HomeMy WebLinkAboutAudit Committee Minutes 01 14 2009_201402041939406314
Town of Nantucket
Audit Committee Meeting
Minutes – Audit Committee Meeting January 14th, 2009
Approved February 10th, 2009
Present: Mr. Jim Kelly, Ms. Patricia Roggeveen, Ms. C. Elizabeth Gibson, Mr. Malachy Rice,
and Ms. Constance Voges, Mr. Bob Dickinson
Absent: Mr. Michael Kopko.
Also present: Mr. Rick Atherton, Ms. Reneé Davis, Mr. Glenn Field, Mr. Craig Abernathy, and
Mr. Whiting Willauer
Call to Order:
Ms. Roggeveen called the meeting to order at 9:00 AM.
Announcements and Updates:
None.
Approval of Minutes:
Mr. Kelly made a motion to approve the minutes from the meeting of December
10th, 2008; seconded by Ms. Roggeveen. So voted unanimously.
Discussion of FY 2008 Audit with Powers and Sullivan:
Reneé Davis, of Powers and Sullivan Certified Public Accountants, stated that after
working for eight days on the FY 2008 Audit she believes the Town’s financial statements
are in good shape. She noted that she does expect some slippage in the draft timeline due
to delays in receiving cash reconciliations, the Treasurer’s Cash Book and updated fixed
assets for FY 2008. Ms. Davis added that she expects to receive these documents by the
23rd of January, 2009. Ms. Gibson asked if Ms. Davis expects to meet the deadline for
submitting a FY 2008 Final Audit on March 31st, to which Ms. Davis responded that she
believes that to be a realistic deadline. Mr. Kelly asked if a one week delay in receiving cash
reconciliations and fixed assets will result in a one week delay for the FY 2008 Draft Audit.
Ms. Davis responded that the delay in receiving information will result in a one to two week
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January 14th, 2009 Page 2 of 4
delay in the draft due to scheduling issues. Ms. Roggeveen asked that Ms. Davis send an e‐
mail to confirm that the audit schedule is on track.
Ms. Voges asked if a draft of the Federal Financials has been completed, to which
Ms. Davis responded that the Federal Findings are in good shape and that there were no
new findings in this year’s audit. She also stated that the same material weaknesses from
previous years will again appear in the audit. Mr. Rice commented that this has been the
expectation of all stakeholders, since there has been little time between the completion
dates for several years of financial reporting.
Mr. Kelly asked Ms. Davis to describe the process used to perform the payroll audit.
Ms. Davis stated that her firm looks at two areas when performing a payroll audit: ensuring
that items are categorized in the correct fiscal year and reviewing policies and procedures.
Mr. Kelly then asked if Powers and Sullivan performs a “pay stub” audit. Ms. Davis
answered that her firm does not perform this type of audit. Mr. Kelly then asked if the firm
looks at overtime and other types of premium pay to ensure that they are calculated in the
correct manner. Ms. Davis answered that as a part of the audit the accrual of sick and
vacation time is scrutinized and tested.
Cash Reconciliation Update for FY 2009:
Ms. Voges stated that two weeks prior to the meeting she directed the Finance
Department to focus its efforts on the FY 2008 Audit, so work on cash reconciliations for FY
2009 has been put on hold. Mr. Dickinson characterized work on the FY 2008 cash
reconciliations as “thorny,” but stated that the Finance Department will be in a much better
position regarding cash reconciliations for FY 2009. He added that work on FY 2009 cash
reconciliations has helped identify issues with cash reconciliations in FY 2008. Ms. Davis
asked Mr. Dickinson if he is comfortable with a deadline of January 23rd for completing the
FY 2008 cash reconciliations and fixed assets. Mr. Dickinson answered that Deb Palmer,
Staff Accountant, is working on fixed assets and he is working with Deb Weiner, Treasurer,
to complete the cash reconciliations, and stated that he feels comfortable that he will be
able to meet the deadline.
In reference to an audit of the implementation of new cash reconciliations
performed for FY 2009, Ms. Davis asked if anyone would like to discuss the findings of this
work. Ms. Roggeveen commented that she feels an audit of another month’s cash
reconciliations would be appropriate, as it would allow for comparison between two
months of cash reconciliations. Ms. Davis noted that most of the errors discovered in the
audit were “first month errors” that should have been corrected in subsequent months.
Ms. Voges asked that the current focus remain on completing the FY 2008 Audit before
commissioning further audit work. Ms. Gibson reminded the Committee that the audit
work performed on cash reconciliations was costly, and that if further audit work is
commissioned a method of financing the work will need to be found.
Discussion of Indirect Costs:
Minutes – Audit Committee
January 14th, 2009 Page 3 of 4
Describing a formula used to determine costs incurred through joint usage of
administrative services, Ms. Gibson stated that the Finance Department is developing a
formula for assessing indirect costs that is reasonable and calculated in a fair and consistent
basis. She commented that the Airport and the Water Company have disputed the amounts
assessed for indirect costs in recent years.
Ms. Voges stated that there are four issues with indirect costs: the formula for
assessing indirect costs, budgeting for indirect costs, a change in the Department of
Revenue (DOR) instructions on how to budget for indirect costs, and how to handle revenue
deficit issues with the Solid Waste Enterprise Fund. Providing history on the process, Ms.
Voges explained that in the past the payment was based on property value and assessed as
a payment in lieu of tax. She noted that the Abrahams Group has recommended that a
formula for assessing indirect costs be developed. Ms. Voges stated that she has contacted
other municipalities that operate airport enterprise funds in order to compare methods of
assessing these costs. Mr. Kelly asked how the current amount of funds collected for
indirect costs is assessed. Ms. Voges answered that the Finance Department presents the
Airport and the Water Company with an amount based upon a reasonable formula that is
calculated in a fair manner that is consistent with other municipalities in the
Commonwealth, but these entities have declined to pay the assessed amounts. Mr. Kelly
asked what amount these entities pay, to which Ms. Voges stated that they pay a self‐
determined amount that is included within their existing budgets. She added that if a
reasonable formula is assessed the Town would add an additional $150,000 to $200,000 to
the General Fund.
Ms. Roggeveen asserted her belief that the development of such a policy should be
a policy decision for the Board of Selectmen, noting that such a policy would be similar to
existing policies that are enacted by the Board and implemented by the Finance Committee.
Ms. Gibson agreed, stating that she believes a Board endorsement will add weight and
validity to the formula. Mr. Kelly noted that the Airport’s proposed capital plan includes
funding a residence for the Airport Manager ($800,000), adding that this expenditure was
partially justified by a need to allocate unrestricted assets. Mr. Kelly then asked if it is
within the purview of the Audit Committee to consider a policy decision regarding indirect
costs, to which Mr. Rice answered that as the matter is a recommendation of the work
performed by the Abrahams Group for the Committee it is within the purview of the
Committee.
In regard to impending changes to budgeting methods for indirect costs proposed
by DOR, Ms. Voges stated that there is some confusion about these changes as Barbara
Dakin, DOR Representative, states these changes will take place while Mark Abrahams
states that they will not take place. Ms. Voges also noted that any formula developed to
assess indirect costs applies to all enterprise funds and as such it should be applied
uniformly. Ms. Davis stated her opinion that whatever method is used it is important to
demonstrate that a calculation is performed and indirect costs are assessed equally. Mr.
Rice agreed, noting that it is important to consider all costs when looking at revenue
streams. Mr. Kelly encouraged parties negotiating for the use of a formula in determining
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January 14th, 2009 Page 4 of 4
indirect costs to look back at recent years and document the amount of indirect costs that
have been paid as well as the amount that could have been allocated.
New Business:
Ms. Roggeveen spoke of her interest in developing a Town policy for providing
compensation in the form of a housing allowance. She noted that currently the Town has
no policy for providing or tracking these allowances, and noted that in recent years the
amount of housing allowances has become substantial. Ms. Gibson asked which
departments receive such allowances, to which Ms. Voges responded that the School,
Airport, and Water Company provide housing allowances. Ms. Gibson noted that these
departments lie outside of the authority of Town Administration. Ms. Roggeveen proposed
that the Board of Selectmen can implement a recommended policy for providing additional
compensation in the form of a housing allowance. Discussion of other forms of
compensation followed, including: free housing, take‐home vehicles, and commuting
expenses.
Other Business:
None.
Date of Next Meeting:
Ms. Roggeveen proposed that the next meeting should take place on Wednesday,
January 28th, 2009, at 9:00 AM.
Adjournment
Ms. Roggeveen asked for a motion to adjourn which was “so moved” by Mr. Kopko.
The meeting was adjourned at 9:57 AM.
Prepared by Craig Abernathy