HomeMy WebLinkAboutAudit Committee Minutes 10 08 2008_201402041938558655
Town of Nantucket
Audit Committee Meeting
Minutes – Audit Committee Meeting October 8th, 2008
Approved November 5, 2008
Present: Mr. Jim Kelly, Mr. Michael Kopko, Ms. Patricia Roggeveen, Ms. Connie Voges,
Mr. Bob Dickinson, and Mr. Malachy Rice
Absent: Ms. Libby Gibson
Also present: Mr. Whiting Willauer, and Mr. Craig Abernathy
1. Call to Order:
Mr. Kopko called the meeting to order at 9:00 AM.
2. Announcements and Updates:
Mr. Rice stated the Ms. Gibson was unable to attend the meeting due to a
scheduling conflict. He said that he would like to begin the meeting with a brief update
of the Abrahams Group Study. In the past few weeks, Mr. Rice said that he, Ms. Gibson
and Ms. Voges met with the School and Enterprise funds. On the Thursday and Friday
before the meeting, Mr. Rice said that the Abrahams Group had been in Nantucket to
work on the development of the implementation plan with Ms. Voges and the Finance
Department. He added that he expected to have an outline of the implementation plan
in mid‐October, and then have a fully vetted plan in mid‐November.
In another update to the Abrahams Group process, Ms. Voges said that in the
last week Kathy Griffin and Mark Abrahams met with key lead Finance Department staff.
The Abrahams Group also introduced David Wilkerson, Controller for the City of
Newton. Ms. Voges said the primary focus of the meetings was the last quarter of the
calendar year, October through December. She noted that a few changes were needed
after talking through ideas about implementation, and in the end it was a fruitful
meeting.
Minutes – Audit Committee
October 8th, 2008 Page 2 of 6
On the status of cash reconciliations for FY 2009, Mr. Dickinson stated that he
met with Renee Davis from Powers and Sullivan on September 30th, 2008. He said that
he went through the process of reconciling from bank statement, to cash book, to the
general ledger. Mr. Dickinson said that all reconciliations for July were complete, and
that he is now finishing August and working on reconciliations for September. He added
that there was much work to be done, but in terms of transactions reconciliations have
been performed to the penny for July and August.
Mr. Dickinson then presented members of the Committee with a brief summary
of reconciliation procedures. In listing items that affect the Town’s cash, Mr. Dickinson
cited cash receipts, payroll, disbursements and journal entries. Mr. Dickinson stated
that using a new format he and Treasurer Deborah Weiner could look at what is in the
general ledger compared to Treasurer’s Cash and then find any discrepancies. Mr. Kelly
asked if the Mr. Dickinson had begun to identify opportunities for improvement after
documenting the reconciliation process. Mr. Dickinson answered that he had identified
a lot of problems with the way the Town takes cash. He noted that one problem with
cash receipts was that sometimes cash codes post to incorrect accounts.
Mr. Kopko asked where the Town receives cash. Mr. Dickinson replied that most
Town departments receive cash, listing the School, Building Department, Marine
Department, and Parking as examples. Ms. Voges said that each type of receipt has a
different code to direct it to the proper place in the general ledger. These codes vary
between three and five digits, and they tie the receipts to anywhere from two to six to
twelve accounts. As an example Ms. Voges cited the Boat Excise fund, as its proceeds
are split between the general ledger and the Waterways Improvement Fund.
Mr. Dickinson said that this process has helped identify a lot of the problems
with how the system actually works. He stated that he is working on an operating
procedure for handling cash. Mr. Dickinson said that receivables that are generated by
a separate system are handled in several different ways. He stated that he and Ms.
Larivee are looking at methods of standardizing cash receipts.
Recalling the Abrahams Group Report, Mr. Kopko asked if these problems had to
do with the Enterprise funds and the School. Ms. Voges answered that Mr. Kopko was
correct. She added that there are also areas where there is job specific software that
performs much better than MUNIS, the software used for Town accounting. In these
cases, she said the departments have to adapt data and pull it into MUNIS. In speaking
with the Abrahams Group the week before, Ms. Voges said it was interesting to talk with
Mr. Wilkerson about Newton’s software usage. In that case, MUNIS is only used for
receivables, while Pentamation is used for all other purposes. She said that
Pentamation was used in this manner because it was a far better system for processing
everything except receivables.
Minutes – Audit Committee
October 8th, 2008 Page 3 of 6
Mr. Kelly praised the cash reconciliation plan. Mr. Dickinson said that he is
implementing daily reconciliation of cash receipts that are received by the Treasurer’s
office. He said that looking at receipts with this kind of detail in the beginning of the
process should help eliminate some of the problems later in the process. Mr. Kelly said
that he expected some improvement would occur due to the Hawthorne Effect, a
management theory that attributes increased performance to observations that people
will be more productive when appreciated or when watched.
Ms. Davis from the accounting firm Powers and Sullivan conducted a preliminary
audit of the cash reconciliation process during the week prior to the meeting. Ms.
Voges said that Ms. Davis was pleased with the reconciliation and that she will write the
Board of Selectmen and the Town Manager for the purpose of communicating her
approval. Regarding preparations for the FY 2008 Audit, Ms. Voges said that there was
seven weeks to left to prepare. She listed the following items as a part of this process:
• Ms. LaPiene is working on cash reconciliations on a month by month basis.
• Ms. Larivee has completed accounts receivable reconciliations.
• Debt is being reviewed by Ms. Voges.
• Mr. Dickinson and Ms. Richen closed FY 2008 in MUNIS.
• Abrahams Group staff will be assisting with financial reporting.
In an update from the Executive Office of Transportation (EOT), Ms. Voges stated
that she received a letter which indicated that they will begin reimbursing expenditure
on August 22nd, 2008, and that indirect costs prior to December 21st, 2007, would be
paid. Ms. Voges cited the amount of indirect costs incurred prior to December 31st,
2007, as $124,000. She said the EOT will not reimburse the Town for the amount of
direct or indirect costs between January 1st and August 21st, 2008. Ms. Voges added
that the EOT is the one agency out of all of the grants received by the Town that wants
to receive an audit report directly, but the Federal standard is to submit the report to
the Audit Clearing House in Missouri. Ms. Voges said that she has submitted materials
stating that the Department of Revenue has approved an audit deadline of March 31st,
2009, for completing the FY 2008 Audit. The EOT will be reviewing this documentation
and then indicating whether or not that date will be acceptable. Mr. Kopko asked what
would happen if the EOT found the timeline to be unacceptable, to which Ms. Voges
responded that the EOT would then withhold funds until the audit was complete.
3. Approval of Minutes:
Mr. Kelly made a motion to approve the minutes from the meeting of September
10th, 2008. The motion was seconded by Mr. Kopko.
4. Discuss Request for Proposal for Audit Services:
Ms. Voges said that she wanted to ensure that the Audit Committee was aware
that it would soon be time to either renew its contract with Powers and Sullivan or
Minutes – Audit Committee
October 8th, 2008 Page 4 of 6
request bids from other audit firms. She said that the last Request for Proposal was for
the 2003 to 2005 Audits. That contract was awarded to Powers and Sullivan, and
subsequently renewed for another three year period. Mr. Kelly asked if there was a
requirement that this process go out for bid. Ms. Voges answered that it is not
necessary to go out for bid for professional services. Mr. Kelly indicated that for the
sake of stability he would prefer not to change auditing firms at this time. Ms.
Roggeveen and Mr. Kopko agreed.
Mr. Rice stated that he hoped to expand the responsibilities of Powers and
Sullivan at the time of renewal. Ms. Voges agreed, and cited the audit of the work
performed by Peter Lamb as an example. She said that in the last contract negotiation
she asked that Powers and Sullivan not rely on the Peter Lamb audit when auditing the
Water Company and the Airport. Powers and Sullivan did not provide a separate audit
for the two enterprises, but instead relied upon the work of Peter Lamb. Ms. Voges said
that she would like for the information for these two entities to be reliably entered into
MUNIS. At present, the Airport keeps separate books that are much more accurate than
the records contained in MUNIS. Ms. Voges stated that having accurate information in
MUNIS would allow Powers and Sullivan to conduct an audit based upon the
information in MUNIS. She noted that this is one of the recommendations put forward
by the Abrahams Group, and said that while the Finance Department has some work to
do in implementing this recommendation, a culture change will be necessary before
implementation is successful.
In the course of conducting past audits with Powers and Sullivan, Ms. Voges said
that at times the firm had not been very responsive. Mr. Kelly asked if it would be
possible to ask the Abrahams Group to establish benchmarks and timelines when
requesting further auditing services. Mr. Kopko said that he felt it would be prudent to
ask the advice of the Abrahams Group. Looking at the firm’s performance in providing
the FY 2008 Audit will be an effective method of gauging the firm’s future performance
according to Ms. Voges. She added that she felt that the Town should consider holding
conversation regarding renewing the auditing relationship after the FY 2008 Audit is
complete.
In regard to the County, Mr. Rice asked if any further consideration had been
given to providing a separate audit report. Ms. Voges said that discussions about
providing a separate audit had been conducted internally, and that in the past Scanlon
had always considered the County a separate entity. Mr. Kelly asked about the possible
benefit of having a separate report. Ms. Voges said that a separate report would allow
the Town to complete some portions of the audit in a timelier manner and also allow for
greater detail in reporting. Mr. Rice reminded the Committee that when the Town
renews the contract with Powers and Sullivan they can expect to see some cost
increases due to the increases in the scope of auditing services.
Minutes – Audit Committee
October 8th, 2008 Page 5 of 6
The state of change in the economy and the Town gave Mr. Kelly reason to
believe that it might be difficult for Powers and Sullivan to provide a good cost estimate.
Ms. Roggeveen asked when the contract would be open for renewal, to which Ms.
Voges responded that the past contract would be considered complete upon the
submission of the FY 2008 Audit. She added that even if the Town does not request any
increase in scope it can expect to see an increase in costs.
5. New Business:
Mr. Kopko asked Ms. Voges if she could clarify the Finance Department’s
relationship with the Nantucket Regional Transit Authority (NRTA). Ms. Voges answered
that regional transit authorities are independent entities of the State. She said that the
Finance Department provides payroll services for NRTA, and that the NRTA pays for
these services. While the employees of NRTA do participate in the Towns self‐funded
health plan, Ms. Voges stated that all other parts of the organization are separate from
the Town. Mr. Rice noted that he saw this question as another benefit of having a
separate County Audit, as more information would help better inform people as to how
the unique systems of Nantucket work. As an example, Mr. Rice asked where else is a
County administrated by a Town. He said that over time these systems have evolved to
their current status, but that the level of complexity had risen to the extent that it would
be better to compartmentalize information.
Mr. Kopko asked if it was the preference of Ms. Voges to have a separate County
Audit. Ms. Voges responded that on a personal level she liked the additional reporting,
but she does not know if that is the State’s preference. Mr. Kopko asked if there were
reasons to consider a separate audit from a management perspective. Mr. Rice
answered the he felt it would be helpful in delineating the operations of the Town and
County, and he added that he believes there is a real need to separate operations and
view all available funds. He also said that in lean budget times people begin to ask why
the County does not reimburse the Town for operations costs. Mr. Kelly said that he felt
a separate audit would more effectively communicate to the public that the Town and
County are separate entities.
Mr. Willauer asked if the Board of Selectmen provide any oversight for the NRTA.
He said that it seemed as if the Board makes financial decisions but has no financial
responsibility. Ms. Roggeveen answered that the NRTA has a State approved budget.
Mr. Rice said that the relationship is similar to the one between the State and the
Sheriff, as they both receive State approved funding. Ms. Voges noted that the Board of
Selectmen acts as the NRTA Advisory Board.
6. Other Business:
Minutes – Audit Committee
October 8th, 2008 Page 6 of 6
In an update regarding services provided by Bank of America, Ms. Voges stated
that in the prior week the Town’s lawyers returned comments on the agreement, but it
has yet to be signed.
7. Date of Next Meeting:
Ms. Roggeveen proposed that the next meeting should take place on
Wednesday, November 5th, 2008, at 9:00 AM.
8. Adjournment
Ms. Roggeveen asked for a motion to adjourn which was “so moved” by Mr.
Kopko. The meeting was adjourned at 9:42 AM.
Prepared by Craig Abernathy