,250   $60,500                     $0       $440,750
Highway (Town outside village)             $402,500  $141,000                $50,000       $211,500
Lighting District                            $6,250         $0                    $0         $6,250
Fire Protection Districts                   $50,450         $0                    $0        $50,450
Hospital Fund                              $403,000  $299,000               $104,000             $0

Based on the results of our audit, we found the significant revenue and expenditure projections in
the proposed budget to be reasonable, except for those related to the Hospital Fund. We found
that Town officials have not implemented the recommendation we made in our prior budget
review, specifically, to appropriate only available fund balance. Instead, the Board continues to
appropriate fund balance from the Hospital Fund that does not exist. As a result, the Hospital
Fund deficit will increase by $104,000 in 2010.
At June 30, 2009, there was a fund balance deficit of about $1.7 million in the Hospital Fund,
mainly representing vendor liabilities payable at the time the hospital closed. At that date, the
Hospital Fund had a cash balance of approximately $400,000. However, this amount was not
available for appropriation because the fund’s assets, which include cash, are far exceeded by the
fund’s liabilities.

Town officials appropriated $104,000 of non-existent fund balance in the Hospital Fund to
finance 2010 Hospital Fund appropriations. This action will increase, rather than decrease, the
fund balance deficit in the Hospital Fund. We again state that the Board should not appropriate
fund balance that does not exist to finance future appropriations.

The Board has the responsibility to initiate corrective action. Pursuant to Section 10.10 of Local
Finance Law, the Board shall review the recommendation in this report and may make
adjustments to its proposed budget. The Board must explain in writing to our office any
recommendations that it has rejected. In addition, pursuant to Section 35 of General Municipal
Law, the Board should prepare a plan of action that addresses the recommendation in this report
and forward the plan to our office within 90 days. We encourage the Board to make this plan
available for public review in the Town Clerk’s office. For guidance in preparing your plan of
action and filing this report, please refer to the attached documents.

We request that you provide us with a copy of the adopted budget.

We hope that this information is useful as you adopt a budget for the Town. If you have any
questions on the scope of our work, please feel free to contact Patrick A. Carbone, Chief
Examiner in our Binghamton Regional Office, at (607) 721-8306.

                                                    Very truly yours,

                                                    Steven J. Hancox
                                                    Deputy Comptroller

cc:   Meg Hungerford, Budget Officer
      Lisa French, Town Clerk
      Hon. Carl Kruger, Chair, Senate Finance Committee
      Hon. Herman D. Farrell, Jr., Chair, Assembly Ways and Means Committee
      Hon. Peter D. Lopez, State Assembly
      Hon. John J. Bonacic, State Senator
      Robert L. Megna, Director, Division of the Budget
      Patrick Carbone, LGSA Regional Chief Examiner