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HomeMy WebLinkAbout2012-9-25Minutes for September 25, 2012, adopted Oct. 30 L N O N —i C C1 o C 70 Town of Nantucket 711 � N rn n �' Audit Committee - i3 3 rn www.nantucket - ma.gov z � o r m o MINUTES Tuesday September 25, 2012 16 Broad Street, Conference Room — 9:00 a.m. Staff: Libby Gibson, Town Manager; Irene Larivee, Finance Director; Bob Dickinson, Assistant Town Accountant; Debbie Dilworth; Debbie Weiner; Martin Anguelov, Budget Analyst; Tom Rafter, Airport Manager; Terry Norton Town Minutes Taker Attending Members: Patty Roggeveen, Matt Mulcahy, Rick Atherton Absent Members: None Early Departure: Mulcahy 9:57 a.m. Public: Bruce Miller, John Tiffany, Dan Drake 1. CALL TO ORDER Roggeveen called to order at 9:00 a.m. II. PUBLIC COMMENTS Ill. APPROVAL OF MINUTES 1. July 31, 2012 adopted by Unanimous consent Miller — Expressed belief that information about Enterprise budgets had not been presented in a coherent fashion that sufficient enough to make a recommendation at Special Town Meeting (STM). 1) Numbers were not presented in a fashion that facilitated a conclusion that they were correct. 2) This principle does not apply to just the airport but to all the Enterprise Funds. In a recent presentation, there were bad cells in the presentations; there were formatting /continuity issues varying between the Enterprise Funds. The principal of formats for all Enterprise Funds should be embraced. Roggeveen — Would like the Board of Selectmen (BOS) to have a discussion on how to structure the formats. Suggested not all the Selectmen have the same challenges with understanding the format of Enterprise Fund presentations. Atherton — Stated that the BOS had ever addressed format; formats have change over time developing in the course of dialog. Roggeveen — No one member of the BOS can go to a commission and have the Enterprise Funds change their presentation format; it must be a decision by the BOS. In terms of systemic changes, the Audit Committee is in a position to look at how those presentations happen. Larivee — In the past Finance Department presented the figures; about 2 years ago, that process changed. Now the departments now fill out all the information; theoretically that information comes back to Finance to be checked. Have had instances of getting information at the last minute and it Page 1 of 5 Minutes for September 25, 2012, adopted Oct. 30 was already on the screen before Finance had the opportunity to double check it. That is being corrected internally. Roggeveen — Would like to get this on the BOS agenda for discussion. Miller — Had a BOS meeting in May when it was determined as a Board that Messers Atherton and Miller would meet with Ms Chretien, Ms Buzanosk & Mr. Anguelov, from which came constructive improvements. At the Finance Committee (FinCom) meeting September 17, the use of a ledger instead of a presentation was a step backward; on the handout from Airport Commission there were ten significant errors. There was an attempt to summarize the fund balance but the numbers don't add up. It looked like the end -of -year fund balance year will be $2,500,000, which will have a serious impact on how to handle the Airport going forward. Gibson — FinCom never asked for that presentation; they have always preferred to see the line items and the numbers. There was not enough time to put together a presentation for the FinCom meeting. At the Fincom meeting, it was noted that some of the numbers were not right. It will be made clear as FinCom goes forward. Debt service and other non - operating expenses are still an issue; it is part of the overall budget. Roggeveen — Sometimes what looks like a large deficit is in fact not, once fuel sales and retained earnings are factored in. The public needs to know the truth and need to understand that sometimes it is an accounting truth and sometimes it is a policy truth. It is important at this time for the Boards and Committees to note that the bookkeeping might show a huge deficit, which is not really the case. Miller — The situation looks worse than it is. There is a coherent argument that we can present shows that the situation is under control and a plan going into the future. Mulcahy — A MUNIS budget will be approved that will be for the Department of Revenue (DOR) and at the same time explain to the voters the actual situation. The Town is required by law to report to the actual numbers State. Roggeveen — It is import that the electorate knows that this is being managed. It is not always appropriate to post the numbers as they look without keeping in place the truth behind them, which often indicates a better situation. Larivee — The retained earnings projection does include payback to the general fund. In revenue in the past, the Airport only reported two revenue line items; history exists only for fuel and airport income. Since Mr. Rafter came on board, all the additional revenue line items have been added; however since there is no history or data for the other line items, they remain empty. Time is needed to create a monthly pro forma that goes out at the end of the fiscal year and includes all the knowns, the timing, the debt service, and capital planning. It will take about 3 months. Roggeveen — It is going to take time, and we don't have the history that we should on some of these line item; we need to be up front about that. Miller — Mr. Rafter, is a manager who knows how to run a business, and should not be sent up to present to the DOR. Larivee — Revenue did not jump by $2,000,000. Mr. Rafter included all the transfers into the $1,500,000. Miller — The Finance Department's job is to be sure the numbers Mr. Rafter is using are accurate and complete. Larivee — Finance is no longer populating all the information into presentations. Finance is still working with departments on that. Mulcahy — As a Committee, let's decide how we want to go forward with this today. Roggeveen — Believed it would be helpful to have a discussion between BOS and FinCom about how the presentations should look. Miller — Stated that he would like to have a presentation of one or two pages that is clear enough to be easily justified. Page 2 of 5 Minutes for September 25, 2012, adopted Oct. 30 Roggeveen — Would suggest that Mr. Rafter eventually will have to provide the business reports. In the meantime, there is the need to make sure that the numbers match the report. As far as structure of reporting, that is a technical presentation. Perhaps there should be a workshop with Abrahams on how to create a presentation that makes sense to the public. Tiffany — Speaking as a member of FinCom, but not for FinCom, it would be typical to give one format to the BOS and a more detailed report to FinCom. FinCom's role is to get more into the detail. Stated that he would like to see the summarized format as well as the details behind it. Roggeveen — A workshop covering how to do presentations for BOS and presentations for FinCom would be very helpful. Drake — Municipal accounting is very different from public sector accounting. MUNIS is not a management tool; it is a reporting tool. The airport was looking for a management tool and using MUNIS `blew up in their face.' The numbers weren't wrong; it was the way the numbers were presented and how they were interpreted. It is no small effort to add that level of reporting and managing to the Enterprise Funds. Roggeveen — The Enterprise Funds and the Revolving Funds and Committees and BOS need to figure out how the presentations should be done. What happened at the airport could have been nothing more than not understanding how to manage a municipal account. That needs to be corrected. Atherton — Stated he is interested in knowing what the plan is on how the airport is going to get back to a proper balance and repay the town. Mulcahy — At STM a presentation will be ready to explain Mr. Miller's concerns to the public. Larivee — Mr. Rafter plans on having the numbers to Finance soon enough to double check the figures prior to the BOS meeting on September 26. Roggeveen — The workshop would be a healthy way to deal with the situation. Mulcahy — This report and workshop are steps in right direction. Agree about the debt information; but there is a way to incorporate levels. Larivee —Only caution is that FY2014 is already out to departments; so if line items are changing aspect in any way, the board should to look at that for 2015. Roggeveen — Would like to get the workshop on a BOS agenda. Miller — For the September 26 BOS meeting, asked Ms Larivee for a presentation of 3 -4 year summary of fund balance for the airport going back to 12/31/09 and how it has changed. Larivee — The problem with that is it includes Bond Proceeds, which is garbage data and presents a false picture. Dickinson — It will take time because the fund balance has to be taken as a whole and then reserve out all the money that is targeted for a specific project. Would have to remove all the reserves and show subsidies that need to be repaid to the general fund. Larivee — Could do a less bond proceeds and put a net retained earnings. Miller — There is a need for a "pay -back the Town" number from the Airport. Larivee — The repayment schedule presently being looked at is capital borrowing, capital retained earnings and when to start putting in the repayment to the Town. That is not something that can be done overnight. Miller — It is important for the voters to know how the Airport is going to be able to pay the Town back. Larivee — People think it is all Airport retained earning but there are general fund monies in that. Roggeveen — Do not want to give a false impression. The problem is that a "snapshot" will not be realistic. Could talk about a scheduled conversation about how the money will be paid back. Larivee — The Airport is scheduled to come back before the Board October 17. Roggeveen — Need to put this continued discussion on the next Audit Committee Agenda. Page 3 of 5 Minutes for September 25, 2012, adopted Oct. 30 Larivee — In regards to the checklist as it was presented to this committee several weeks ago, everything was turned into the auditors except the airport financials from Peter Lamb and the draft. Still do not have those financials from Mr. Lamb so the checklist is not complete; still have to have a conversation with Rene Davis of Powers & Sullivan, as to the impact on November 1. This could jeopardize the Town's status. Reviewed past history of problems with two different companies doing audits and the extra work that caused for the finance department. Atherton — Powers & Sullivan are using numbers from MUNIS upon which they are basing their report. Larivee — Still paying Powers & Sullivan to do a single audit draft but Finance has to them to validate the second independent audits for Wannacomet Water Company and the Airport. Roggeveen — This is something to go back to the workshop. It is necessary to have a management system and a reporting system. With cash coming in, a management system is necessary. Asked Ms Larivee to let the committee members know what the impact is; Powers & Sullivan's responsibility is to "mine" it. Larivee — Since Powers & Sullivan are being paid to do the work, asked the Audit Committee to issue a letter with a recommendation that the two enterprise funds to stop using secondary services. Roggeveen — This should be part of the conversation of how the audit works and how it happens. Larivee — Finance does all the fixed assets for the Enterprise Funds. Atherton — The Airport Commission is supplying the asset schedule to support the MUNIS. Larivee — That has slowed the process down as well as a second auditor asking for the same information in a different format and challenging the numbers. Roggeveen — Asked what it would take have Powers & Sullivan do it all and dismiss Mr. Lamb. Atherton — Need a session with Mr. Rafter, Ms Davis, Mr. Lamb and Ms Roggeveen to work this out. Roggeveen — Requested that Ms Larivee organize such a meeting. Drake — My understanding is that an audit is required by the Federal Aviation Administration (FAA). Larivee — It is the same audit; they have to do federal wards also. The report to the FAA generates the sign -off. Will talk to Ms Davis about a face -to -face meeting to discuss the issue. V1. 2011 MANAGEMENT LETTER PROGRESS Larivee— (56,56) Internal Control Witnesses issues will continue to show up until a Financial Management Manual is completed. Do have a copy of a recent manual to facilitate writing a new one for Finance. Capital Bond Finding pertained to the airport because the DOR items arose due to borrowing; this year is good. Wannacomet/'Sconset payables need to be shown differently than has been past practice; in government accounting payables are shown as intergovernmental transfers. Procurement Loss will continue to come up in the 2012 Management Letter because of everything that has come out of the airport. Under Material Weaknesses, revolving deficits were resolved at fiscal year end. Police Off -duty Detail needs a more in -depth reconciliation; new findings include all invoices need to be stamped with the received date. With this in place, will ask for leniency in regards to the requirement that the stamped time of receipt be included on the invoice. There are two other open items which will be in the report as "other matter ": Purchase Order (PO) dates where POs were created after the invoice was received. Capital Assets monitoring to ensure land sales do not show up on the fixed assets list. Page 4 of 5 Minutes for September 25, 2012, adopted Oct. 30 A couple of internal controls now in place in regards to POs are: To turn on the line -item management tool in MUNIS; if a department should exceed its budget threshold, an email will go to Martin Anguelov and the department head. Department heads sign and attest that everything is in the right place. Motion to Adj ourn: 10: 0 1 a.m. Submitted by: Terry L. Norton Page 5 of 5