HomeMy WebLinkAboutAudit Committee Minutes 09 10 2008_201402041938553029
Town of Nantucket
Audit Committee Meeting
Minutes – Audit Committee Meeting September 10th, 2008
Approved October 10th, 2008
Present: Ms. Libby Gibson, Mr. Jim Kelly, Mr. Michael Kopko, and Mr. Malachy Rice (Ms.
Patricia Roggeveen participated in the meeting via telephone.)
Absent: Ms. Connie Voges
Also present: Mr. Rick Atherton, Ms. Elizabeth Brown, Mr. Bob Dickinson, Ms. Deborah
Dilworth, Ms. Irene Larivee, Ms. Patricia Perris, 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:
None.
3. Approval of Minutes:
Mr. Kelly made a motion to approve the minutes from the meeting of August
13th, 2008. The motion was seconded by Mr. Kopko.
4. Abrahams Group Study Report
Ms. Gibson began by reviewing the process of conducting the Abrahams Group
Study. She said the Abrahams Group was engaged by Town Administration in
recognition of chronic difficulties in completing timely audits as well as issues raised in
auditor letters to management. The goal of the study was to have the Abrahams Group
take a look at staffing and internal control regulations. Ms. Gibson stated that several
significant accomplishments have been made and acknowledged by the Department of
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September 10th, 2008 Page 2 of 7
Revenue: the completion of three audits in less than twelve months, various cash
reconciliation changes, and filling two additional positions all while making
improvements in other areas. She noted that the focus of the Audit Committee and the
Board of Selectmen has helped keep the improvements on track. However, she also
highlighted the need to recognize the amount of time, effort and hard work performed
by the Finance Department in achieving these goals. Ms. Gibson specifically mentioned
Ms. Voges, Ms. Larivee, Ms. Weiner and Mr. Dickinson as being instrumental in
achieving the goals of the Finance Department. She repeated that the hard work
performed by the Finance Department needed to be recognized and that it cannot be
overemphasized.
Ms. Gibson said that the past few months had been tough and the next few
months will continue to be tough. She said that the hard work performed by the
Finance Department has put the Town in a position to make systemic improvements to
make sure that audits will be performed on time in the future. Ms. Gibson added that it
has been a long road but all parties are moving ahead with measurable progress.
Moving forward, she stated that the Town would be looking at ways to document work
and to do things more efficiently. The implementation process will be next in the
timeline, and she asserted a belief that it will consume a considerable amount time for
Ms. Voges, Ms. Larivee and her office. Ms. Gibson said that the Finance Department
was only the first department to undergo an organizational study, as over the next
several years all departments will be engaging in the process. She then asked Mark
Abrahams to provide an overview of his study.
Mr. Abrahams began by explaining that he would like to give a quick five to ten
minute overview of his report and then turn the discussion over to the Audit Committee
for questions. He stated that his firm, The Abrahams Group, had been hired by the
Town to conduct an organizational review of the Finance Department. He noted that in
the past both Powers and Sullivan and the Department of Revenue had been critical of
the Finance Department. In a letter in the spring of 2008, the Department of Revenue
asked the Town to establish milestones for completing financial reporting in a timely
manner. He stated that the objective of the organization study was to review
department staffing, organization, and activities, and then make recommendations for
improvement. Additionally, Mr. Abrahams stated that the study sought to review
internal controls, assure a sound division of responsibilities, make recommendations to
assure effective practices and procedures, review operations, systems, and workflows in
order to improve the pre‐audit and review function as well as controls and to develop
an implementation plan to set in motion the recommendations of the study. Mr.
Abrahams stated that most of this work had been completed in July and August, and
that his organization delivered a draft report on August 26th, 2008. He said that after
making some edits, the final report was delivered on September 5th, 2008.
Mr. Abrahams highlighted thirty‐six recommendations contained in the report,
noting that “some of the recommendations overlap because they are recommendations
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September 10th, 2008 Page 3 of 7
that are organizational in part and also help to enhance internal controls.” Continuing,
he stated that some of the recommendations centered on internal controls, some
centered on organization and staffing, and some centered on operations. Mr. Abrahams
pointed to four themes in the recommendations:
• Strengthen the pre‐audit and control function of the accounting function.
• With respect to workflow, decentralize tasks.
• Address problems with the Treasurer’s Cash reconciliation function.
• Improve the integrity of the general ledger.
Moving forward, Mr. Abrahams emphasized his belief that many of the
recommendations could be implemented quickly, while others will take some time. He
added that the Town has recently achieved several milestones. Mr. Abrahams stated
that the Town completed the FY 2006 and FY 2007 Audits, completed the first bi‐
monthly report to the Department of Revenue, and submitted the September 4th letter
to the Department of Revenue. He also noted that these achievements were made
while conducting and completing the organizational study of the Abrahams Group. Mr.
Abrahams said that he has seen a significant turnaround in the Town’s ability to
establish timetables and milestones, and then attain those timetables and milestones.
Pointing to the need to accomplish these goals, Mr. Abrahams cited the necessity of
completing theses tasks due to the scrutiny of the Department of Revenue. In closing,
Mr. Abrahams said that he hoped that his firm’s recommendations would set a
foundation for the Town to continue to establish and attain milestones.
Mr. Kopko asked for questions or comments. Ms. Roggeveen stated that one of
the items that initially caught her attention in the report was the word immediately.
She said that she felt a need to clarify terminology, and that she also believed that there
would be a real need to follow up on timelines. Ms. Roggeveen also said that she
believed that some of the recommendations could be achieved quickly, but others
would take time. She noted that shifting the responsibilities assigned to positions may
be more complicated and may take more time, but she believed that in the end it would
be “doable.” Ms. Roggeveen said that she was concerned about overall accountability
in moving responsibility away from the Director of Finance, and that she would like to
see more detail on the process.
In reference to the timeline, Mr. Kopko said that it was his sense that all parties
would talk about a realistic schedule for implementation of the recommendations. He
said that he believed the timeline would develop much in the same way the Department
of Revenue timeline developed. Ms. Roggeveen added that the other departments in
the Town would have to share responsibility in implementation of the
recommendations. She said that she hoped the Ad Hoc Budget Committee would work
with the School in implementation. Mr. Kopko said that he believes the implementation
will involve discussions with the School, Airport and the Water Company. Mr. Kelly
added that he felt the Abrahams Group has compiled a thorough plan for each area, and
asked if the work redesign is included in the implementation plan.
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September 10th, 2008 Page 4 of 7
Mr. Abrahams said that he could answer Mr. Kelly’s question in two parts. In the
first response he stated that he would be presenting the report to the Finance
Department staff the following week, as they had not had not had the opportunity to
listen to and respond to the recommendations. After that, Mr. Abrahams said that it
was his intent to begin a more detailed implementation of the plan. He said that while
he has developed some “high level” implementation plans, he has not collectively sat
down with the Finance Department to determine the best place to start. He highlighted
the need to study the impacts of implementation, and then collectively determine the
best course of action in making changes. Mr. Abrahams said that two of the final results
are to document new policies and procedures around the new way of doing things and
then to translate that into new job descriptions.
Mr. Kelly said that he felt it is important to communicate externally changes that
are made within the Finance Department. He felt that as duties shift, it will be
necessary to communicate that information in order to avoid confusion. In regard to
the implementation, Mr. Kopko said that clearly there were recommendations that are
already in place, and other “housekeeping” items that can be easily put into place. Mr.
Kopko stated that before tackling the implementation plan, it would be better to go
after the “low hanging fruit.” He added that after the less complicated items had been
resolved, interested parties could meet to work on implementation of the more difficult
items. He noted that there are clearly items that must be addressed by the School,
Airport and the Water Company, and that these items will involve the efforts of the
Board of Selectmen. Division of responsibilities and dividing specific tasks were cited by
Mr. Kopko as important considerations in the implementation process. Mr. Kopko
complemented Mr. Abrahams on the thoroughness of the report.
Ms. Larivee said that some of the recommendations would require additional
funding, and that all parties need to be aware of that fact during implementation. She
added that in the current economic climate the Town has been seeking ways to cut
spending, so this challenge will need to be addressed early in the implementation
process. Mr. Kopko pointed out that some recommendations involve technical aspects
of MUNIS that will involve the training of people to perform new tasks, as well as
additional software, consultants, and new staff. He said that if any money was involved
it would obviously need to be a part of the implementation plan.
Mr. Kelly asked about the level of cooperation and the availability of staff within
the Finance Department. Mr. Abrahams responded that cooperation was superb and
that responses were always extremely timely. Ms. Griffin stated that the excellent level
of cooperation was cited in the report, and added that she often received e‐mail
responses within five minutes. Mr. Kopko said that it was his sense that everyone is on
the same page in regard to making changes and moving forward. Mr. Kopko asked Ms.
Gibson if she agreed, and she stated that she wasn’t sure that everyone was on the
same page, but everyone recognized the need for systemic change. She noted that
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September 10th, 2008 Page 5 of 7
change is difficult for people, but change has to be made. She said that part of the
implementation challenge would be moving from the difficulties to the necessity for
systematic change. Mr. Kopko added that he believed this would be the first of many
departmental reviews in the coming years.
Ms. Gibson asked to follow up, and began by stating that overall there are many
ways to improve work. She said that changes can be difficult for everyone, from the
implementers to the policy makers. She also reminded the Committee that sometimes
it may be necessary to “slow down in order to speed up.” Mr. Kopko noted that “in this
era when change is all around us, it is enough for us to know that top management is
committed to change.” Ms. Gibson agreed, stating that she and Ms. Roggeveen had
spoken the day before about the need to “buck up,” as change might be uncomfortable
for some people.
Mr. Rice spoke of the concept of cultural change as a very difficult change to
affect. He said that these changes would put things into effect that have never been in
effect in the Town of Nantucket. He highlighted a balance that allowed for forward
movement that did not move so quickly that all stakeholders were not brought along
with the changes. Mr. Rice said that the danger of moving to quickly would be that
people did not “buy‐in” or accept changes. Additionally, he said that he felt the correct
approach would be to move quickly but be cognizant of the need take a deliberate
approach.
Mr. Kopko affirmed the support of the Board of Selectmen, as long as the
process continued to move forward. Mr. Kelly added that from the perspective of the
Finance Committee, a perception of organization and focus on implementation of the
report will be well received. Mr. Kopko commented that he found the role of the Audit
Committee, as defined by the report, interesting. Specifically, he referred to the
emphasis and focus placed on reporting to the Audit Committee. He also said that he
believed that the Ad Hoc Budget Committee would be a key tool in making sure the
changes are implemented.
Ms. Dilworth stated that she felt the report is well done. She said that she has
been working for the Town since 1982, and as such has seen a lot of change, including
significant growth in the budget. She spoke of her early days with the Town when all
finance offices were under the Treasury, due to the Town’s small size. Ms. Dilworth
compared the Finance Department to an “old clunky car.” She said that the car had just
rambled along with more and more passengers getting on board. She felt that the fact
that someone was finally taking a look under the “hood” was a positive development.
After completing this process, Mr. Kopko said that he believes there will be a lot
more responsibility and accountability to the Finance Department and the Town
Manager’s Office. He stated that while treating enterprise funds as if they are a part of
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September 10th, 2008 Page 6 of 7
town government was not a new concept elsewhere, he believed this was a new
concept in Nantucket.
Mr. Kopko said that he expected there to be a lot of communication with the
public in regard to the report, and he asked that everyone keep a perspective and not
get too excited about the achievements made so far. Ms. Gibson stated that she was
giving all parties a preliminary pat on the back, but she realized that there is much more
work to be done. She added that the report would be presented to the Board of
Selectmen at their televised meeting on September 24th, 2008, and she believed the
Board will talk more about proposed changes at that time.
Noting that he had only looked briefly at the report, Mr. Atherton commented
on the periodic reporting of cash reconciliations as one example of a way the report can
become a tool for implementing change. He stated his belief that more reporting would
be good for the Town, as with continued growth reporting will become a more
important management tool. Mr. Kopko agreed, adding that written procedures,
reporting schedules and guidelines outlined in the report will help clarify responsibilities
going forward. Ms. Gibson said that Mr. Atherton raised a good point in his comments
about cash reconciliations. She said that in the past there had not been resources
available to do this kind of reporting, but she said that after addressing the systemic
issues within the department that is an item that will be closely examined.
Regarding Phase II of the Abrahams Group Report, Mr. Kopko asked if another
report would be issued at its completion. Mr. Abrahams said that a report would be
issued, but its timing has yet to be worked out. He said that he will be presenting the
report to the Board of Selectmen on September 24th, and that would give him two
weeks to work with management and staff on some of the details. Mr. Kopko said that
he felt it was important to set realistic timelines and then meet them.
5. New Business
None.
6. Other Business
Ms. Larivee noted that another major milestone would be met with a “mini‐
audit” by Renée Davis from Powers and Sullivan. On September 30th, Ms. Davis will be
reviewing the implementation process of FY 2009 cash reconciliations. Mr. Kopko asked
if the findings of the “mini‐audit” would be reported to the Audit Committee. It was
decided to meet on October 8th, 2008 to discuss the findings. Mr. Kopko asked if the
members of the Finance Committee could be invited to this meeting. He also asked Ms.
Gibson if she would invite the School, Airport and the Water Company.
Ms. Larivee said that Ms. Voges was unable to attend the meeting due to a prior
commitment to her family. Going forward, she said Ms. Voges and Mr. Dickinson would
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September 10th, 2008 Page 7 of 7
represent the Finance Department at Audit Committee meetings, as she will be focusing
her efforts on budget development. Mr. Kopko thanked Ms. Larivee for her hard work,
and said that she will be missed.
7. Date of Next Meeting:
Ms. Gibson proposed that the next meeting should take place on Wednesday,
October 8th, 2008, at 9:00 AM.
8. Adjournment
Mr. Kopko asked for a motion to adjourn which was “so moved” by Mr. Kopko.
The meeting was adjourned at 9:45 AM.
Prepared by Craig Abernathy