town of saugerties – justice court operations (ulster … · following is a report of our audit...

Division of LocaL Government & schooL accountabiLity

o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r

report of ExaminationPeriod Covered:

January 1, 2013 – November 3, 2014

2015M-47

Town of SaugertiesJustice Court Operations

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

INTRODUCTION 2 Background 2 Objective 2 Scope and Methodology 2 CommentsofTownOfficialsandCorrectiveAction 2

JUSTICE COURT OPERATIONS 4 ReconciliationsandAccountabilities 4 Bail Records 6 Cash Receipts and Deposits 7 Recommendations 8

APPENDIX A ResponseFromTownOfficials 9APPENDIX B OSC Comments on the Town’s Response 12APPENDIX C AuditMethodologyandStandards 13APPENDIX D HowtoObtainAdditionalCopiesoftheReport 14APPENDIX E LocalRegionalOfficeListing 15

Table of Contents

11Division of LocaL Government anD schooL accountabiLity

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability June2015

DearTownOfficials:

A toppriorityof theOfficeof theStateComptroller is tohelp localgovernmentofficialsmanagegovernment resources efficiently and effectively and, by so doing, provide accountability for taxdollarsspenttosupportgovernmentoperations.TheComptrolleroverseesthefiscalaffairsoflocalgovernmentsstatewide,aswellascompliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversightisaccomplished,inpart,throughouraudits,whichidentifyopportunitiesforimprovingoperationsandTownBoardgovernance.Auditsalsocanidentifystrategiestoreducecosts and to strengthen controls intended to safeguard local government assets.

FollowingisareportofourauditoftheTownofSaugerties,entitledJusticeCourtOperations.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’sauthorityassetforthinArticle3oftheNewYorkStateGeneralMunicipalLaw.

This audit’s results and recommendations are resources for local government officials to use ineffectivelymanagingoperationsand inmeeting theexpectationsof their constituents. Ifyouhavequestionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedat the end of this report.

Respectfullysubmitted,

Office of the State ComptrollerDivision of Local Governmentand School Accountability

State of New YorkOffice of the State Comptroller

2 Office Of the New YOrk State cOmptrOller2

Background

Introduction

Objective

Scope andMethodology

Comments ofTown Officials andCorrective Action

The Town of Saugerties (Town) is located in Ulster County and has approximately19,500residents.TheTownisgovernedbytheTownBoard(Board),whichcomprisesfourelectedmembersandanelectedTown Supervisor (Supervisor). The Board is the legislative body responsiblefortheTown’soverallmanagement,includingoversightoftheTown’sfinancialactivitiesaswellasfinancialactivityoftheTownJusticeCourt(Court).TheTownhastwoelectedJustices,whopresideoverCourtoperations,and three full-timeclerksappointedby the Justices.

TheCourthasjurisdictionovervehicleandtraffic,criminal,civilandsmall claims cases. The Justices’ principal duties include adjudicating legal matters within the Court’s jurisdiction and administering moneys collected from fines, bail, surcharges, civil fees and restitutions.Justices are required to submit monthly reports to the Office ofthe State Comptroller’s Justice Court Fund (JCF) on the financialactivitiesoftheprecedingmonth.TheCourtcollectedapproximately$1millioninfines,feesandsurchargesduringourauditperiod.

TheobjectiveofourauditwastoexamineinternalcontrolsovertheCourt’sfinancialactivity.Ourauditaddressedthefollowingrelatedquestion:

• WasCourtmoneyproperlyrecorded,depositedandreported?

WeexaminedtheCourt’sinternalcontrolsfortheperiodJanuary1,2013throughNovember3,2014.

We conducted our audit in accordance with generally acceptedgovernmentauditingstandards(GAGAS).Moreinformationonsuchstandards and the methodology used in performing this audit are includedinAppendixCofthisreport.

The results of our audit and recommendations have been discussed withTownofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report. Except asspecified inAppendixA,Townofficials generally agreedwith ourrecommendations and indicated they planned to take corrective action.AppendixBincludesourcommentsontheissuesraisedintheTown’s response letter.

The Board has the responsibility to initiate corrective action. Awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendations in this report should be prepared and forwarded


toourofficewithin90days,pursuanttoSection35oftheGeneralMunicipalLaw.FormoreinformationonpreparingandfilingyourCAP, please refer to our brochure, Responding to an OSC Audit Report,whichyoureceivedwiththedraftauditreport.Weencouragethe Board to make this plan available for public review in the Town Clerk’soffice.


Justice Court Operations

Justices must maintain complete and accurate accounting records and safeguard all moneys collected by the Court. Justices are also responsible for reconciling Court collections to corresponding liabilities,disbursingfeescollectedtotheSupervisorandreportingCourt transactions to the JCF. Justices must ensure that internal controls are in place and working effectively.

TheJusticesdidnotensurethatCourtfundswereproperlyrecorded,deposited and reported. Court clerks performed incompatible duties related to cash receipts and the Justices did not provide effective oversightoftheirwork.Asaresult,bankaccountsforoneJusticehadunaccounted-forfundsinboththefineandbailaccountseachmonthaveraging$14,627 and$6,703, respectively. In addition, theCourtwas in possession of stale bail1from21individualstotaling$5,935.Also,bailrecordswereinaccurateandcashreceiptswerenotalwaysdeposited within 72 hours as required by law. Because of this lack of oversight,theCourthasanincreasedriskthaterrorsandirregularitiescouldoccurwithoutbeingdetected,placingpublicresourcesatrisk.Similarfindingswerecitedinapreviousaudit.2However,theauditrecommendations were not implemented.

Each month, justices are required to account for cash collectionsanddisbursements,verifytheaccuracyoftheirfinancialrecordsandreconcile all Court bank accounts. Justices also should perform an accountability of funds they hold by preparing a list of Court liabilities andcomparingitwithreconciledbankbalances.Atanypointintime,Courtliabilities,suchasbailheldonpendingcasesandunremittedfinesandfees,shouldequaltheJustices’availablecash.

The Justices and clerks did not perform adequate bank reconciliations or accountability analyses. The clerks maintained copies of all banking activity and compared deposits slips and signed checks to the bank statements at the end of themonth.However, no formalreconciliation was performed. The clerks did not compare cash on hand and on deposit to detailed lists of bail activity and amounts due to the JCF.

WepreparedamonthlyaccountabilityfortheauditperiodforeachJustice’sfineaccount,andamonthlyaccountabilityofthebailaccountsfor thosemonths inwhichbail activity reportswere available.Wefound significant variances in both fine and bail accounts for oneJustice.

Reconciliations and Accountabilities

____________________1BailheldbytheCourtformorethansixyears2Seereport2011M-283titled,Internal Controls Over Selected Financial Activities.


• As shown in Figure 1, JusticeLamb’s fine account had onaverage $14,627more than known liabilities for the entireaudit period. Excess unaccounted-for cash fluctuated from$10,550 to $23,050 amonth from January toDecember of2013.3Thedifferenceswere$10,620eachmonthfromJanuaryto October 2014.

• As shown in Figure 2, JusticeLamb’s bail account had onaverage $6,703more than known liabilities in eachmonthduring2014.Excessunaccounted-forcashrangedfrom$291to$22,601permonth.ThelackofCourtrecordsprecludestheCourtfromdeterminingiftherewasunaccounted-forcashinthe bail account in prior periods.

____________________3TheamountofcashinthefineaccountdecreasedsignificantlyfromJuly2013toAugust 2013 because some of the funds were identified as bail moneys.Therefore,themoneywastransferredfromthefineaccounttothebailaccount.

Figure 1: Justice Lamb’s Unaccounted-For Cash: Fine Account

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Figure 1: Justice Lamb Unaccounted Cash: Fine Account


Bail Records

Theunaccounted-for,excesscashbalancesoccurredbecauseJusticeLambdidnotensurethatmonthlyaccountabilityanalysesofthefineandbail accountswere being performed.Court officials suggestedthat the balances were passed down to Justice Lamb from former justices,someofwhichdatebackprior to theuseofcomputerizedrecords.Asaresult,theybelievebalancesinJusticeLamb’saccountaccumulated over time and Court officials cannot identify, withcertainty, the sourceof the funds. In addition,bail recordsused tosupport the associated liabilities were not accurate.

HadCourtofficialscomparedthereconciledbankbalanceswiththerecordedcashbalances eachmonth, theycouldhave identified thevariancessoonerforamoretimelycorrectionoftheCourtfinancialrecords.Asaresultofthesevariances,theCourtdoesnothaveaccuratemonthlyfinancial information necessary to effectivelymonitor theCourt’sfinancialoperations.

It is essential that each Justice maintain a record of all bail. Thereceipt and disposition of bail should be recorded promptly to ensure that records are complete and up-to-date. The bail activity reportidentifiesallbailforwhichaJusticeisaccountable.TheJusticemustensure that the total per the bail activity report agrees with the bank balance.Exoneratedbailshouldbereturnedtothepersonwhopostedthebail,lessanyapplicablefees.TheCourtshouldmakeagoodfaitheffort for a reasonable period of time to locate the person who posted cashbail.Ifunabletolocatethepersontowhomtoreturnbail,theCourt may transfer such moneys to the Supervisor pending a claim. Cashbailthatremainsunclaimedsixyearsafterexonerationbecomesthe Town’s property.

AlthoughbothJusticesmaintainedaseparatebankaccountforbail,neither Justice reconciled the bail account bank balances with the

Figure 2: Justice Lamb Unaccounted-For Cash: Bail Account

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2014 Monthly Bail Accountability Analysis Results


bailactivityreports.Infact,bailreports,identifyingbailheldbytheCourt,werenotprintedandretainedpriorto2014.

Weobtainedallavailablebailactivityreportsfor2014andcomparedthem to account balances on deposit in the bail accounts. The bail activity reports did not reconcile with the bail bank statement balances for any of the months tested for Justice Lamb. The bank accounts had moreavailablecashthantherecordslisted.Inaddition,theCourthas$5,935inbailmoneyfrom21individualswhosecaseswereclosedoversixyearsagoandshouldhavebeentransferredtotheSupervisor.

The Court clerk explained that bail received prior to the use ofcomputerizedrecordshadnotbeenenteredintothecomputerrecordsandbailaccumulatedovertimewasimproperlytracked.Therefore,the Court did not have an accurate record of the amount of bail in its possession. The Court clerk also informed us that she is working with the independent accountant to help identify and resolve the variances. Whenbailcannotbeproperlyaccountedfor,thereisriskthatthesefunds can be substituted for current liabilities and available cash to misappropriate funds without detection or correction.

Justices are required to issue receipts to acknowledge the collection ofall fundspaid to theCourt. In addition, Justices are required todeposit intact (in the same amount and form of payment as received) allfundscollectedbytheCourtassoonaspossible,butnolaterthan72 hours from the date of collection. Deposited amounts should always agree with amounts received and recorded.

Eachclerkissueshandwrittenreceiptsforfines,feesandbailusingpress-numbered duplicate receipts;4 enters the receipts into the computerized accounting software; anddeposits the funds into theJustices’ bank accounts. However, the Justices do not adequatelyreview or otherwise monitor the clerks’ work to ensure that the Court’s accounting records are accurate and deposits are made in a timely manner.

Werandomlyselectedthreemonths’activityduringtheauditperiodandcompared500handwrittenreceipts5totaling$71,887issuedbythe Court for Justice Lamb to the computerized cash book, bankdeposits and monthly reports submitted to the JCF to determine if receiptnumbers,payees,datesandamountsmatched.Wefoundthatthereceiptswereproperlyissued,recordedandreported.Whilewedidnotfindanyinconsistencieswiththerecording,wealsocompared

Cash Receipts and Deposits

____________________4 Aduplicatereceiptconsistsoftwocopies:onecopyisgiventothepayerandthe

other retained by the Court.5 Wereviewedallofthereceiptsforthethreemonths.


317Court collections by cash ormoney order totaling $42,364 tobank deposits for the three months to determine whether the funds receivedwere deposited in a timelymanner.Of 317 cash receiptsreviewed,93(29percent)totaling$11,971werenotdepositedwithin72 hours as required by law. This happened because the Court clerks makedepositsweekly,insteadofwithin72hoursasrequiredbylaw.

Althoughwefoundlimitedexceptionswithourtesting,thelackofoversight of the clerks and the lack of timely deposits can result in misappropriations of funds.

TheJusticesshould:

1. Ensurethatmonthlybankreconciliationsandaccountabilitiesare performed and available cash reconciles with liabilities. Anydifferencesshouldbeinvestigatedandresolvedpromptly.

2. Perform an analysis of all bail liabilities and adjust Courtrecords to ensure that the bail activity reports represent a completeandup-to-datelistofbailmoneys.

3. Make a good faith effort to locate the personswho postedexonerated bail so it can be returned. All exonerated bailthatisunclaimedaftersixyearsshouldbetransferredtotheSupervisor.

4. Ensurethatallfundsareproperlydepositedwithin72hoursof receipt.

Recommendations


APPENDIX A

RESPONSE FROM TOWN OFFICIALS

TheTownofficials’responsetothisauditcanbefoundonthefollowingpages.

10 Office Of the New YOrk State cOmptrOller10 10 OFFICE OF THE NEW YORK STATE COMPTROLLER10

SeeNote1Page12

SeeNote2Page12

SeeNote2Page12

1111Division of LocaL Government anD schooL accountabiLity 1111DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY

SeeNote5Page12

SeeNote3Page12

SeeNote4Page12


APPENDIX B

OSC COMMENTS ON THE TOWN’S RESPONSE

Note1

Atthetimeofouraudit,theTownhadbeenusingcomputerizedrecordsfor21years.WebelievethisisasufficientperiodoftimefortheCourttodevelopthenecessaryexpertiseformaintainingadequaterecords. Inaddition,our2010auditof theCourt identified thesamedeficiencies identified in thisreport.Suchdeficiencieshaveremaineduncorrected.

Note2

Whetherthefineandbailaccountsarecombinedorseparate,eachJusticehasalwaysbeenrequiredtoensurethatthefineandbailbalancesareproperlyidentified.Havingoneaccountwithacarryoverofbail does not preclude the Justices from reconciling monthly statements.

Note3 The use of a small petty cash fund for making change will eliminate the risk associated with keeping larger cash deposits on hand and will also help ensure that the Justices deposit all moneys received within72hours,asrequiredbylaw.Whilethestatutorydeadlineisthelatestpointintimeatwhichadepositmaybemade,fromaninternalcontrolperspective,thebestapproachistodepositmoneysassoonaspossible.Thelongermoneyremainsundeposited,thegreatertheriskthatlossortheftwilloccur.

Note4

Manyrecordsexaminedduringtheauditwerenotaccurate.Infact,aprecipitatingcauseforamajorityofthedeficienciesidentifiedwereduetopoorandinaccuraterecords.

Note5

The audit staff is well versed in justice court operations.


APPENDIX C

AUDIT METHODOLOGY AND STANDARDS

Our overall goal was to determine if internal controls over Court operations were appropriately designed and operating effectively to allow for the proper accounting and reporting of the Court’s financialactivityfortheperiodJanuary1,2013throughNovember3,2014.Toachieveourobjectiveandvalidauditevidence,ourauditproceduresincludedthefollowing:

• WeinterviewedTownofficialsandemployeestoobtainanunderstandingofCourtoperations.

• WegainedanunderstandingofthepoliciesandproceduresoverCourtoperations.

• WereviewedbankstatementsforeachJustice’sbailaccountandcomparedbankbalancestoavailable2014bailreports.Weperformedamonthlyaccountabilityforthebailaccountsforeach Justice.

• Weidentifiedunclaimed,exonerated(stale)bailamountsforeachJustice.

• WeperformedamonthlyaccountabilityanalysisforthefineaccountsofeachJusticefor2013and 2014.

• Wetestedtheaccuracyofrecordsbycomparingcomputerizeddatatohard-copyreports.

• Weperformedtestsofreceiptstoensurethatthereceiptsequencewasintactandthatreceiptinformation(receiptnumbers,amountsandpayees)matchedCourtrecords.

• Wedeterminedthetimelinessofdepositsbycomparingthedatesofreceiptissuancetodepositslips and bank deposit dates.

• Wereviewedandtestedtheanalysisofrawdatatoidentifydeletionsinrecordsandfollowedupwithtestingtodeterminethevalidityoftheexplanations.

• Wecomparedthemanualreceiptsissuedtothecashbookreports.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.


APPENDIX D

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/

Toobtaincopiesofthisreport,writeorvisitourwebpage:


APPENDIX EOFFICE OF THE STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller

GabrielF.Deyo,DeputyComptrollerNathaalieN.Carey,AssistantComptroller

LOCAL REGIONAL OFFICE LISTING

BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Suite170244 Hawley StreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:[email protected]

Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties

BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:[email protected]

Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties

GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOneBroadStreetPlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:[email protected]

Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties

HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:[email protected]

Serving:NassauandSuffolkCounties

NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:[email protected]

Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties

ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThePowersBuilding16WestMainStreet,Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:[email protected]

Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties

SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333E.WashingtonStreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]

Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties

STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding,Suite170244 Hawley Street Binghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313

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