More than a year after state auditors flagged serious problems with how the Village of Cato managed its water system, local officials have failed to fix most of them — putting residents at continued risk of billing errors, uncollected revenue, and rising costs.
A follow-up report released in September shows village leaders only partially implemented 3 of 11 recommended changes, and ignored the rest. Some of the financial missteps involve hundreds of thousands of dollars.
Billing errors, missing oversight, and $614K in undocumented adjustments
In the original 2024 audit, the New York State Comptroller’s Office found the village had no written procedures for billing or collecting water charges, resulting in widespread errors. A total of 71 bills had miscalculations, costing the village over $6,600 in unbilled usage and overcharging other customers by $1,296.
That problem hasn’t been fixed.
The follow-up found the Board of Trustees still hasn’t adopted any written policies, despite handling nearly $220,000 in water charges from mid-2023 to mid-2025. Adjustments to water accounts also continue without any formal review or oversight — including 193 adjustments totaling $614,327 made without documentation or board approval.
Officials claimed some of those changes were to fix meter issues or past mistakes, but auditors said there was no paperwork to back that up.
Weak controls and one-person oversight
The village still has not corrected its internal control problems. Auditors noted that one employee — the Village Clerk — continues to manage billing, collecting, adjustments, and deposits with little or no oversight.
An interim treasurer was hired, but only handles bank reconciliations and filings. The clerk does not provide the Board with any billing or adjustment reports — despite being reminded of this responsibility during the original audit’s exit conference.
“This lack of segregation puts the entire system at risk of undetected errors or even fraud,” the report warned.
Thousands in penalties and charges left on the table
The audit found penalties on overdue water bills were not correctly assessed, due to software issues and unclear board policy. In just five sample bills, the village undercharged penalties by 12 percent, amounting to $43 — a small number that suggests a potentially much larger problem across all accounts.
Additionally, $7,746 in delinquent accounts may not have been properly added to property tax bills for collection — known as “relevy” — because no one reviewed the records or ensured reports were complete.
Auditors also couldn’t verify whether water purchased from an outside vendor — totaling $15,198 — matched what was actually delivered. The Department of Public Works did not independently check the supplier’s readings.
No plan, few reserves, and rising rates without a clear basis
The village has yet to develop a multiyear capital or financial plan, despite being required to by the Cayuga County Health Department after a major leak drained its water tower in 2022.
Officials did hire an engineering firm and a grant writer to begin assessing the infrastructure. But as of June 2025, the village still had no final plan and had not established dedicated reserve funds for future water system repairs.
Meanwhile, the Board did raise water rates in July 2025 — 6 percent for the base rate and 10 percent per 1,000 gallons — but did not base the increase on projected needs. They simply followed the pattern of a previous hike in 2022.
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