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presentation 26 pages

Also attached to this agenda item: Final 2024 Village of Croton FS

VILLAGE OF CROTON-ON-HUDSON, NEW YORK Report to Those Charged with Governance May 31, 2024 December 11, 2024 Prepared by Alan Kassay, CPA Partner akassay@pkfod.com December 11, 2024 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, 2024 and have issued our report thereon dated December 11, 2024. 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. 96, “Subscription-Based Information Technology Arrangements”. 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. 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 11, 2024 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 $30,528 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 $36 of outstanding checks that were greater than one year old on bank reconciliations for the T.213 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.  General Fund Deposits Payable During our review of deposit payable accounts, it came to our attention that the Village has twenty-one 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.  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. Village of Croton-on-Hudson, New York Control Deficiencies  Special Purpose Fund Inactive Trusts During our audit it was noted that three out of the five trust accounts in the special purpose fund had no activity for the year other than interest income. Recommendation We recommend that the Village determine if these trusts need to remain open, or if they should be closed and monies transferred to the general fund.  Journal Entries Missing Approvals for Journal Entries During our audit, we noted that eight journal entries we tested did not have evidence of supervisory approval. Recommendation We recommend that upon management’s review and approval of journal entries, a signature or other form of approval be documented. This process would improve internal control over adjustments to the general ledger. On the Horizon GASB Statement No. 101 – Compensated Absences Under this Statement, the liabilities for compensated absences is required to be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. The Statement establishes guidance for measuring the liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. Measurement for the liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. The Statement does allow recognition of certain types of compensated absences until the leave commences, including parental, military and jury duty leave. Further, the Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability, as long as it is identified as a net change. In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. 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 December 15, 2023 (i.e., the Village’s financial statements for the year ended May 31, 2025). GASB Statement No. 102 – Certain Risk Disclosures The objective of this Statement is to disclose within government financial statements risks related to a government’s vulnerabilities due to certain concentrations or constraints. A concentration is defined as a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority. Concentrations and constraints may limit a government’s ability to acquire resources or control spending. Under this Statement, a government is required to assess whether an event or events associated with a concentration or constraint that could cause substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024 (i.e., the Village’s financial statements for the year ended May 31, 2025). GASB Statement No. 103 – Financial Reporting Model Improvements The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This Statement also addresses certain application issues as follows:  Management’s Discussion and Analysis (“MD&A”) - This Statement requires that the information presented in the MD&A be limited to five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long-Term Financing Activity, and (5) Currently Known Facts, Decisions or Conditions. The Statement requires that the detailed analyses within the MD&A should not only present the amounts or percentages of changes from the prior year, but also include explanations as to the reasons for the changes. The Statement emphasizes that only the most relevant information be presented by eliminating duplicative explanations and removing “boilerplate” discussions.  Unusual or Infrequent Items - This Statement describes unusual or infrequent items as transactions and other events that are either unusual or infrequent in occurrence. Furthermore, governments are required to display the inflows and outflows related to each item separately as the last presented flow(s) of resources prior to the net change in resource flows in the government-wide, governmental fund, and proprietary fund statements.  Presentation of Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position – This Statement requires that proprietary fund statements continue to distinguish between operating and nonoperating revenues and expenses as in the past. However, in addition to the subtotals currently presented, this Statement requires that a subtotal for operating income (loss) and noncapital subsidies be presented before reporting other nonoperating revenues and expenses. Subsidies are defined as (1) resources received from another party or fund (a) for which the proprietary fund does not provide goods and services to the other party or fund and (b) that directly or indirectly keep the proprietary fund’s current or future fees and charges lower than they would be otherwise, (2) resources provided to another party or fund (a) for which the other party or fund does not provide goods and services to the proprietary fund and (b) that are recoverable through the proprietary fund’s current or future pricing policies, and (3) all other transfers.  Major Component Unit Information - This Statement requires governments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. If readability is reduced, combining statements of major component units should be presented after the fund financial statements.  Budgetary Comparison Information – This Statement requires governments to present budgetary comparison information as Required Supplementary Information (similar to pension and other postemployment benefits reporting). Governments are also required to present (1) variances between original and final budget amounts and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in the notes to the Required Supplementary Information. The requirements of this Statement are effective for fiscal years beginning after June 15, 2025 (i.e., the Village’s financial statements for the year ended May 31, 2026). Appendix 1 Corrected and Uncorrected Misstatements Account Description Debit Credit General Fund Adjusting Journal Entries JE # 7 A .00.1000.000.4960 FEDERAL EMERG DISASTER-FEMA 294,925.00 A .00.0000.000.410 DUE FROM STATE & FEDERAL 294,925.00 Adjusting Journal Entries JE # 11 A .90.9901.000.9050 TRANSFER TO DEBT SERVICE FUND 252,931.00 A .00.0000.000.635 DUE TO DEBT SERVICE FUND 252,931.00 Adjusting Journal Entries JE # 14 A .00.0000.000.909 FUND BALANCE 275,000.00 A .00.0000.000.910 FUND BALANCE UNRESERVED 275,000.00 Adjusting Journal Entries JE # 15 A .00.0000.000.909 FUND BALANCE 223,550.00 A .00.0000.000.867 RESERVE FOR COMPENSATED ABSENC 223,550.00 Adjusting Journal Entries JE # 18 A .00.0000.000.909 FUND BALANCE 3,325,140.00 A 885 Reserve for Capital Projects 90,000.00 A 885 Reserve for Capital Projects 535,140.00 A 885 Reserve for Capital Projects 690,000.00 A 885 Reserve for Capital Projects 2,010,000.00 Capital Fund Adjusting Journal Entries JE # 4 H .00.0000.000.410 DUE FROM STATE & FEDERAL 218,543.00 H .00.1000.000.3501 .24462 CHIPS - GENERAL ROAD REPAIR 218,543.00 To adjust compensated absences reserve To record assigned for capital projects To accrue per subsequent receipts test and Capital revenue and expenditure test To remove receivables for FEMA/SEMA amounts recognized in FY 2023 To record Transfer to Debt for installment purchase To record designated for subsequent years' per 2025 budget Debt Service Fund Adjusting Journal Entries JE # 3 V .00.0000.000.910 FUND BALANCE UNRESERVED 200,000.00 V .00.0000.000.909 FUND BALANCE 200,000.00 Adjusting Journal Entries JE # 8 V .00.0000.000.391 DUE FROM GENERAL FUND 252,931.00 V .00.1000.000.5031 TRANSFER FROM GENERAL FUND 252,931.00 Pension Trust Fund 1000 01 Expenditure / Pension Benefits 87,700.00 Asset / Invesment/US Equities 460,926.00 Asset / Invesment/US Equities 90,285.00 Asset / Investment /Fixed Inc Mutfnd 844,315.00 Asset/ Invesment/Internat.Equit 145,357.00 Investment/ Other Assets 6,267.00 Asset /Service Awards Programs 47,649.00 000 01 Revenue/ Contributions 216,334.00 000 02 Revenue / Earnings on Investments 48,047.00 2000 00 Unrealized Gain or Loss 26,266.00 Liability / Service Awards Fire Dept 1,200.00 Equity / Fund Balance 1,390,652.00 Adjusting Journal Entries JE # 1 To Book Fire Service Activity To adjust designated for subsequent years' per 2025 adopted budget To record transfer from General Fund for installment purchase debt Appendix 2 Management Representation Letter Appendix 3 About PKF O’Connor Davies, LLP