Loading...
HomeMy WebLinkAboutmin light commission 12/15/04 .\'1 ...~\C:t C\' \" - r,\~ ' \~,i "'";.-''-''/'' c\ .) --\ (: ..~.' , " . S'-1 ......- ~"\ \ \ . U. \', \ \ \ . ," \S~) j \-\' . <" \\.;-.- ',) ,,(\ S \,\I:,,;~~\\\)Pf.esent: Chairman Roger Achille; Vice Chairman Louis P. Amoruso; Clerk Bernie ~ ~ CO ~') F' Dolan; Commissioner Mike McCue; Director Gary Babin; Chief Financial Officer Kimberly Stoyle; Financial Assistant Jacqueline Lee and Manager John D' Agostino Mansfield Municipal Electric Department Minutes of Light Commissioners Meeting December 15, 2004 Light Commissioners Meeting The meeting was called to order at 7:30 followed by the Pledge of Allegiance. Chairman Achille commended the Light Department on a job well done with the holiday lights and thanked them for their efforts. MMED 2003 Audit - James Goulet, CPA, of Goulet, Salvidio & Associates, reviewed the MMED 2003 audit. He began by explaining that he performs audits for approximately a dozen light departments and that his responsibility is to take the financial statements and provide an opinion as to whether the financial records of the department are equitably stated. r- Mr. Goulet reported that MMED's net worth had increased 4.63% from December 31, 2002 to December 31,2003. He also reported that MMED had a net operating income for 2003 of$I,365,884. Operating revenues increased approximately 5.33% on a 6.12% increase in kilowatt-hour (kWh) sales. Mr. Goulet reiterated that MMED is allowed to earn a profit up to 8% of gross plant value. Mr. Goulet reviewed the statement of net assets. Total current assets decreased from $4,575,078 in 2002 to $4,203,912 in 2003. Utility plant assets for 2003 were $15,652,995, while total non-current assets were $20,149,998. Total assets for 2003 were $24,353,910, up slightly from 2002. Total liabilities were down slightly, $4,510,459 in 2002 and $4,350,393 in 2003. Mr. Goulet also reviewed the income statement which showed operating revenues for 2003 of $23,752,855, up from $22,550,008 in 2002. Total operating expenses were also up, from $21,566,305 in 2002 to $22,522,922 in 2003. Income before contributions and transfers was $1,192,451 in 2002, while it increased to $1,365,884 in 2003. As a result, MMED is well within the allowed 8% profit. Mr. Goulet reported that MMED's cash balance for 2003 was $4,949,668, while in 2002, it was $4,292,537. Mr. Goulet then reviewed the auditors accompanying notes to the financial statements: Note 1 - Summary of Significant Accounting Policies was explained as being very boiler plate and is included in the audit every year. r . - Note 3 - Accounts Receivable showed customer accounts receivable at $2,269,477, with ......- an allowance for doubtful accounts of $365,000. Note 8 - Mr. Goulet explained that the rate stabilization fund was originally set up to help MMED better compete because of deregulation. He said this fund could be used in other ways. For example, if the PPCA was required to increase, one option would be to use the fund to offset this increase. Note 13 - Mr. Goulet made mention of MMED's participation in certain projects of Massachusetts Municipal Wholesale Electric Company (MMWEC). MMED participation was done through a series of Power Sales Agreements (PSA) and Mr. Goulet explained various facets of those agreements. Note 16 - Contingent Liabilities shows MMED as owing $72,586,000 on outstanding bonds issued for projects through 2019. In addition, MMED is also required to pay its share of the Operations and Maintenance (O&M) costs of the projects in which it has PSAs. The amount MMED paid in O&M for 2003 was $11,960,000. Mr. Goulet noted, with respect to the State pension plan in which it participates, that MMED is a member ofthe Bristol County Retirement System. r-- Mr. Goulet reviewed the Schedules of Operations and Maintenance Expenses. Total Power Production Expenses for 2003 were $18,236,440, up from $17,771,880 in 2002. He pointed out that MMED really has no control over power costs because .the fixed payments are set and the O&M expenses are dictated by the unit owners. Chairman Achille asked Mr. Goulet what jumped out at him that the Board needs to be concerned about. Mr. Goulet responded that nothing really jumped out at him, although there are potentially large infrastructure projects anticipated down the road. While indicating to the Board that MMED's financial condition is quite good, Mr. Goulet did have some recommendations. Mr. Goulet explained that his staff doesn't wait until the end of the audit to talk to the MMED staff about areas they might improve, but rather there is an ongoing relationship. Chairman Achille reiterated that the service Mr. Goulet and his staff provide is interactive throughout the year and that they don't just pop in for a couple of weeks. The first recommendation is that cash reconciliation needs to be tightened up a bit. Cash accounts are not being reconciled to the Town on a monthly basis. Mr. Goulet also said that it was his opinion that MMED' s depreciation fund was being inappropriately used by the Town Treasurer to fund Town obligations. He stated this was not a correct use of these funds under Chapter 164. He explained no recommendation was necessary, however, as the matter had already been handled. r- 2 . ... The second recommendation made by Mr. Goulet was regarding property and equipment r--- retirements, which are generally a reporting nightmare for Light Departments. An example is when a car hits a pole and the pole needs to be taken out of service, the original cost of the pole is used. He advised MMED to keep better track of what plant assets come out of service and to remove these from the plant inventory. Along with this, he recommended MMED have their inventory software integrated with their general ledger software. Currently, MMED has new software to keep track of inventory and this software may possibly be used to track retirement of assets. With regard to receivables, Mr. Goulet stated his staff can always suggest stronger and better collection activity. He believed $365,000 in reserve was rather a large amount for the size of MMED. He also thought it would be worth MMED considering taking customer deposits. He explained a lien can always be placed on an owner, but there was nothing in place to ensure payment of bad debt from renters. He also said the law has been changed regarding security deposits and the 6% interest rate on deposits, which had been in place for decades, is going to be reduced to reflect market rates. This might make it worthwhile for MMED to collect deposits. r- In regards to the recommendations in the management letter from Mr. Goulet, Director Babin stated that the MMED staff did submit formal responses to Mr. Goulet's recommendations and that those had been distributed to the Board. Having reviewed the responses with Mr. Goulet, Director Babin believed that Mr. Goulet thought the responses were adequate and said MMED will move forward with implementing their responses. Clerk Dolan questioned whether MMED was going to automate the inventory and general ledger software, as had been suggested. CFO Stoyle explained that Bruce Dyke, MMED Procurement Clerk, keeps close track of the inventory and can manually post an accurate inventory value each month. She also explained that one of the problems was that the vendor of the inventory software was bought out, so it's a new relationship with a new vendor which requires MMED to modify the upload format of the inventory software to the general ledger. Eventually, the manual entry will be replaced by an automatic upload. Mr. Goulet stated that in all the years he has worked with MMED, he has appreciated the cooperation from the staff. He believes the staff is excellent and their cooperation has made it easier for his own staff to complete the audit. CFO Stoyle also thanked Mr. Goulet and his staff. She said they were a great pleasure to work with and she respected and admired Mr. Goulet's knowledge of the field. Chairman Achille invited Chairman of the FINCOMM, Andy Gazzolo, to join in the meeting, but he declined. He said he would like to have the answers to the recommendations at the same time he receives the audit, so that he has everything in front of him. Chairman Achille inquired of Mr. Goulet as to when a 2003 audit is usually received. Mr. Goulet replied that the audit was dated August 8, 2004, which is when the r 3 field work was completed. However, an issue in the management letter held up final r completion of the report. Basically, it was a legal technicality. Motion: To accept the MMED 2003 audit report and management response to the auditor's recommendations (Amoruso/McCue) Passes 4/0 2003 DTE Report - Director Babin explained there was one last item he would ask the Board to take care of while Mr. Goulet was there. It is a legal requirement that all utilities in the state submit to the Massachusetts Department of Telecommunications and Energy (DTE) a report on an annual basis summarizing its activities. Under the law, the Board is required to sign off on it. Director Babin explained that the DTE report is a statistical summary for 2003, done in the format which is required by the DTE. Goulet, Salvidio and Associates had prepared the DTE report for MMED when also performing the 2003 audit. Director Babin stated he had forwarded copies to the Board a few weeks ago for review. (' Mr. Babin asked if anyone had any questions for Mr. Goulet regarding the report. There were none. It was agreed that David McCarter would need to sign, as he was on the Board during 2003, and that Bernie Dolan would not sign since he was elected in 2004. It was pointed out by Mr. Goulet that only a majority (not all members) were needed to SIgn. Motion: To sign the 2003 DTE report (McCue/Amoruso) Passes 3/0 (Dolan abstains) Adjournment Motion: To adjourn the Light Commissioner's meeting at 8:00 Respectfully submitted: Jacqueline Lee 01112/05 ~.~ gnature ofC J'-j"i -C/!:>-- Date of Approval r 4 r "T