Loading...
HomeMy WebLinkAbout2018-06-13 Audit Committee Minutes y orq i e Town of Reading Meeting Minutes RECEIVED TOWN CLERK Moa.o. REA,oimC, SAA. Board - Committee - Commission - Council: 2020 JpN 14 PM 5 26 Audit Committee Date: 2018-06-13 Time: 7:30 PM Building: Reading Town Hall Location: Berger Room Address: 16 Lowell Street Purpose: FY17 Audit Results and FY18 Audit Planning Attendees: Members - Present: Barry Berman, Phil B. Pacino, Peter Lydecker and Stephen Herrick Members - Not Present: Nick Boivin, Paul McNeice and Elaine Webb Others Present: Sharon Angstrom, Ed Boyd and Scott McIntire Minutes Respectfully Submitted By: Sharon Angstrom Topics of Discussion: Mr. Lydecker called the meeting to order and asked the Committee If they had an opportunity to review the minutes from May 5, 2016. Mr. Pacino made a motion to accept the minutes as written which was seconded by Mr. Berman. The Audit Committee voted 4- 0-0 to accept the minutes as written. Mr. Lydecker instructed Mr. McIntire to begin the review of the FY17 audit results. Mr. McIntire started by saying that in his opinion the audit went very well. He pointed out that no material journal entries were proposed and that the records are in good working order. He noted that the auditor's opinion is found on pages 1-3 of the financial statements. He stated the opinion is that the financial statements present fairly in all material respects, the financial position of governmental and business-type activities of the Town of Reading. Mr. McIntire then directs the Committee Members to turn to page 4 where the Manager Discussion and Analysis begins. He points out that this section gives a snapshot of the General Fund. It is a great resource as it summarizes the key elements of the General Fund. Mr. McIntire then directs the Committee to turn to pages 15-17. He notes that the Statement of Net Position and The Statement of Activities provide a long-term perspective. He points out on the Statement of Net Position the unrestricted Is -$26.6 million. The negative balance is attributable to the net pension liability of$29.6 million for governmental and $44.5 million with enterprise included. The full liability was added to the balance sheet 2 years ago in accordance with GASB 68. McIntire points out that bond rating agencies are not shocked to see this liability as this in not a new liability it has been shown in the disclosures all along. He also comments that the Town's $44.8 million in pension liability is smaller than many similar size communities. Mr. McIntire then points out the Town's pension liability is 73% funded according to its most recent valuation and is on track to fully fund this liability by 2029. Mr. McIntire pointed out on page 15 that the town's net OPEB obligation for governmental is $19.7 million and $20.3 million in total including enterprise funds. He further explained that these figures do not represent the full OPEB liability but represent the shortfalls from the Page 1 1 annual required liability from the funding schedule. Mr. McIntire explained that in FY18 GASB 75 will require the entire OPEB liability to appear on the BS. Mr. McIntire directs the Committee members to page 60 to see the details regarding the Net OPEB Liability. The chart shows the following: Total OPEB Liability $75,292,954 Plan fiduciary net position (6.478.298) Net OPEB liability $68,814,656 Plan funding level 8.60% Mr. McIntire then points out the funding percentage of 8.60% is relatively good when compared to peers. Reading has taken an active approach toward funding its OPEB and bond rating agencies recognize this. Mr. McIntire directed the committee members to turn to page 18. He stated that the statements found on pages 18-20 are modified accrual/cash basis. Mr. McIntire also states that this is the first place the readers of the financial statements Flip to. McIntire explains that unassigned fund balance is funds available for future use. He further explains that unassigned fund balance is not necessarily free cash; as DOR makes some adjustments. He continued on page 18 stating that the General Fund net position unassigned fund balance is $11.6 million, up approximate $1.32 million over prior year and approx. 12% of expenses, which is In line with many AAA communities. Total General Fund - Fund Balance is approximately $16.6, representing roughly 17% of expenses, which Is stable and healthy. Mr. McIntire mentions that Stabilization funds are considered unassigned unless the purpose is specified. McIntire then directs the Committee to turn to pages 47-48 where the different types of fund balance is detailed out. He notes that the unassigned fund balance includes $1.58 million in stabilization funds. Assigned funds are encumbered funds or funds voted to fund next year's budget. Nothing in the General fund is classified as non-spendable. Restricted funds are federal and state grants and revolving funds. Mr. Herrick inquires if the pension/OPEB funds are included in the fund balance totals. Mr. McIntire explains the funds for pension and OPEB are trust funds that are set aside for the benefit of others. He then directs the members to page 26 to the Statement of Fiduciary Funds where these trust funds are reported. Mr. Berman then asked Mr. McIntire's opinion regarding free cash and stabilization funds. Mr. Berman stated that many communities use free cash as a rainy-day fund or savings account. The Town tends to use it as a working line of capital at 0% interest. Would you recommend a policy that defines how we use it to make It more transparent? Would you recommend moving some of the funds to a Stabilization Fund? Mr. McIntire responded that It is a good management practice to have a policy that states a baseline minimum for maintaining free cash and stabilization balances. The policy would show a commitment to maintain a certain percentage of reserves and a commitment to bring them back up if they fall below. Mr. McIntire then began reviewing the Management Letter with the Committee. He began by stating that there were no significant weaknesses. The current year recommendations are to prepare new GASB statements regarding OPEB and to Implement Municipal Modernization changes. Mr. Pacino then moved to accept the Audit and Management Letter. Mr. Berman seconded the motion. The Audit Committee voted unanimously (4-0) to accept the audit and management letter. The discussion was then shifted to areas of specific audit interest for the FY18 audit. McIntire then referred the members to a departmental testing listing that showed when each area was last tested. After discussion regarding the departmental tests that are due to be tested, Mr. Pacino makes a motion to revisit revolving funds to ensure they are headed Page 1 2 in the right direction. Berman seconded the motion. The Audit Committee voted unanimously (4-0) to select this area for departmental testing. Mr. Berman made a motion at 8:58 to adjourn seconded by Mr. Pacino. The Audit Committee voted to adjourn (4-0). Page 1 3