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HomeMy WebLinkAboutAudit Comm. 10/030/2018Audit Committee Meeting October 3'd, 2018 Rirrst Q f VED Present: Jess Aptowitz (Chairman), Kiera O'Neil (Vice Chairman), Michael DeSantis (9FT'.; C +pl�lPrttiin(CE Guests: Michael Nelligan (Powers & Sullivan), Kyle Warne (Powers & Sullivan), John SiMbLE .1be brbll&G-1 (Mansfield Electric) r LD The meeting of the Mansfield Audit Committee was called to order by John Stanbrook at 7.00pm on October 3`d 2018 in meeting room 3A/B of Town Hall. 1) Reorganization of the Committee for FY19 John Stanbrook calls for a nomination of Chairman. *Ms. O'Neil nominates Mr. Aptowitz for Chairman, 2nd by Ms. Martin. Vote 4-0 Passed. Mr. Aptowitz calls for nomination of Vice Chairman. *Ms. Martin nominates Ms. O'Neil for Vice Chairman, 2nd by Mr. DeSantis. Vote 4-0 Passed. Mr. Aptowitz calls for nomination of Clerk. *Ms. O'Neil nominates Mr. DeSantis for Clerk 2"d by Ms. Martin. Vote 4-0 Passed. 2) Approve May 24th, 2018 Audit Committee meeting Minutes Mr. Aptowitz calls for approval of the meeting minutes for May 24th 2018. *Motion to approve made by Ms. O'Neil 2nd by Mr. DeSantis. Vote 3-0-1 Passed. 3) Review of FY18 Draft Audit for the Mansfield Municipal Electric Department (MMED) Michael Nelligan reviews the FY18 draft audit; along with Kyle Warne. He has provided a two page summary, along with a copy of the FY18 draft audit. The audit of the light plant is almost done. Waiting on management for rep letter; this will be sent in the morning. Goal is to get it issued on either the Monday or Tuesday of the 22nd to provide enough time to file. No issues or delays getting work done. All actuary information was made available right away; which expedited the process. Report was provided to them last Wednesday. He explains about GASB 74 (implemented last year) and GASB 75 (implemented this year). The difference between the two statements is that GASB 74 relates to the OPEB Trust Fund and how it's accounted for, whereas GASB 75 deals with the Town's overall liability for OPEB. Mr. Aptowitz asks if it creates any negative equity. Mr. Nelligan responds that there is no concern because there was a positive of 8m last year; which could be wiped this year. He also notes there is no congruity between different, yet similar communities that allow good benchmarking. Mr. Aptowitz asks if the government has any mandatory allocation requirements. Mr. Nelligan said it can't be regarded in those terms but more like a 'Pay as you go' and that it can be set aside in a specialization fund but cannot be considered a trust fund. Mr. DeSantis notes that a major effect of this would be bond ratings. Mr. Stanbrook explains there is not much spread between AA and AAA ratings in Audit Committee Meeting October 3m 2018 Page 1 regards to the Town and Ms. Martin confirms. Mr. Nelligan says that GASB is up to statement 91 and he is hoping that Statement 92 will consolidate GASB 74 and 75. Mr. Nelligan explains that total revenue was down about 4% on the light plant. Which he considered typical; due to efficiency savings driving kilowatt sales down and he suggests raising the rates to counter the drop. Mr. Sollecito explains that multiple industrial customers have left which has led to a substantial drop. He also mentions that things like solar have minimal effects on the bottom line. He explains 80% of expenses are outside the realm of the Town and managing peaks is the major driving force behind the utility. Mr. DeSantis asks why the revenue has decreased 4% and why the expenses have also decreased by around 9.5%. Mr. Sollecito explains that if sales go down than purchasing should also go down. Mr. Aptowitz explains that the light plant works on a peak management system and it's not necessarily charged on usage but on peak. Mr. Nelligan explains there was a one-time credit of $1,624,000 and this explains the lower than expected debt service costs and why there was an expense decrease. Mr. Sollecito explains how five commercial/industrial customers were lost; three out of the five were in the top ten customers. He says there is currently a replacement looking into taking over the space of the second largest company they lost. Mr. Nelligan explains the amounts recorded in the financials, as of June 30th, 2018. The pension and OPEB liabilities were $2,768,516 and $1,720,970, respectively. The pension liability is the Town's portion of the Bristol County Retirement System and the OPEB is a stand-alone plan for just the Town. The Light Department's allocations are based on the amounts used to determine the annual costs of both plans. He recites the budgetary numbers on page 11 of the draft audit and explains they are healthy numbers. On page 23 of the draft audit the OPEB foot track starts as it relates to GASB 74 and 75. GASB 74 requires it be presented on a balancing date; whereas GASBY 75 is based on a year old measurement date. Once you pick that measuring date,,the date is set. Ms. Martin asks why the inflation rate is different. Mr. Nelligan explains it has to do with the difference between healthcare rates versus general inflation rates. Mr. Nelligan will provide more information at a later date. Mr. Nelligan explains these numbers are from an actuary and those actuaries are different depending on the assumptions. He goes on to explain that GASB 45 allowed you to bring over the liability over a 30 year period and that any assets that are on the books were offset by the liabilities. Mr. DeSantis asks about the effect to bank covenants. It was concluded through discussion that cash management isn't an issue for cash borrowing. Mr. Nelligan explains there is plenty of cash on hand; which is a large amount of operating money which negates the need for borrowing money. Mr. Aptowitz says there is an ability to comingle with the Light Plant. Mr. Nelligan explains you can do that, but if you create a deficit in the capital fund. However, if you don't borrow again at the end of the year then you will be hit for free cash off that deficit. Mr. Stanbrook asks if you can get a better rate percentage when OPEB is recalculated if you have a plan to fully fund it and he references page 24 of the draft audit. Mr. Nelligan explains if the light plant commission got their own OPEB evaluation it could be considered its own asset rather than an allocation. Ms. O'Neil asks what the major benefit of this is. Mr. Nelligan says it would be a lower discount rate. Mr. Stanbrook explains Audit Committee Meeting October 3rd 2018 Page 2 how the general fund can't do it, but the enterprise funds could. Mr. Nelligan explains that he's starting to see unions request OPEB benefits and clients starting to put funds into their OPEB fund. Mr. DeSantis asks if there is anything else in the future that could affect this. Mr. Nelligan says no. Mr. Stanbrook noted that page 44 of the draft audit is what will be used as the template for the pilot of FY20. 4) Possible acceptance of FY18 MIMED draft audit and authorization to release the FY18 MIMED audit when in final form *Motion to approve draft audit as presented and authorize its release made by Mr. DeSantis, 2°d by Ms. O'Neil. Vote passed 4-0. 5) Timeline update for FY18 Town audit Mr. Nelligan goes over the timeline and it is scheduled to start the rest of the Town a week from Monday. Mr. Warne will be leaving for his honeymoon in 2 weeks and they will accomplish it before that time. Mr. Stanbrook says he was waiting on 1 state grant; the state sent it on the 24th of September. Mr. Stanbrook sent in the balance sheet the next day. He received information today if free cash was required to balance the budget and the answer is no. Once the year has been rolled in, he cannot go back and edit; based on the software. Mr. Nelligan explains that hurricane relief funds will be coming within the next few weeks and how to process the funds. They are estimated around $3,000 for the Town. It will be reported as a receivable and since the money has already been spent it will be hit from free cash. Mr. Stanbrook states that once the balance sheet is certified, that the only thing remains is the update to the comprehensive audit report. Discussion of date availability occurred to discuss the final audit. This will occur December 4th at 7pm and Mr. Stanbrook will verify room availability. 6) Other relevant agenda items not known by the Chairman 48 hours prior to the meeting Mr. Aptowitz explains the Town Selectman have voted to add an assistant town manager position and hire a town accountant; with the assistant town manager position most likely being Mr. Stanbrook. Mr. Stanbrook states the Finance Committee has provided him a reserve fund transfer to hire a consultant to assist him before the position is filled and that it's not currently auditable. It is required to have 3 bids and he currently has 3 people in mind to fill the role of town accountant. Mr. Aptowitz says the town is looking to migrate to MUNIS. Mr. Nelligan explains if it's going to be used; it's recommended to be rolled out to everyone. Mr. Aptowitz explains during a Light Department meeting there was some kickback in regards to the software they use. He has recommended having all directors between the Town, School and Light Departments meet to discuss how to all go on the same Audit Committee Meeting October 3rd 2018 Page 3 software and this is currently being planned. Mr. Nelligan explains that he is currently talking to five SOFTRIGHT customers who are currently migrating to MUNIS. Mr. DeSantis suggests looking into the parent company of MUNIS to verify risk of them not being around for support. Mr. Stanbrook explains the parent company is Tyler Technologies. Mr. Aptowitz says the possible plan is to start converting this year. Mr. Stanbrook says implementation costs have been lowered due to use of the cloud for data. Mr. Nelligan says at least 80% of their customers use MUNIS. 7) Adjourn *Motion to adjourn made by Ms. O'Neal at 8:02pm, 2nd by Mr. DeSantis. Vote 4-0 Passed. G - re Minutes prepared by Chris George Audit Committee Meeting % �—:.`/ :aid" Date October 3rd 2018 Page 4