Internal Controls Over Cash Receipts and Disbursements by mwt90268

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									OFFICE   OF THE   NEW YORK STATE COMPTROLLER
                  D IVISION OF LOCAL GOVERNMENT
                      & SCHOOL ACCOUNTABILITY




     Fort Johnson
  Fire Company, Inc.
Internal Controls Over Cash
Receipts and Disbursements
           Report of Examination
                    Period Covered:
          March 1, 2007 — February 29, 2008
                       2008M-160




               Thomas P. DiNapoli
                               Table of Contents


                                                                               Page

AUTHORITY LETTER                                                                2


EXECUTIVE SUMMARY                                                               3


INTRODUCTION                                                                    5
           Background                                                           5
           Objective                                                            5
           Scope and Methodology                                                6
           Comments of Local Officials and Corrective Action                     6


BOARD OVERSIGHT                                                                 7
           Board Minutes                                                        7
           Policies and Procedures                                              8
           Recommendations                                                     10


CASH RECEIPTS AND DISBURSEMENTS                                                11
            Records and Bank Reconciliations                                   11
            Claims Processing                                                  12
            Recommendations                                                    15


APPENDIX   A   Response From Local Officials                                    16
APPENDIX   B   Audit Methodology and Standards                                 18
APPENDIX   C   How to Obtain Additional Copies of the Report                   19
APPENDIX   D   Local Regional Office Listing                                    20




                      DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY          11
                                              State of New York
                                 Office of the State Comptroller

Division of Local Government
and School Accountability

October 2008

Dear Company Officials:

The Office of the State Comptroller is authorized to oversee the fiscal affairs of Fire Companies
statewide, as well as their compliance with relevant statutes and observance of good business practices,
through the conduct of audits. These audits identify opportunities for improving fire company
operations and governance. By doing so, the audits can help Fire Company officials manage Company
resources efficiently and effectively, and provide accountability for moneys used to support Company
operations. Audits also can identify strategies to reduce costs and to strengthen controls intended to
safeguard Company assets.

Following is a report of our audit of Fort Johnson Fire Company, Inc., entitled Internal Controls
Over Cash Receipts and Disbursements. This audit was conducted pursuant to the State Comptroller’s
Authority as set forth in Article 3 of the General Municipal Law.

This audit’s results and recommendations are resources for Fire Company officials to use in effectively
managing operations and in meeting the expectations of the public. If you have questions about this
report, please feel free to contact the local regional office for your county, as listed at the end of this
report.


Respectfully submitted,


Office of the State Comptroller
Division of Local Government
and School Accountability




   2         OFFICE OF THE NEW YORK STATE COMPTROLLER
                                                                            State of New York
                                                               Office of the State Comptroller
                                                                EXECUTIVE SUMMARY



The Fort Johnson Volunteer Fire Company, Inc. (Company) is located in the Village of Fort Johnson
(Village), in Montgomery County. The Company, which was established in 1935, has two stations and
comprises 35 volunteer members who provide fire protection services to the Village and a portion of
the Town of Amsterdam. The Company is governed by a five-member Board of Directors (Board).
The Board is responsible for overseeing the Company’s general and financial affairs. The Company
Chairman1 is the chief fiscal officer and is responsible for receiving, depositing and disbursing funds
and maintaining the financial records. The Company reported total annual revenues of $258,000 in
2005, $248,000 in 2006 and $279,000 in 2007.

Scope and Objective

The objective of our audit was to examine the Board’s oversight and the internal controls over cash
receipts and disbursements for the period March 1, 2007 to February 29, 2008. We expanded our
review of cash receipts for the period of March 1, 2007 to April 30, 2008. Our audit addressed the
following related questions:

       •   Does the Board of Directors effectively monitor Company operations?

       •   Are internal controls over cash receipts and disbursements appropriately designed and operating
           effectively to adequately safeguard the Company’s assets?

Audit Results

The Board did not adequately monitor the Company’s financial activities. We found that the Company
had a very weak control environment. The minutes of the Board proceedings were incomplete and
did not include sufficient information related to financial transactions, such as cash receipts that were
collected and claims that were approved for payment. The Board has not established policies and
procedures governing claims processing or debit cards, and did not design adequate policies and
procedures to segregate duties over the Company’s financial activities. Additionally, the President did
not appoint an audit committee to audit the Company’s books, and the Board did not provide Company
members with an annual report detailing the Company’s financial affairs.



____________________
1
    The Company Chairman also serves as the Treasurer for the social fund.


                                 DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY              33
Internal controls over cash receipts and disbursements were not appropriately designed and were not
operating effectively. The Chairman and his bookkeeper did not maintain adequate and up-to-date
cash records, did not deposit collections timely and did not prepare monthly financial reports for the
Board. The Board did not audit or engage an accountant to audit the Chairman’s records. The Board
did not properly audit claims prior to payment to ensure they represented proper Company charges.
We found $46,875 in claims and $33,073 in debit card purchases that lacked adequate documentation
to prove they were valid Company purchases. In addition, another $36,141 in claims contained no
supporting documentation other than information on the corresponding bank statements. Consequently,
we could not determine whether all of these purchases/disbursements were made for proper Company
purposes.

Comments of Local Company Officials

The results of our audit and recommendations have been discussed with Fire Company officials and
their comments, which appear in Appendix A, have been considered in preparing this report. Company
officials generally agreed with our recommendations and have initiated, or indicated they planned to
initiate, corrective action.




  4         OFFICE OF THE NEW YORK STATE COMPTROLLER
                          Introduction

Background        The Fort Johnson Volunteer Fire Company, Inc. (Company) is located
                  in the Village of Fort Johnson (Village), in Montgomery County.
                  The Company, which was established in 1935, has two stations and
                  comprises 35 volunteer members who provide fire protection services
                  to the Village and a portion of the Town of Amsterdam.

                  The Company is governed by a five-member Board of Directors
                  (Board). The Board is responsible for overseeing the Company’s
                  general and financial affairs. However, Board decisions may be
                  overruled by a majority vote of the Company membership. The
                  Company reported total annual revenues of $258,000 in 2005,
                  $248,000 in 2006 and $279,000 in 2007.

                  The Chairman is the chief fiscal officer of the Company whose duties
                  include receiving, depositing and disbursing funds, maintaining
                  financial records, and filing an annual report of the Company’s
                  revenues and expenditures of foreign fire insurance premiums with
                  the Office of the State Comptroller. The Company’s primary sources
                  of revenues are fire protection contracts, fundraising activities, grants
                  and foreign fire insurance premiums.

                  The Company accounts for its financial activities in its general,
                  reserve and social funds. The general and reserve funds are used to
                  account for the Company’s general operations and equipment needs
                  and are primarily financed with the proceeds from fire protection
                  contracts and grants. The social fund is used for the general benefit of
                  the members and is funded by foreign fire insurance premiums2 and
                  donations.

Objective         The objective of our audit was to examine the Board’s oversight and
                  internal controls over cash receipts and disbursements. Our audit
                  addressed the following related questions:

                      •   Does the Board of Directors effectively monitor Company
                          operations?


                  ____________________
                  2
                   Generally, a foreign fire insurance tax is imposed on premiums of fire insurance
                  policies written for New York State property owners by insurance companies that
                  are not based in New York State. These additional premiums are remitted to the
                  New York State Insurance Department, which, in turn, remits a portion of these
                  premiums to fire companies/departments that service the insured properties. These
                  premium monies are supposed to be expended for benefit of all fire company/
                  department members.

             DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                         55
                               •   Are internal controls over cash receipts and disbursements
                                   appropriately designed and operating effectively to adequately
                                   safeguard the Company’s assets?

Scope and                  During this audit, we interviewed Company officials and tested cash
Methodology                receipts and disbursements records, along with related financial records
                           and reports for the Company’s general and social fund checking and
                           savings accounts for the period March 1, 2007 to February 29, 2008.
                           We expanded our review of cash receipts for the period of March 1,
                           2007 to April 30, 2008.

Comments of                We conducted our audit in accordance with generally accepted
Local Officials             government auditing standards (GAGAS). More information on such
and Corrective Action      standards and the methodology used in performing this audit are
                           included in Appendix B of this report.

                           The results of our audit and recommendations have been discussed
                           with Fire Company officials and their comments, which appear in
                           Appendix A, have been considered in preparing this report. Company
                           officials generally agreed with our recommendations and have
                           initiated, or indicated they planned to initiate, corrective action.

                           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 Company
                           Secretary’s office.




  6        OFFICE OF THE NEW YORK STATE COMPTROLLER
                         Board Oversight

                     The Board is responsible for developing and implementing a system
                     of internal controls that provides reasonable assurance that Company
                     resources are adequately safeguarded from loss, waste and abuse, and
                     that all financial activities are accounted for properly. The Board is
                     responsible for taking an active role in safeguarding the Company’s
                     resources by attentively monitoring operations.

                     The Board did not establish internal control policies and procedures
                     or provide oversight in key areas of operations. The Board’s lack of
                     oversight allowed errors and inconsistencies to occur and go undetected
                     and uncorrected. Specifically, Board minutes were inadequate as a
                     record of Company activity because they did not clearly indicate
                     whether the Board approved financial transactions and what took
                     place at meetings. The Board did not establish adequate policies and
                     procedures for claims processing or the use of Company debit cards,
                     and did not provide for segregation of duties over the Company’s
                     financial transactions. Without adequate policies and procedures,
                     Company members do not have sufficient guidance on how to perform
                     their duties, and there is an increased risk that errors could occur and
                     not be detected or corrected. Finally, the Company’s President did not
                     appoint an audit committee to audit the Company’s books, and the
                     Board did not present an annual report to the Company’s membership
                     on its financial affairs. Without a detailed synopsis of the Company’s
                     financial condition, Company members do not have assurance that
                     Company moneys are being used appropriately.

Board Minutes        The minutes of the Board proceedings serve as the Company’s official
                     record. It is important that Board minutes are kept permanently by filing
                     them in a minute book. Pages must be dated, consecutively numbered
                     and filed in date order in the minute book. The minutes must contain
                     a complete, detailed and accurate account of all Board authorizations
                     and decisions. Approved contracts, adopted budgets, audited and/or
                     reviewed claims, established policies, periodic reports, and various
                     authorizations, resolutions and designations must all be part of the
                     official record. At each Board meeting, the previous month’s minutes
                     should be reviewed, amended as needed, and adopted as the official
                     record. Well-kept minutes are essential to formally document the
                     Board’s actions and to provide Company management and the public
                     with information on the Company’s operations.

                     We found that the Board minutes were incomplete and inconsistent.
                     As an official, permanent record of the actions and key decisions


                DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                  77
                           of the Board, the minute book provided very little useful financial
                           information. Financial transactions such as cash collections, cash
                           transfers and claims that were approved for payment were not included
                           in the minutes. Pages were not numbered and were sporadically dated.
                           Further, the minutes were not prepared and inserted in the minute book
                           on a timely basis; as of the completion of our fieldwork, the minutes
                           of Board meetings that occurred between February 2008 and July
                           2008 were not in the minute book. Further, as the official record of
                           the Company’s proceedings, the Board minutes were insufficient and
                           unclear whether certain Company activities and financial transactions
                           were properly approved by the Board. Because of inadequate Board
                           minutes, Company members and the public do not have a clear
                           understanding of what took place at the Board meetings, and have no
                           assurance that Company moneys were spent appropriately.

Policies and Procedures    Effective policies and procedures provide reasonable assurance that
                           an organization’s assets are adequately safeguarded. It is important
                           that these policies and procedures provide for a proper segregation
                           of financial duties and managerial oversight of financial activities.
                           Control policies and procedures segregate the transaction approval,
                           accounting and asset custody functions and are designed to prevent
                           or to detect errors and fraudulent activity on a timely basis. Policies
                           and procedures must also require independent oversight of the work
                           performed by those involved in financial operations. The lack of
                           appropriate oversight increases the risk that errors and/or irregularities
                           may not be prevented or detected timely.

                           The Board had not established written policies and procedures
                           governing cash receipts and disbursements (including claims
                           processing), the use of debit cards, segregation of financial duties and
                           Board monitoring of Company finances including an annual audit. As
                           a result, Company members had no clear guidelines on how to perform
                           their duties, and the risk was increased that errors and irregularities
                           could occur and not be detected.

                           Claims Processing — In practice, the Chairman reviews and approves
                           claims, while the Treasurer signs and issues the disbursement checks.
                           However, the Board has not established a policy directing the Board
                           to audit and review these claims to ensure that they are adequately
                           supported and are for proper Company purposes.

                           Debit Cards — The Company issued debit cards to three Board
                           members. However, the Board has not developed any policies or
                           procedures governing the use of debit cards or for monitoring their
                           usage. Since debit cards provide unlimited access to an entity’s
                           checking account, using them significantly increases the risk that
                           entity funds could be used for unauthorized purposes without

  8        OFFICE OF THE NEW YORK STATE COMPTROLLER
     detection. In light of this risk, some governing boards have opted
     instead to authorize credit cards and to develop appropriate policies
     and procedures governing their use. Written policies and procedures
     are needed to establish effective controls over credit card usage. It is
     important that the policy specifically define the allowable expenditures
     that Company officers can charge to these cards; identify all the
     authorized users; set appropriate expenditure limits; establish custody
     of the cards when they are not in use; describe the documentation
     needed to support the claims; and provide a means for the Company
     to recoup improper expenditures.

     Segregation of Duties — The Board has not established adequate
     policies and procedures designed to provide proper segregation of
     financial activities. The Company Chairman performed virtually
     every aspect of the cash accounting functions, including maintaining
     the general and social fund checking and saving accounts. His duties
     included counting monies received, preparing deposit slips, depositing
     checks, preparing and signing social fund checks, and making bank
     transfers between accounts. Although the Treasurer signs checks that
     are drawn on the main checking account, and a local accounting firm
     prepares bank reconciliations, there are no other Board review and
     oversight procedures in place.

     Annual Audit — Company By-Laws3 require the President to appoint
     an audit committee to audit the Company’s books and the Board to
     present an annual report to the Company’s membership on its financial
     affairs. However, we found no evidence that an audit committee was
     established or that the Board had annually reported its financial affairs
     to the Company’s membership.

     Lack of controls invites abuse. Since the Board has not established
     any policies and procedures for controlling cash receipts and
     disbursements, it has not fulfilled its fiduciary responsibility to account
     for and safeguard Company moneys. In addition, since the Board did
     not monitor the Chairman’s activities or the activities of individuals
     who made purchases with Company debit cards, Company funds
     were vulnerable to theft and misuse. Because the Company failed
     to perform an annual audit and present an annual financial report
     to the Company’s membership, Company members do not have
     assurance that moneys are being spent appropriately, and there is an
     increased risk that the Company’s moneys could be misused and not
     be detected.


     ____________________
     3
      The Company By-Laws provide the rules under which the Company is organized
     and operated.


DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY                     99
                         Subsequent to the completion of our field work, we noted that
                         the Chairman implemented a process for reporting the monthly
                         disbursements and balances in all accounts to the Board.

Recommendations          1. All of the Board’s key actions and decisions should be accurately
                            recorded and permanently retained in the Company’s official
                            record of proceedings in a timely manner. The public record of
                            the Board minutes should be safeguarded from loss or alteration.

                         2. The Board should adopt adequate policies and procedures over
                            Company financial recordkeeping, purchasing, and claims
                            processing.

                         3. The Board should replace its debit cards with credit cards and
                            develop a credit card usage and monitoring policy. The credit card
                            policy should be reviewed and updated annually.

                         4. The Board should take an active role in monitoring the Company’s
                            financial operations and should require monthly reports including
                            bank reconciliations and a comparison of the Treasurer’s budget
                            to actual expenditures. The Board should audit all claims and
                            audit or require the Company’s financial records to be audited
                            annually.




 10      OFFICE OF THE NEW YORK STATE COMPTROLLER
                   Cash Receipts and Disbursements

                         The Board is responsible for developing and implementing a system
                         of internal controls, including effective controls over cash receipts
                         and disbursements, to adequately and properly account for Company
                         resources and to protect them from theft and misuse. Maintaining
                         current, complete and accurate accounting records provides essential
                         information needed by the Board to effectively manage and safeguard
                         cash and properly monitor the Company’s fiscal affairs. Reconciling
                         cash book balances to the bank balances on a monthly basis helps
                         ensure that the Company’s cash assets are properly accounted for.

                         We found that the Chairman did not keep adequate records to properly
                         account for the general fund’s cash transactions and did not maintain
                         records for the social fund’s bank accounts. While all cash receipts
                         for the general fund were properly recorded and deposited timely,
                         we found that social fund collections were not always properly
                         recorded or deposited timely. The Board did not audit claims prior
                         to authorizing payment, payments were made without adequate
                         supporting documentation, and some purchases were made that were
                         not for legitimate Company purposes. Debit card usages also resulted
                         in overdrafts of the general fund checking account on two occasions,
                         and overdraft fees were assessed. Because the Company did not keep
                         adequate records or provide proper oversight over its purchases,
                         Company funds were misused.

Records and Bank         The Chairman is responsible for posting all bank transactions. The
Reconciliations          Chairman’s bookkeeper reviews all transactions to verify that they
                         are recorded to the correct accounts and also performs the bank
                         reconciliations. The Chairman did not keep adequate records to
                         properly account for the general fund’s cash transactions and did
                         not maintain adequate records for the social fund’s checking and
                         savings accounts. The Chairman’s bookkeeper did not perform bank
                         reconciliations for the social fund’s checking account on a regular
                         basis, and has not reconciled two of the four social fund accounts
                         since September 2006. The Chairman had not posted transactions
                         for two accounts to the general ledger since November 2007. As a
                         result, these accounts were collectively understated in the Company’s
                         records by $3,650 as of March 31, 2008.

                         Due to the absence of controls over the Company’s funds, we
                         examined all cash receipts during our audit period for the general
                         fund and social fund, totaling $377,000 and $18,200 respectively, to
                         determine whether moneys received were properly accounted for.



                    DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY               11
                                                                                        11
                          While all cash receipts for the general fund were properly recorded
                          and deposited timely, we found that social fund collections were
                          not always properly recorded or deposited timely. We noted that
                          collections totaling $3,755 that were received between November
                          2007 and January 2008 were not deposited in the social fund until
                          February 8, 2008.

                          Without complete and accurate records of Company moneys, the
                          performance of regular and competent reconciliations of those
                          records to the bank accounts, and the prompt deposit of funds into
                          Company accounts, there is a significant risk that Company moneys
                          could be stolen or misused, particularly if the Board does not monitor
                          the Company’s financial activities.

Claims Processing         Claims are bills or invoices submitted by vendors requesting payment
                          for services rendered or materials furnished to the Company. While
                          the Company does not have a formal policy on claims processing,
                          prudent business practices dictate that claims should not be paid
                          unless they have been audited and approved for payment by the Board
                          or its representative. The Board must ensure that all claims contain
                          sufficient documentation to verify that purchases are legitimate
                          Company expenses. In cases where a Board representative is auditing
                          and approving the claims prior to the monthly Board meetings, he/
                          she can provide an abstract of these claims, along with supporting
                          detail, to the Board for inspection at the meeting. It is important that
                          the approval/inspection of the claims is documented by a resolution
                          in the Board minutes indicating that the claims have been authorized
                          and approved for payment by the Board.

                          The Board assigned the claims approval responsibilities to the
                          Chairman, who did not audit the claims or submit them for Board
                          review prior to authorizing payment. Further, the Board minutes did
                          not specifically identify claims that were submitted and approved by
                          the Chairman, but merely included a motion stating “Paying bills as
                          they come in.”

                          General Fund — We examined all 211 general fund cancelled checks,
                          totaling approximately $149,000 for the audit period, to determine
                          whether payments were supported by adequate documentation and
                          were for actual and necessary Company purposes. All deficiencies
                          are noted below:

                              •   Twenty-eight disbursements totaling $46,875 lacked adequate
                                  documentation; primarily the supporting receipts on file were
                                  not itemized. Without properly itemized receipts, we could
                                  not readily identify individual items that were purchased and
                                  whether they were made for proper Company purposes.

 12       OFFICE OF THE NEW YORK STATE COMPTROLLER
        •   Forty-five disbursements totaling $36,141 lacked any
            supporting documentation. Consequently, we could not
            determine what was purchased and if the purchases were for
            valid Company purposes. Subsequent to the completion of
            fieldwork, the Company located the claim documentation for
            25 of these disbursements totaling $30,940.

        •   We identified two duplicate payments totaling $695 for
            purchasing uniforms and repairing a truck. The duplicate
            payments were caused by a failure to check prior invoices to
            ensure that claims were not previously paid.

     Payments made without adequate supporting documentation and/or
     proper Board audit and approval increase the risk that moneys may be
     expended inappropriately or for non-Company purposes.

     Social Fund — We reviewed all 23 disbursements totaling $16,759
     that were made from the Company's social fund checking account for
     the audit period, and found the following:

        •   There was no supporting documentation for eight
            disbursements totaling $9,964. One of these disbursements,
            a check for $6,140, was issued in October 2007 to purchase a
            sign. The only documentation of this purchase was a reference
            in the Board minutes indicating that $4,800 was approved for
            the purchase of a sign. The Company received the sign in
            August 2008, subsequent to the completion of fieldwork.

        •   The Company did not properly record one voided check and
            three issued checks totaling $2,353.

     Because payments were made without adequate supporting
     documentation and/or Board audit and approval, the Company had
     no assurance that its moneys were being used appropriately, and the
     Company paid for a sign that was never received.

     Debit Cards — While it is common practice for fire companies to use
     credit cards for the convenience of making purchases or paying for
     travel expenses, it is generally unadvisable for a company to issue
     debit cards because it provides the user with unlimited access to the
     company’s checking account. The Company issued debit cards to three
     Board members (Chief, Chairman and the Treasurer). However, there
     were no policies and procedures in place governing the debit cards’
     use, and there was no indication that the Board adequately monitored
     the purchases that were made. As a result, the Company incurred fees
     for overdrafts and charges that were not properly supported.

     We analyzed all 327 purchases totaling $33,073 that were made
     during the audit period and found that the three Board members who

DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY               13
                                                                    13
                     made these purchases did not submit purchase receipts. Because
                     of the lack of documentation for these purchases, we reviewed the
                     bank statements for the main checking account and analyzed all 327
                     transactions. We found questionable purchases, including:

                         •   $6,400 was spent on food, which the Chairman explained was
                             purchased in conjunction with scheduled drills. However, due
                             to the lack of documentation, we were not able to confirm that
                             these purchases corresponded to the specific dates the drills
                             occurred.

                         •   $4,100 and $3,800 was spent at Wal-Mart and Home Depot,
                             reportedly for renovations made to Station #2 and for general
                             supplies. Because of a lack of adequate documentation, we
                             could not confirm this assertion.

                         •   Over $1,000 was spent on fuel. We were told that it is Company
                             practice to allow the Chief and Chairman to purchase gas up
                             to $50.00 a month for responding to calls. However, there was
                             no formal monitoring of mileage.

                         •   $724 was spent on four purchases that were for non-Company
                             purposes, including two of the Chief’s personal insurance
                             payments, a train ticket for a stranded former Company
                             member, and the Chairman’s veterinary bill.

                     We were told by the Chairman that he believed all of the purchases
                     listed above were made for legitimate Company purposes, with the
                     exception of the purchases totaling $724. We note that all but the train
                     ticket in the amount of $170 were reimbursed prior to our audit.

                     The Company’s debit card usages also resulted in overdrafts of the
                     general fund checking account on two occasions, and overdraft fees
                     were assessed. In April 2007, the general fund checking account was
                     overdrawn by $4,021 which resulted in overdraft fees of $400. On
                     March 14, 2008 the checking account was overdrawn again by $749
                     and resulted in an additional $175 in overdraft fees. These overdrafts
                     occurred because Board members used the debit cards without
                     tracking the available daily cash balance.

                     Because payments were made without adequate supporting
                     documentation and/or Board audit and approval, the Company had
                     no assurance that its moneys were being used appropriately, and it
                     paid for unauthorized and non-Company related costs. The Company
                     also incurred unnecessary overdraft fees because debit cards were
                     used without first checking available balances.


14   OFFICE OF THE NEW YORK STATE COMPTROLLER
Recommendations        5. The Chairman should maintain accurate and complete accounting
                          records that document all cash receipt and disbursement
                          transactions and account balances.

                       6. The bookkeeper should reconcile Company bank accounts to
                          accounting records on a monthly basis.

                       7. The Board should periodically review accounting records and
                          bank statements.

                       8. The Board should ensure that all claims are appropriately itemized
                          and contain sufficient documentation before approving them for
                          payment.

                       9. The Board should establish internal control procedures over the
                          purchase of fuel for personal vehicles.




                  DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY               15
                                                                                      15
                                          APPENDIX A

                        RESPONSE FROM LOCAL OFFICIALS

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




  16        OFFICE OF THE NEW YORK STATE COMPTROLLER
DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY    17
                                                         17
                                          APPENDIX B

                     AUDIT METHODOLOGY AND STANDARDS

We examined Fort Johnson Fire Company, Inc.’s records and reports for the period March 1, 2007 to
February 29, 2008.

To accomplish the objective of this audit and obtain valid audit evidence, our procedures included the
following steps:

   •   We conducted interviews with Company officers to gain an understanding of procedures that
       were in place and the nature of internal controls.

   •   We reviewed Company By-Laws to gain an understanding of how the Company is structured
       and the Officers’ job duties.

   •   We reviewed the Company’s financial records and reports, tested all cash transactions during
       our audit period and examined pertinent documents, including contracts, vendor invoices and
       receipts, cancelled checks and bank statements.

We conducted our 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.




  18        OFFICE OF THE NEW YORK STATE COMPTROLLER
                                           APPENDIX C

           HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

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




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




                           DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY    19
                                                                                    19
                                                    APPENDIX D
                             OFFICE OF THE STATE COMPTROLLER
                              DIVISION OF LOCAL GOVERNMENT
                               AND SCHOOL ACCOUNTABILITY
                                            Steven J. Hancox, Deputy Comptroller
                                            John C. Traylor, Assistant Comptroller

                                      LOCAL REGIONAL OFFICE LISTING
BUFFALO REGIONAL OFFICE                                      GLENS FALLS REGIONAL OFFICE
Robert Meller, Chief Examiner                                Karl Smoczynski, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
295 Main Street, Suite 1032                                  One Broad Street Plaza
Buffalo, New York 14203-2510                                 Glens Falls, New York 12801-4396
(716) 847-3647 Fax (716) 847-3643                            (518) 793-0057 Fax (518) 793-5797
Email: Muni-Buffalo@osc.state.ny.us                          Email: Muni-GlensFalls@osc.state.ny.us

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

ROCHESTER REGIONAL OFFICE                                    ALBANY REGIONAL OFFICE
Edward V. Grant, Jr., Chief Examiner                         Kenneth Madej, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
The Powers Building                                          22 Computer Drive West
16 West Main Street – Suite 522                              Albany, New York 12205-1695
Rochester, New York 14614-1608                               (518) 438-0093 Fax (518) 438-0367
(585) 454-2460 Fax (585) 454-3545                            Email: Muni-Albany@osc.state.ny.us
Email: Muni-Rochester@osc.state.ny.us
                                                             Serving: Albany, Columbia, Dutchess, Greene,
Serving: Cayuga, Chemung, Livingston, Monroe,                Schenectady, Ulster counties
Ontario, Schuyler, Seneca, Steuben, Wayne, Yates
counties

SYRACUSE REGIONAL OFFICE                                     HAUPPAUGE REGIONAL OFFICE
Eugene A. Camp, Chief Examiner                               Jeffrey P. Leonard, Chief Examiner
Office of the State Comptroller                               Office of the State Comptroller
State Office Building, Room 409                               NYS Office Building, Room 3A10
333 E. Washington Street                                     Veterans Memorial Highway
Syracuse, New York 13202-1428                                Hauppauge, New York 11788-5533
(315) 428-4192 Fax (315) 426-2119                            (631) 952-6534 Fax (631) 952-6530
Email: Muni-Syracuse@osc.state.ny.us                         Email: Muni-Hauppauge@osc.state.ny.us

Serving: Herkimer, Jefferson, Lewis, Madison,                Serving: Nassau, Suffolk counties
Oneida, Onondaga, Oswego, St. Lawrence counties


BINGHAMTON REGIONAL OFFICE
Patrick Carbone, Chief Examiner                              NEWBURGH REGIONAL OFFICE
Office of the State Comptroller                               Christopher Ellis, Chief Examiner
State Office Building, Room 1702                              Office of the State Comptroller
44 Hawley Street                                             33 Airport Center Drive, Suite 103
Binghamton, New York 13901-4417                              New Windsor, New York 12553-4725
(607) 721-8306 Fax (607) 721-8313                            (845) 567-0858 Fax (845) 567-0080
Email: Muni-Binghamton@osc.state.ny.us                       Email: Muni-Newburgh@osc.state.ny.us

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


  20            OFFICE OF THE NEW YORK STATE COMPTROLLER

								
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