HomeMy WebLinkAboutAudit Committee Minutes 04 22 2009_201402041939420532
Town of Nantucket
Audit Committee
Minutes – Audit Committee Meeting, held April 22nd, 2009
Approved May 13th, 2009
A duly noticed meeting of the Audit Committee was held in the conference room at 16 Broad
Street on Wednesday, April 22nd, 2009, commencing at 9:00 AM.
Present: Jim Kelly and Michael Kopko
Absent: Patty Roggeveen
Also present: C. Elizabeth Gibson, Malachy Rice, Constance Voges and Craig Abernathy.
Call to Order:
Mr. Kelly called the meeting to order at 9:05 AM.
Announcements/Updates:
None.
Approval of Minutes 25 March 2009:
Mr. Kelly stated that he wished to clarify that in the last paragraph of the minutes he
was trying to make the point that it is important to foment a greater understanding of
accounting process at the committee level.
Mr. Kelly moved to adopt the minutes of March 25th, 2009; seconded by Mr. Kopko. So
voted unanimously.
Discussion Regarding Completion of FY 2008 Audit:
Ms. Voges stated that the FY 2008 Audit was submitted on March 31st. She noted that
there were some negative findings in the Federal Financials and that these were due to internal
controls procedures. She pointed out that on page four there is new language that results from
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April 22nd, 2009 Page 2 of 5
the implementation of new standards. Ms. Voges said that these standards are increasingly
concerned with internal controls in the wake of such financial scandals such as Enron. She also
commented that most of the material weaknesses concerning internal controls are the same as
in prior years and that this was to be expected. Ms. Voges added that she will be submitting
responses to the auditor’s findings for this year’s final report.
Mr. Kelly asked to know more about the dynamics of submitting responses. Ms. Voges
stated that she will send her responses to Powers and Sullivan and they will incorporate them
into one report. She noted that one of the findings may be corrected, Ambulance Reserve Fund
Interest. Mr. Kopko noted that Ms. Voges indicated that the same comments should be
expected and asked if anything stands out in the new report. Ms. Voges responded in the
negative and reminded the Committee that the FY 2008 audit was compressed into a brief time
period. She commented that in order to meet the deadlines for the audit it was not possible to
get everything corrected on time. Mr. Kelly and Ms. Gibson highlighted indications of progress
within the report.
Referring to a previously mentioned objective of the Audit Committee, Mr. Kelly asked if
there was any update on the status of independent meetings with Powers and Sullivan. Mr.
Kopko stated his understanding that the Committee decided to wait until after the audit was
complete before exploring this further. Ms. Voges said that Renée Davis has indicated she
would be available for these types of interviews on most Wednesdays. After further discussion,
it was decided that it would be best to confer with Ms. Roggeveen before going forward.
Discussion of Audit Firm Renewal:
Indicating her understanding of the wishes of the Audit Committee, Ms. Gibson stated
that she believes the Committee wants to continue the Town’s relationship with Powers and
Sullivan. She referred Committee members to a renewal proposal from Powers and Sullivan
that would increase annual costs from $75,000 to $85,000 and also allow for an optional audit
of the Student Activities Fund. Mr. Kelly stated his unfamiliarity with the Student Activities
Fund. Ms. Voges explained that this is a School fund that is used to pay for clubs and activities.
Mr. Kelly asked if there is any regulatory requirement to audit the fund; to which Ms. Voges
responded in the negative.
Mr. Kopko asked if the Airport and Water Company will continue to have their own
auditors. Ms. Voges answered that in the last three years Powers and Sullivan has not relied on
work performed by outside firms. Going forward, Ms. Voges stated that these enterprise funds
have now agreed to use Powers and Sullivan for their audits, so it will be reasonable to expect
them to pay the amount assessed for these audits.
Mr. Kelly asked what amount has been budgeted for auditing services in FY 2010. Ms.
Voges responded that the budget for this item is flat. Mr. Kelly asked why it was not subject to
the ten percent overall budget cut. Ms. Gibson replied that the budget cut was an overall
budget cut that did not affect each line item. Mr. Kelly recommended asking Powers and
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April 22nd, 2009 Page 3 of 5
Sullivan to cut the amount of the increase by ten percent. Mr. Kopko stated that the Board of
Selectmen has been looking at ways to rein in legal costs that he expects these savings to
exceed ten percent of total legal expense. He said that these measures do not contain a request
for a reduction in price, but it would not hurt to ask.
Ms. Voges stated that she has some information available on the amounts other towns
are paying for their audits. Mr. Kelly commented that he does not believe that a comparative
analysis will be useful in this case. Mr. Rice asserted his belief that such an analysis can be
useful in providing a context for costs.
Ms. Gibson proposed that the matter of cost be discussed with Powers and Sullivan
during the proposed independent meetings. Mr. Kelly recommended that Ms. Gibson discuss
the matter with the firm. Ms. Gibson referred to the charter for the Committee and stated that
it is the charge of the Audit Committee to negotiate contracts for auditing services.
In reference to the aforementioned enterprise fund audits, Mr. Kopko asked when it will
be possible to get a commitment to pay for these audits from senior management at these
entities. Ms. Gibson answered that a commitment should be forthcoming. Mr. Kelly noted that
discussions with these entities were to take place in March and asked if they occurred. Ms.
Voges responded, stating that the discussions in March yielded a verbal proposal from the
Airport but she is still waiting for written support. Mr. Kopko pointed out that savings from the
enterprise funds bearing the cost of their own audits would represent more than the proposed
ten percent savings. Mr. Kelly countered that additional funds will be necessary for interim
audits. Ms. Gibson responded, stating that funding is available but it may mean not doing
something else.
Mr. Kopko asked if Ms. Gibson would call Powers and Sullivan to relate the Audit
Committees concerns. Ms. Gibson stated that she will call the auditing firm and communicate
on behalf of the Audit Committee, but reiterated her earlier statement that by charter the Audit
Committee is the designee to engage firms for auditing services. Mr. Kelly restated his belief
that this negotiation should be performed by staff. Mr. Kopko reminded Mr. Kelly that there
was a fear earlier last year that Powers and Sullivan would decide to no longer provide auditing
services for the Town. Mr. Kelly asserted his belief that this is a duty that should be negotiated
by Town Administration and reminded Mr. Kopko of the need to always focus on expenses. He
continued stating that he doesn’t understand why the Town should spend more than the
amount currently being spent and advocated for the importance of always seeking price
reductions.
Mr. Kopko asked Mr. Kelly if he would like to consider shopping around for a new
auditing firm. Mr. Kelly stated that he was not trying to promote conflict. Ms. Gibson asserted
her desire to build consensus and offered to make an inquiry with Powers and Sullivan. She
reminded the Committee that in the past there were several discussions regarding the negative
implications of changing audit firms while there are still negative findings. Mr. Kelly then
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April 22nd, 2009 Page 4 of 5
requested that the comparative information earlier mentioned be prepared for the next
Committee meeting.
Mr. Kopko offered negotiations of the Town’s legal contract as a model for this
situation. He noted that in this model the contract is negotiated by the Board of Selectmen and
then managed by Town Administration. On the topic of costs, Mr. Kopko stated that as long as
he has the assurance of Town Administration that the amount is manageable he is satisfied. Mr.
Kelly moved to accept the proposal as written. Mr. Kopko cautioned against rushing the
decision and asked Ms. Voges what is the deadline for making a decision. Ms. Voges answered
that if the Town hopes to be on the fall schedule proactive measures must be taken.
Mr. Rice proposed a stepped increase over the term of the contract. He offered the
following: Level fund the Town and County amount of the audit cost for the first year while
increasing the amounts for the Water Company and the Airport to $9,500. In the second year
increase the Town and County amount to $55,000 and the Water Company and Airport to
$10,000 each. All costs would be at the full amount of the proposal in the third year. Mr. Kelly
amended his motion to accept Mr. Rice’s proposal.
Mr. Kopko stated his desire to wait until Ms. Roggeveen is present before acting on the
motion. Ms. Gibson offered to relate the proposal to Powers and Sullivan. Ms. Voges noted
that this would also be the time to request special items such as a separate audit report for the
County. Mr. Kelly proposed that other items such as turnaround times could be outlined within
the contract. Mr. Kopko asked that Ms. Gibson discuss the matter with Powers and Sullivan and
then meet again the following week when everyone can be present. Ms. Gibson offered to have
Powers and Sullivan participate in the next meeting via conference call, but Mr. Kelly indicated
his desire to have a complete plan before beginning discussions with the firm. Mr. Kopko
agreed and stated his wish to meet first as a full committee before going forward.
The Committee then discussed viewing original contracts and it was decided that this
information should be available at the next meeting.
Discussion of Implementation of Abrahams Group Recommendations:
Ms. Voges stated that Mark Abrahams will be on island tomorrow for the sake of
discussing the Sewer Rate Proposal. She said that several members of Town Administration and
the Finance Department will be meeting with him at that time. Ms. Voges noted that Mr.
Abrahams has requested a full reconciliation of cash. She reminded the Committee that her
office has been reconciling only activity in order to finish FY 2008 work, but now she expects
work to resume on a full reconciliation of FY 2009.
Ms. Gibson said that she will be discussing a new timeline for implementation of
recommendations with Mr. Abrahams. Mr. Kopko asked if she expects him to be unhappy about
the lack of full reconciliation. Ms. Gibson answered that she does not expect him to be unhappy
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April 22nd, 2009 Page 5 of 5
or surprised, as she has been in regular contact with him. She stated that the purpose of the
next day’s meeting is to work on bringing the implementation plan back to the forefront.
Update on Cash Reconciliations:
Ms. Voges explained that the standard for reporting cash reconciliations has been to
provide the March reconciliation at the May meeting. She noted that this standard was
exceeded in February. Ms. Voges stated that a full reconciliation for March will be presented on
May 13th.
New Business:
Mr. Kelly offered that it may be more efficient to clarify agenda items before addressing
them. As an example he cited the fact that he was unaware that the Audit Committee
negotiated contracts for auditing services and as such it took him much longer to reach the
correct conclusion. Mr. Kopko stated that he was beginning from the starting point of hoping to
retain the firm for future services.
Old Business:
None.
Date of Next Meeting:
The date of the next meeting was scheduled for April 29th, 2009, at 8:30 AM in the
conference room at 16 Broad Street.
Adjournment:
Mr. Kelly asked for a motion to adjourn that was “so moved” by Mr. Kopko. The
meeting was adjourned at 10:09 AM.
Prepared by Craig Abernathy