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presentation 26 pages

Also attached to this agenda item: Final 2023 Village of Croton FS

VILLAGE OF CROTON-ON-HUDSON, NEW YORK Report to Those Charged with Governance May 31, 2023 December 1, 2023 Prepared by Alan Kassay, CPA Partner akassay@pkfod.com December 1, 2023 The Board of Trustees and Village Manager Village of Croton-on-Hudson, New York One Van Wyck Street Croton-on-Hudson, New York 10520 We have audited the financial statements of Village of Croton-on-Hudson, New York (“Village) as of and for the year ended May 31, 2023 and have issued our report thereon dated September 1, 2023. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter to you dated September 19, 2023. Professional standards also require that we communicate to you the following information related to our audit. We are pleased to be of service to you and the Village and appreciate the opportunity to present our audit findings to you. We are also pleased to discuss other matters which may be of interest to you and to answer any questions you may have. This information is intended solely for the information and use of Those Charged with Governance and management of the Village and is not intended to be and should not be used by anyone other than these specified parties. PKF O’Connor Davies, LLP Contents Status of the Audit ................................................................................................................................4 Required Communications and Other Matters.......................................................................................5 Internal Control Over Financial Reporting ...........................................................................................10 On the Horizon....................................................................................................................................13 Appendices 1 – Corrected Misstatements 2 – Management Representation Letter 3 – About PKF O’Connor Davies, LLP Status of the Audit Audit of Financial Statements  Audit fieldwork is complete  The financial statements have been drafted and reviewed by management.  We have issued an unmodified report on the financial statements. Required Communications and Other Matters Required Item Comments Auditor’s responsibility under professional standards and planned scope and timing of the audit We have communicated such information in our engagement letter to you dated September 19, 2023. Generally, these responsibilities include: • Forming and expressing an opinion on the financial statements. • Obtaining reasonable assurance that the financial statements are free of material misstatements, whether caused by error or fraud. • Accumulating and communicating uncorrected misstatements to Those Charged with Governance (“TCWG”). • Maintaining professional skepticism. • Communicating audit related matters that are, in our professional judgment, significant to TCWG. Required supplementary information accompanying the financial statements We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Required supplementary information accompanying the financial statements We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance Other information in documents containing audited financial statements Our responsibility as auditors for other information in documents containing the audited financial statements does not extend beyond the financial information identified in the auditors’ report, and we are not required to perform any procedures to determine that such other information is properly stated. Required Item Comments Our responsibilities under the Yellow Book In connection with our audit we performed tests of the Entity’s compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Responsibilities of management and TCWG Management’s responsibilities include: • The fair presentation of the financial statements, including the selection of appropriate accounting policies. • Establishing and maintaining effective internal control. • Complying with laws, regulations, grants and contracts. • Providing the auditors with all financial records and related information and a signed representation letter. • Evaluate if there are any conditions or events, considered in the aggregate that raise substantial doubt about the Entity’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. • Setting the proper tone at the top. • Designing and implementing policies and controls to prevent and detect fraud. TCWG are responsible for communicating with the auditors and overseeing the financial reporting process. Qualitative aspects of accounting practices - Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year, except for the adoption of the provisions of Governmental Accounting Standards Board Statement No. 87, “Leases”. The accounting policies of the Entity conform to U.S. generally accepted accounting principles as applicable to state and local governments. The Entity’s reports are based on all applicable GASB pronouncements. We noted no transactions entered into by the Entity during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Required Item Comments Qualitative aspects of accounting practices – Significant Unusual Transactions No matters have come to our attention that would require us to inform you about the methods used to account for significant unusual transactions. Qualitative aspects of accounting practices - Accounting Estimates and Management’s Judgment Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the Village’s financial statements were:  Actuarial assumptions related to the Other Postemployment Benefit Liability (“OPEB”)  Actuarial assumptions and proportionate share calculations related to pension liabilities  Asset lives for depreciable capital assets  Estimates of certain receivable balances and allowances for uncollectible amounts  Estimates for certain operating and long-term liabilities Qualitative aspects of accounting practices - Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosure affecting the financial statements are:  Other postemployment benefit liabilities payable  Pension plan information  Outstanding bonded indebtedness  Fund balances The financial statement disclosures are neutral, consistent and clear. Required Item Comments Going concern The auditor is required to communicate with TCWG events or conditions that, when considered in the aggregate; indicate a substantial doubt about the Entity’s ability to continue as a going concern for a reasonable period of time. We concur with management’s assessment that the Entity will continue as a going concern for one year from the balance sheet date. Management has completed their assessment of going concern and has concluded that a going concern uncertainty does not exist. Significant risks We have identified the following significant risks in connection with our audit: Management override of internal controls Improper revenue recognition due to fraud The audit procedures applied as a result of the aforementioned significant risks were designed to and have reduced the risk of material misstatement to low. Difficulties encountered in performing the audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and uncorrected misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit (including passed adjustments and omitted financial statement disclosures), other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. Disagreements with management For purposes of this communication, a disagreement with management is a matter, whether or not resolved to our satisfaction, concerning financial accounting, reporting, or auditing, which could be significant to the financial statements or the auditors’ report. We are pleased to report that no such disagreements arose during the course of the audit. Required Item Comments Management representations We have requested certain representations from management that are included in the management representation letter (see Appendix 2). Management’s consultations with other accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Entity’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Auditor independence We affirm that PKF O’Connor Davies, LLP is independent with respect to the Entity in accordance with relevant professional standards. Significant issues discussed with management prior to retention We generally discuss a variety of matters, including the application of accounting principles and auditing standards with management each year prior to retention as the Entity’s auditor. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Auditors’ report Due to the adoption of the provisions of GASB Statement No. 87, “Leases”, we included an emphasis of matter paragraph in our auditors’ opinion. The following is the wording of the paragraph in our independent auditors’ report. We draw attention to Note 2E in the notes to financial statements which disclose the effects of the School District’s adoption of the provisions of Governmental Accounting Standards Board (“GASB”) Statement No.87, “Leases”. Our opinion is not modified with respect to this matter. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Village of Croton- on-Hudson, New York (the “Entity”) internal control over financial reporting (“internal control”) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Entity’s internal control. Accordingly, we express no such opinion. Professional standards require that we communicate to you, in writing, all significant deficiencies and/or material weaknesses in internal control that we identify in performing our audit. For this purpose, deficiencies in internal control are categorized as follows:  A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis.  A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.  A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. We did not identify any deficiencies in internal control that we consider to be material weaknesses, as defined above. However, we share for your consideration on the following pages other observations about the internal control and operations. This communication is intended solely for the information and use of management and others charged with governance and is not intended to be and should not be used by anyone other than these specified parties. We will be pleased to discuss these communications and comments in further detail at your convenience, or to assist you in implementing the recommendations. Harrison, New York December 1, 2023 Village of Croton-on-Hudson, New York Control Deficiencies  Cash Outstanding Checks Greater Than A Year Old Per review of the General Fund Checking account, we noted there was $29,736.41 of outstanding checks that were greater than one year old on bank reconciliations for the A.200 account. Per review of the Agency Payroll Account, we noted there was $520.69 of outstanding checks that were greater than one year old on bank reconciliations for the T.201 account. Recommendation We recommend the Village research the nature of the outstanding checks and if they meet the definition of unclaimed property under the New York State Abandoned Property Law, perform the due diligence required under the law.  User Access Listing Superusers During our testing, it was noted that there were six employees with access to the payroll system who are superusers and have access to add and modify employee information, including the Deputy Treasurer who has access to print checks. Recommendation We recommend that the access rights of users of the accounting software be limited to correlate with everyone’s responsibilities. To establish stronger controls, we recommend that full access be given to only one key user with others having limited access only to areas in which they would need to perform their job responsibilities. Village of Croton-on-Hudson, New York Control Deficiencies  General Fund Deposits Payable During our review of deposit payable accounts, it came to our attention that the Village has four deposit accounts that had no activity during the current year. Recommendation We recommend that the Village research the origin of the current and pre-existing balances in the deposit payable accounts and if the money is no longer payable a transfer should be made to the appropriate operating fund as revenue upon board approval.  Payroll Personnel File During our testing, it was noted that one of the employees of the Village had a personnel file but there was no form of ID on file. Recommendation We recommend that the Village always ensures that employees’ personnel file and form of ID are on file.  Due to and Due From The Village has due to/due from balances that are excessive. Recommendation We recommend that the Village determine if these are valid due to/due from, or if they should be cleared. On the Horizon GASB Statement No. 96 – Subscription-Based Information Technology Arrangements (“SBITA”) A SBITA is defined as a contract that conveys control of the right to use another party’s information technology (“IT”) software, alone or in combination with tangible capital assets (the underlying IT assets), as specific in the contract for a period of time in an exchange or exchange-like transaction. The subscription term not only includes the period during which a government has a noncancellable right to use the asset, but also include periods covered by an option to extend or terminate. Under this Statement, a government generally should recognize the right-to-use subscription asset as an intangible asset and a corresponding subscription liability. The liability should be recognized at the commencement of the subscription term, which is when the subscription asset is placed into service. The liability should be initially measured at the present value of the subscription payments expected to be made during the subscription term. Any future payments should be discounted using the interest rate charged, or if not readily determinable, the government’s incremental borrowing rate should be used. The subscription asset will be measured as the sum of the liability amount, payments made to the vendor prior to commencing the subscription term and any implementation costs, offset by any incentives received from the vendor. The amortization of the subscription asset would then be reported as an outflow of resources over the subscription term. The Statement does provide an exception for short-term SBITAs, which have maximum contractual terms of 12 months or less, including any option to extend regardless of their probability of being exercised. Any payments for these short-term SBITAs would be recognized as outflows of resources. Further, the Statement provides for additional disclosure requirements detailing descriptive information about the SBITA, including but not limited to the amount of the subscription asset, accumulated amortization, other payments not included in the measurement liability, principal and interest requirements and any other essential information. Governments should review this standard early to anticipate what changes might need to be made to policies, accounting procedures, laws and regulations. The provisions of this Statement are effective for fiscal years beginning after June 15, 2022 (i.e., the Village’s financial statements for the year ended May 31, 2024). Appendix 1 Corrected and Uncorrected Misstatements Account Description Debit Credit General Fund Adjusting Journal Entries JE # 14 A .00.0000.000.410 DUE FROM STATE & FEDERAL 294,925.00 A .00.1000.000.4960 FEDERAL EMERG DISASTER-FEMA 294,925.00 Total 294,925.00 294,925.00 Adjusting Journal Entries JE # 16 A 454 Leases Receivable - GASB 87 2,376,351.00 A 691.04 Deferred Inflow of Resources - Leases - GASB 87 2,376,351.00 Total 2,376,351.00 2,376,351.00 Adjusting Journal Entries JE # 17 A .00.1000.000.2410 RENTAL OF REAL PROPERTY 202,016.00 A .00.1000.000.2412 RENTAL - YACHT CLUB 25,000.00 A .00.1000.000.2401 INTEREST & EARNINGS 39,368.00 A 454 Leases Receivable - GASB 87 187,648.00 Total 227,016.00 227,016.00 Adjusting Journal Entries JE # 18 A 691.04 Deferred Inflow of Resources - Leases - GASB 87 203,875.00 A 1000 014 4242 1 Lease Payments Collected - GASB 87 203,875.00 Total 203,875.00 203,875.00 Adjusting Journal Entries JE # 28 A .00.0000.000.909 FUND BALANCE 543,180.00 A .00.0000.000.867 RESERVE FOR COMPENSATED ABSENC 190,249.00 A .00.0000.000.880 Reserve for Tax Stabilization 100,000.00 A .00.0000.000.914 Assigned for Contractual Obligations 252,931.00 Total 543,180.00 543,180.00 To recognize deferred inflow straight line To accrue FEMA revenues received subsequently To recognize the lease receivable and deferred inflow of resources at the commencement of the To reclass current year receipts Board resolutions to adjust fund balance Account Description Debit Credit Capital Fund Adjusting Journal Entries JE # 2 H .00.1000.000.5710 .22394 SERIAL BOND-IT UPGRADES 3,060.00 H .00.1000.000.5710 .22395 SERIAL BOND-EMS EQUIPMENT 11,343.00 H .00.1000.000.5710 .22396 SERIAL BOND-POLICE EQUIPMENT 6,544.00 H .00.1000.000.5710 .22398 SERIAL BOND-PLANNING STUDIES H 7,140.00 H .00.1000.000.5710 .22399 SERIAL BOND-REP/RPL STORAGE TA 5,100.00 H .00.1000.000.5731 .22394 BAN REDEEDMED FROM APPROPRIATION 3,060.00 H .00.1000.000.5731 .22395 BAN REDEEMED FROM APPROPRIATION 11,343.00 H .00.1000.000.5731 .22396 BAN REDEEMED FROM APPROPRIATION 6,544.00 H .00.1000.000.5731 .22398 BAN REDEEMED FROM APPROPRIATION 7,140.00 H .00.1000.000.5731 .22399 BAN REDEEMED FROM APPROPRIATION 5,100.00 Total 33,187.00 33,187.00 Adjusting Journal Entries JE # 3 H .90.9901.000.9010 .20362 INTERFUND TRANSFER GENERAL FUND 63.00 H .90.9901.000.9010 .20373 INTERFUND TRANSFER GENERAL FUND 2,300.00 H .90.9901.000.905015305 INTERFUND TRANSFER DEBT SER 9,904.00 H .90.9901.000.905016323 INTERFUND TRANSFER DEBT SER 13,474.00 H .90.9901.000.905017338 INTERFUND TRANSFER DEBT SER 637.00 H .90.9901.000.905021380 INTERFUND TRANSFER DEBT SER 2,968.00 H .90.9901.000.905021385 INTERFUND TRANSFER DEBT SER 975.00 H .90.9901.000.905021388 INTERFUND TRANSFER DEBT SER 1,362.00 H .00.0000.000.391 DUE FROM GENERAL FUND 2,363.00 H .00.0000.000.635 DUE TO DEBT SERVICE FUND 27,403.00 H .90.9901.000.905021378 INTERFUND TRANSFER DEBT SER 1,917.00 Total 31,683.00 31,683.00 To reclassify BAN payments from account 5710 - Proceeds from Debt to account 5731 BAN To record board resolution to close-out completed Capital Projects. Debt Service Fund Adjusting Journal Entries JE # 3 V .00.0000.000.909 FUND BALANCE 200,000.00 V .00.0000.000.910 FUND BALANCE UNRESERVED 200,000.00 Total 200,000.00 200,000.00 Adjusting Journal Entries JE # 4 V .00.0000.000.395 DUE FROM DEBT SERVICE FUND 106,905.00 V .00.0000.000.909 FUND BALANCE 95,190.00 V .00.0000.000.393 DUE FROM CAPITAL FUND 19,097.00 V .00.0000.000.396 DUE FROM SEWER FUND 106,905.00 V .00.0000.000.630 DUE TO GENERAL FUND 38,318.00 V .00.0000.000.632 DUE TO WATER FUND 34,335.00 V .00.0000.000.636 DUE TO SEWER FUND 3,440.00 Total 202,095.00 202,095.00 Adjusting Journal Entries JE # 5 V .00.0000.000.393 DUE FROM CAPITAL FUND 27,403.00 V .00.1000.000.5033 TRANSFER FROM CAPITAL FUND 27,403.00 Total 27,403.00 27,403.00 Pension Trust Fund 1000 01 Expenditure / Pension Benefits 99,692.00 2000 00 Unrealized Gain or Loss 254,838.00 Asset / Accounts Receivable 580.00 Asset / Invesment/US Equities 201,428.00 Asset / Invesment/US Equities 205,284.00 Asset / Investment /Fixed Inc Mutfnd 840,028.00 Asset/ Invesment/Internat.Equit 112,228.00 Investment/ Other Assets 2,426.00 Asset /Service Awards Programs 28,678.00 000 01 Revenue/ Contributions 123,671.00 000 02 Revenue / Earnings on Investments 44,505.00 Equity / Fund Balance 1,577,006.00 Asset/ Investment/Mixed Assets Total 1,745,182.00 1,745,182.00 To Book Fire Service Activity, see page 22 of 31 of annual report wp 7350.03 To record prior year adjusting journal entries To close out Capital Projects To adjust amount designated for subsequent years expenditures to agree to transfer out reported in Adjusting Journal Entries JE # 1 Appendix 2 Management Representation Letter Appendix 3 About PKF O’Connor Davies, LLP