Loading...
HomeMy WebLinkAbout2019-06-12 Audit Committee Minutes Town of Reading r Meeting Minutes 'Jielllto� �,/ Board - committee - Commission - Council: Audit Committee Date: 2019-06-12 Time: 7:00 PM Building: Reading Town Hall Location: Berger Room Address: 16 Lowell Street Purpose: FY18 Audit Results and FY19 Audit Planning Attendees: Members - Present: Erik Burkhart, Mark Dockser, Nick Boiven, Phil B. Pacino, Elaine Webb and Stephen Herrick Members - Not Present: Others Present: Sharon Angstrom and Scott McIntire Minutes Respectfully Submitted By: Sharon Angstrom Topics of Discussion: Mr. Burkhart called the meeting to order and asked the Committee if they had an opportunity to review the minutes from June 13, 2018. Mr. Boivin made a motion to accept the minutes as written which was seconded by Mr. Dockser. The Audit Committee voted 1- 0-3 to accept the minutes as written, only one member, Steve Herrick was present at the last meeting all other abstained. Mr. Burkhart instructed Mr. McIntire to begin the review of the FY18 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 $-63.6 million for governmental funds -$28.08 million overall with enterprise funds included. The negative balance is attributable to the net pension and OPEB liabilities of $24.4 million (pension) and $60.2 million (OPEB) respectively for governmental and $36.7 million (pension) and $68.8 million (OPEB) with enterprise funds included. McIntire points out that although these liabilities are large they are lower than many of our peer communities. He also comments that the pension liability did not change drastically. The OPEB liability changed drastically due to GASB 75, a new accounting standard that was implemented in FY18, which requires the entire OPEB liability to appear on the Balance Sheet. Prior to GASB 75, only the shortfalls from the OPEB annual required liability were shown on the Balance Sheet. Mr. Page 1 1 Dockser asked when the last OPEB valuation was done. Ms. Angstrom stated the last OPEB valuation was done as of 7/1/17. Ms. Webb noted the Deferred Outflows for pension were $7.2 million, which seems high. Mr. McIntire noted this change is attributable to a change in the assumed investment return from 7.75% to 7.65%. Mr. McIntire directs the Committee members to page 68 to see the details regarding the Net OPEB Liability. The chart shows the following: Total OPEB Liability $79,164,345 Plan fiduciary net position (7.765,2251) Net OPEB liability $71,399,094 Plan funding level 9.81% Mr. McIntire then points out the funding percentage of 9.81% is relatively good when compared to peers. Reading has taken an active approach toward funding its OPEB and bond rating agencies recognize this. Mr. Pacino asked why the OPEB valuation uses a 7.5% investment return rate when RMLD OPEB return was only 2.6%. Ms. Angstrom explained that our actuary firm, Segal selected 7.5% as the long-term investment rate based on the fact that we intend to invest these funds with PRIT. Mr. Dockser inquired where the Town is with investing the OPEB funds with PRIT. Ms. Angstrom responded that there was a significant delay as a change in legislation required the Town to reaccept the section of the law. We are now awaiting the Trust Document which will need to be accepted by the Select Board and then we can apply to invest with PRIT. Both Ms. Webb and Mr. Dockser stated they felt investing the OPEB funds with PRIT is a high priority. Mr. Docker asked Ms. Angstrom to provide an update on this at her next quarterly meeting with the Select Board. Mr. McIntire directed the committee members to turn to page 19. He stated that the statements found on pages 19-21 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 19 stating that the General Fund net position unassigned fund balance is $13.8 million, up approximate $2.2 million over prior year and approx. 14% of expenses, which is in line with many AAA communities. Mr. McIntire refers to page 23 and notes the actual revenues were $2.1 million greater than expenses, he explained this is the driving force behind the increase in unassigned fund balance. Ms. Webb mentions that we collected $2.1 million more revenues than budgeted. This looks like we are overly conservative when projecting revenues. Mr. McIntire points out that our budgeting style is fairly consistent with our peers. He also notes that our budgeting style only budgets what we know we will have and the use of free cash seems to be regenerated by the unexpected revenues received. Our style of budgeting is viewed favorably by DOR and bond rating agencies. Mr. McIntire noted that the auditors did a comprehensive dive into the revolving funds as the balances were creeping up. There was a wealth of budget documentation/info. A high level of diligence was noted with these funds. The balances in the revolving funds did not go down significantly, but it is difficult to reduce these funds quickly as they are earmarked for specific purposes. Mr. Herrick inquired if he felt there was any leakage in the revolving funds. Mr. McIntire stated they didn't note any signs of fraud during their review. Page 1 2 Mr. Pacino asked if the auditors are aware of GASB 87, which is a change pertaining to leases that will affect the Town's financials in FY21. Mr. McIntire stated he is aware. Mr. Dockser asked why the statements don't show prior year. Mr. McIntire stated the template that is used doesn't easily permit it. Supplementary schedules could be added. Mr. Pacino then moved to accept the Audit Report. Mr. Dockser seconded the motion. The Audit Committee voted unanimously (6-0) to accept the audit report. The discussion was then shifted to areas of specific audit interest for the FY19 audit. After discussion regarding the departmental tests that are due to be tested, Mr. Pacino makes a motion to do an in-depth review of the billing of water and sewer. Mr. Dockser seconded the motion. The Audit Committee voted unanimously (6-0) to select this area for departmental testing. Mr. Dockser made a motion at 9:15 to adjourn seconded by Mr. Herrick. The Audit Committee voted to adjourn (6-0). Page 1 3