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HomeMy WebLinkAbout2004-12-15 Audit Committee Minutes. 'QED ;CLERK . NGP MASS_ r Audit Committee Meeting Jet( 2 P 12: 31 December 15, 2004 The meeting convened at 7:40 p.m. in the Town Hall Conference Room, 16 Lowell Street, Reading, Massachusetts. Present were Finance Committee Chairman and Chairman of the Audit Committee Jim Francis, Finance Committee Member Andrew Grimes, RMLD Member Phil Pacino, School Committee Members Pete Dahl and Lisa Gibbs, and Board of Selectmen Vice Chairman Camille Anthony. Also present were representatives Scott McIntire and Eric Demos from Melanson and Heath, Town Manager Peter Hechenbleikner, Town Accountant Richard Foley and Finance Director Beth Klepeis. Jim Francis opened the meeting and introduced the parties. He asked Melanson and Heath to review the audit. Scott McIntire indicated that overall it was a very positive audit and a very positive fiscal year. The audit went well. The fiscal year books closed in a timely manner. The fund levels are good. Increases in net assets are evident from the GASB 34 statements. The auditors issued a clean audit opinion. Scott McIntire went over Page 3 of the audit - Management Discussion and Analysis. On the bottom half of the page are the highlights. Major events were the $4.5 million override, establishment of a stabilization fund, revenues in excess of anticipation, expenses less than budget, and the discussion of the D.O.R. opinion on the school capital expenses. Scott McIntire went over Page 8 on the General Fund Balances from June 30, 2000 - June 30, 2004. The general fund balances trended down from 2000 - 2003. The balances then increased by $1.6 million which represents 10% of the FY 2000 for expenses. Pete Dahl noted that this was an excellent chart. The question was raised as to what "reserve by a State statute is, and Scott McIntire and Richard Foley explained how these numbers are developed. On Page 39, the last column notes that the premiums,on a $35 million bond ($1.3 million) charges ($1,046,000 including $650,000 from the schools) yields a $2.3 million reserve by State statute. The stabilization fund is also an element. Camille Anthony asked if the School Department under expended by $650,000 and how that relates to the $683,000 number. It was noted that $650,000 is part of the $683,000. On Page 10, there is an analysis of long-term debt. The debt is $74.4 million up from $38 million. This is because of the sale of the High School debt. The question was raised as to whether or not this debt is utilized as a ratio for a bond rating. It was noted that sometimes there is a ratio debt per capita, or percentage of overall expenses. Moody's uses an 8% figure. Also, look at how quickly debt is paid off. Page 11 is the GASB 34 statements. The unrestricted net assets are going up which is a positive factor. It shows the unrestricted net assets on a compared basis. It was requested that we expand this report to include more years and Scott McIntire will review this.. Audit Committee Meeting - December 15, 2004 - Pa e2 Pete Dahl asked what assets are not appreciated. It was noted that land and projects in construction are not appreciated. The notes on business activity include water, sewer, RMLD, and landfill financial insurance mechanism. Phil Pacino noted that on Page 29, the RMLD reference talked about land and construction in progress. Since there is nothing in progress, the "construction in progress" should be removed. On Page IS, there was discussion about a line being shown that confuses the chart. On Page 41, there was discussion about the pension rate of return being a percent. This is industry standard. It is used in the actuarial assumptions. Some organizations are using 7%. It was noted that historically since 1988, the Town of Reading has received 10% and used 8%. Scott McIntire noted that under GASB 45, organizations are going to have to show their post retirement health care cost and actually a study reflecting it should be shown in the budget. On the management letter, Scott McIntire noted that the accounting records are in good order. There are recommendations in their management letter but it is noted that there are no internal weaknesses. On Page 3 prior year's comments, the controls over receipts at the department level can be improved. This could include receipt logs, speedier endorsement of checks and segregation of responsibilities. Regarding fire and police details, it was suggested that Quicken or Quick Books could be used to account for these in a better manner. It was suggested that the Town Accountant be used to do internal audits during the fiscal year. Pete Dahl wondered if more staff would be required in order to do this. Would there be savings that would be reflected? It was indicated that there probably would not be savings but there would be less risk. Item 3, there should be more timely reimbursement of Chapter 90 funds. The policy now is to do this quarterly. Item 4 on Page 6, issue 5.- Collections - it was noted there should be a better segregation of duties between billing, collecting and abatement. There is a possibility for abuse here. The Town Manager noted that because of changes in financial staff this year because of retirements, the Audit Committee's expectation on completion of some of these items should be limited. Jim Francis went over Matt Cummings questions/comments. Pete Dahl asked how Reading compares to other communities in terms of the issues raised in the management letter. Scott McIntire noted that Reading ranks near the top of the 100 plus or minus communities that Melanson and Heath audits in terms of all financial controls and Audit Committee Meetinc- December 15, 2004 - Page 3 systems. He also noted that Reading is the only one of their communities where the Town Accountant does the financial statement. On motion by Anthony seconded by Grimes the Audit Committee voted to accept the audit report for fiscal year ending June 30, 2004 by a vote of 6-0-0 On motion by Pacing seconded by Grimes the Audit Committee voted to accept the management report for the fiscal year ending June 30, 2004 by a vote of 6-0-0 The Town Manager noted that staff would come back to the Audit Committee within two months with a report on the management letter. The Town Manager asked Phil Pacino to report on the Light Department fiscal year issue. The budget the Light Department is currently doing is a six month budget which will expire June 30, 2005. The Light Department will then be on the same fiscal year basis as the Town. Richard Foley noted that for the June 30th date, he will still want 12 months of financials from the Light Department. On motion by Grimes seconded by Anthony, the Audit Committee voted to adjourn the meeting of December 15, 2004 at 8:57 p.m. by a vote of 6-0-0 R pectfull1v submitted, Secretary