HomeMy WebLinkAboutAudit Committee - 03/12/2014Audit Committee Meeting
March 12, 2014
Meeting Room 3 AB, Town Hall
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FRKS OFFICE
Present: Jess Aptowitz— Board of Selectmen, Steve Schoonveld — Finance CommittI915KI'M9 02IelP- 2: 2l
School Committee, James Ragazzo, John Stanbrook -Finance Director, William Ross -Town Mana er
BobBrown— Auditor (j ki''S IEi - Q
Mr. Stanbrook called the Audit Committee meeting to order at 6:02pm
Mr. Stanbrook noted the first order of business was to appoint a temporary Chairperson due to the
absence of James Bazinet. This would be for this evening's meeting ONLY.
Mr. Stanbrook opened the floor to nominations.
Mr. Ragazzo nominated Mr. Aptowitz and Ms. O'Neil seconded the nomination. A vote was then called:
All in favor of Mr. Aptowitz as temporary chair to the Audit Committee: Aptowitz (AYE), O'Neil
(AYE), Ragazzo (AYE)
There was a brief discussion that since Mr. Schoonveld is sitting in as the Finance Committee
representative he would be unable to vote as he is not an "appointed" member.
Mr. Aptowitz noted the Light Department audit has been completed and discussed at the Committee's
previous meeting but it has yet to be presented to the Board of Selectmen. It was Mr. Aptowitz's thought
that the Committee finalize and approve the entire set of audits (Single, Town and Electric) and then
present them to the Board of Selectmen with an invitation to the Finance and School Committees.
FY13 Town Audit Discussion
Mr. Aptowitz's understanding was that the process has been extremely smooth in comparison to previous
years.
Mr. Brown, fiom R.E. Brown and Company, noted that with each year there is significant improvement.
Mr. Brown reported that Cash is timely in terms of monthly reconciliations and noted there are some stale
items but felt they would not create any issues. Mr. Brown stated that Receivables are in much better
shape mainly due to the conversion from Munis to Softright. He explained that there are accounts in
Receivables with balances but felt that they are probably dead accounts that have been left over from the
conversion. He stated they will need to be addressed and removed so as not to create any future
problems. Finally, Mr. Brown reported that Water/Sewer accounts are being monitored daily by Mr.
Stanbrook and no issues have been reported.
Mr. Ragazzo inquired as to the Water/Sewer accounts and asked if there are events or circumstances that
give arise to issues that the Accounting Department had to deal with. Mr. Brown explained that the major
issue is a bunch of accounts in Water/Sewer came over during the system conversion came over as
"junk". He stated none of the accounts in the 9,000 series are generating bills. Some of those accounts
may be legitimate and will need to be identified. Mr. Brown felt that most is essentially static junk and
will eventually need to be removed or addressed as legitimate. Mr. Ragazzo confirmed that this is part of
the Receivables balance and asked if this has been addressed on a specific basis and added to a reserve.
Mr. Stanbrook reported the department does not usually set up reserves on the Town Side but has an
offsetting amount to the receivable. Mr. Ragazzo asked what the offset is and Mr. Stanbrook noted it is a
journal entry to correct the Fund Balance as far as Water/Sewer Enterprise Account is concerned. Mr.
Ragazzo stated that in essence we are receiving a clean opinion that there are no internal control issues as
there were in the past with good cooperation and a better audit with pocket areas that still need
addressing.
Mr. Schoonveld stated he heard in Mr. Brown's explanation that the Town needed to ensure that no
further harm was done and looked for clarification. Mr. Brown explained it was in reference that
activities are being reconciled every month and timely. Mr. Stanbrook noted that there are still automatic
posts and those are the things he reconciles every month to make sure that they are balancing.
Mr. Brown reported that the Town is required to conduct a Federal Grant audit and to report on that by
March 315`. He noted there was one finding in that -report which was of administrative nature and
referenced page 10 to the Committee. He explained there was a filing issue in that it was a requirement to
file within 60 days of year end and that the deadline was not met. He noted that there was a filing from
the previous year (FYI 2) which had the same issue but that did not reoccur and has been rectified. Mr.
Brown went on to state that a Federal Grant audit delivered by March 31" can be conducted as low risk,
meaning the auditors are allowed to select fewer programs to audit, but if that date is not met then 25% to
50% coverage is audited.
Mr. Aptowitz asked if next year the Grant Audit could have larger print. Mr. Aptowitz inquired as to
when the Town would have to book the complete OPEB liability, which he stated would put the Town in
negative equity position and noted it happens in every town. Mr. Stanbrook noted it is already in the
restricted net assets. Mr. Brown stated there will be a change in pension accounting allowing for 100%
pension liabilities to hit the books in 2015 and plans to bring OPEB in line with that with an anticipated
date of FYI or FY19.
Mr. Schoonveld suggested making a plan,change where people 55 years and up would vest in OPEB and
that anyone under the age of, 55 would carry no liability. He stated this would reduce the obligation of the
Town and noted he had experience with this about 25 years ago in the private sector. Mr. Ross noted that
the Legislature is debating OPEB currently.
Mr. Brown noted on page 11, the Statement of Net Position, the total Net Position for Governmental
Activities is $51 million and that the Unrestricted Deficit ($7,417,633) is primarily due to the OPEB
liability, which was about $4.5 million. He noted it is a book entry to the financials.
Mr. Brown reported that he does have copies of the entries made and mainly these entries are to take the
regulatory set of books dictated by the State to get to the GAAP version of financials. He has reviewed
all the entries with Mr. Stanbrook as he needs to ensure the client knows all the items in their statement.
Mr. Stanbrook reported there have been no changes from the Draft to the Final Audit.
Possible Vote To Release FY13 Town Audit
Mr. Aptowitz asked for a motion regarding the release of the FYI 3 Town Audit.
Motion: To accept the audit report from the independent auditor, R.E. Brown & Company, for FY 13
(Ragazzo/O'Neil) PASSES 3:0
Motion: To accept the single audit from independent auditor, R.E. Brown & Company, for FYI
(Ragazzo/O'Neil) PASSES 3:0
Mr. Aptowitz stated that in the past the Audit Committee presented to the Board of Selectmen and asked
for the Committee's feedback as Chairman Bazinet is absent. Mr. Ragazzo recommended to invite the
Audit Committee to the next available Board of Selectmen's meeting to present. Mr. Ross asked if Mr.
Stanbrook could release the audits based on the actions at tonight's meeting to which he stated he could.
It was then decided to have the Audit Committee present at the March 20h BOS meeting since the School
and Finance Committees will also be present for a presentation for the Chocolate Factory.
Mr. Ragazzo asked if the Board of Selectmen have each Committee/Board in prior to Town Meeting. Mr
Aptowitz noted the Board has committees come in and present updates throughout the year but not
specifically before Town Meeting.
Discussion of FY14 Electric Department and Town Audit Time Lines
Mr. Brown noted that there is a filing requirement for September 30°i which would mean that field work
would need to commence in July/August to meet that deadline, which is due to the purchase power
contract. In terms of the Town, Mr. Brown would like to begin some time in October.
Mr. Ross noted the Town has made great progress and one of the things that has helped is the creation of
the Finance Director position. He stated it was a real positive step. Mr. Schoonveld inquired if all the
findings of Malloy Lynch Report have been resolved to which Mr. Ross noted there are a number of
things in the report still unresolved for the School Department.
Mr. Aptowitz reported he will take four sets of audits for the selectmen to distribute at the BOS meeting
this evening. Mr. Stanbrook also noted that a pdf version is available as well.
Motion: To close the Audit Committee meeting (Ragazzo/O'Neil) PASSES 3:0 6:39pm
Minutes: Tracey Whalen, BOS Secretary