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					                                        STATE OF NEW YORK                              MARK P. PATTISON
ALAN G. HEVESI
 COMPTROLLER                 OFFICE OF THE STATE COMPTROLLER                        DEPUTY COMPTROLLER
                                         110 STATE STREET                DIVISION OF LOCAL GOVERNMENT SERVICES
                                      ALBANY, NEW YORK 12236                       AND ECONOMIC DEVELOPMENT
                                                                             Tel: (518) 474-4037 Fax: (518) 486-6479


                                        November 10, 2004

  Supervisor Golden and
  Members of the Town Board
  Town of Lyme
  NYS Route 12E
  Chaumont, N.Y. 13622

  Report No. B3-4-21

  Dear Supervisor Golden and Members of the Town Board:

  Our office has recently completed an audit of the Town’s preliminary budget for the 2005 fiscal
  year. The objective of the audit was to provide an independent evaluation of the preliminary
  budget. Our audit addressed the following questions related to the Town’s preliminary budget for
  the 2005 fiscal year:

  Are the Town’s revenue and expenditure projections in the preliminary budget reasonable?

  Is the Town’s budget structurally balanced so that recurring costs are financed with recurring
  revenues?

  We conducted our audit in accordance with Generally Accepted Government Auditing Standards
  with the exception of reporting views of responsible officials which were omitted from this
  report due to the necessity of providing the Town with this time-sensitive information. Such
  standards require that we plan and perform our audit to adequately assess the estimates in the
  preliminary budget. Further, those standards require that we understand the internal control
  structure at the Town and the Town’s compliance with those laws, rules and regulations that are
  relevant to preparing estimates for the preliminary budget.

  To accomplish our objectives in this audit, we requested your preliminary 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 and if the budget is
  structurally balanced so that recurring costs are financed with recurring revenues. It was not our
  intent and we do not offer comments on public policy decisions, such as, the type and level of
  services to be provided.

  The preliminary budget package for the fiscal year ended December 31, 2005, submitted for
  audit consisted of the following:
     ·    2005 Preliminary Budget
     ·    Supplementary Information

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


                              Appropriations    Estimated    Appropriated Fund     Real Property
  Fund                        and Provisions    Revenues     Balance               Taxes
                              for Other Uses
  General Townwide                  $615,600     $354,385             $126,215         $135,000
  General Outside Village              69,251      69,251                     0               0
  Highway Townwide                    451,599     345,849                     0         105,750
  Highway Outside Village             208,377     208,377                     0               0
  Special Districts                    73,130        2,540                 7,000         63,590
  Water Districts (1)                 781,585     781,585                     0               0

  Total                          $2,199,542 $1,761,987                $133,215         $304,340
(1) Includes budget of $683,000 for construction of Water District #4

The observations and recommendations resulting from our audit are, to a great extent, influenced
by the quality and quantity of materials submitted, and the time between submission and budget
adoption.

Based on the results of our audit, except as noted below, we found the significant revenue and
expenditure projections in the preliminary budget to be reasonable and the Town’s budget
structurally balanced.

Our audit disclosed the following findings which should be reviewed by the Town Board for
appropriate action. Good management practices require that the Town Officials take prompt
action concerning our recommendations. We believe that prompt action by Town Officials will
help improve the Town’s financial condition.

         The Town’s independent audit report for the fiscal year ended December 31, 2003,
         indicated that the Highway Townwide Fund had a deficit fund balance of $118,740. The
         Town’s projections of 2004 revenues and expenditures for the Highway Townwide Fund
         are $381,304 and $320,620, respectively, resulting in a projected operating surplus of
         $60,684. The result of this operating surplus, if it occurs, would be to reduce the
         accumulated deficit of $118,740 to $58,056. Conversely, should an operating deficit
         occur (expenditures exceed revenues), then the deficit in the Highway Townwide Fund
         would increase rather than decrease.

         When compared with the 2004 amended budget, the 2005 preliminary budget increases
         spending in the Highway Townwide Fund by $76,522 or 20%. Although no plan is in
       place to use the increase in 2005 authorizations to eliminate the Highway Townwide
       Fund deficit, every effort should be made to control spending in 2005 so that an operating
       surplus (revenues exceed expenditures) will be created thereby allowing the deficit in this
       fund to be reduced or eliminated.

       The 2005 preliminary budget estimates New York State retirement costs for the Highway
       Townwide Fund (DA9010.8) at $16,823. Based upon budgeted salaries of $197,376 and
       estimated retirement costs of 10.7% of salaries, the retirement appropriation for the
       Highway Townwide Fund should be approximately $21,120.

       The 2005 preliminary budget estimates water rents for Water District #1 (F2140) at
       $13,400 which is an increase of $2,400 or 22% over the 2004 amended budget. The 2005
       preliminary budget also estimates water rents for Water District #2 (FM2140)) at $79,856
       which is an increase of $5,856 or 8% over the 2004 amended budget. The Town Board
       has not taken any action, as of the date of this letter, to increase rates in these two water
       districts. In order to realize the increased water rent revenues estimated for each district,
       it appears likely that water rates should be increased.

The Town has the responsibility to initiate corrective action. Pursuant to Section 35 of the
General Municipal Law, the Town Board should prepare a plan of action that addresses the
recommendations in this report and forward the plan to our office within ninety days. We
encourage the Town 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 your Town. If you have any
questions on the scope of our work, please feel free to contact Principal Examiner, Carol Golden,
at 315-428-4192.
                                             Very truly yours,


                                             Debora Wagner,
                                             Chief Examiner of Local Government Services
                                             And Economic Development




 cc: Trina Comins, Town Clerk