The last time the TOWN AUDITOR (TA) addressed the Cohasset Board of Selectmen was in 2003-2004. He told selectmen this week:
“It’s Important to take this document and read it, analyze it, correct it and move forward. A lot of these comments have been in these management letters and have been repeated throughout those years. Now, we need to turn the page and create and control a sound system.”
Selectman Chairman Karen Quigley and Selectman Lee Jenkins wondered why the auditor stopped meeting with the board.
“I wasn’t asked back,” he said.
Selectman Fred Koed said, “We should move to have joint meeting advisory and selectmen to hear audit presentation.
The TA said the Town’s finance department was broken. “One hundred million worth of capital initiatives began in 2001. All of these projects were reimbursement based. The finance department was dealing with state and federal agencies, debts, banks, financial advisors. Plus, those projects have to be managed. There should be separate, distinct files on every project; you needed a separate person to manage that process. There was five-old in activity and there should have been an upgrade in the system. I am not sure when the last time cash or receivables were reconciled.”
Quigley took issue with the TA’s report saying the Town had inappropriately overloaded the finance director. “I believe attempts were made to stop overload.” The TA said: “Did the person want to control and not delegate, or a combination of the two?”
Town Manager Steve Lombard told selectmen: “All the (financial) software we’re looking at incorporates schools into it. Schools running their end pretty well; the problem is here. The main problem is we have to design the chart of accounts to accommodate them. Plan is to get software packages most commonly used by the State of Massachusetts. Schools are using the same package we’re looking at.”
The TA told selectmen if they were diligent, the Town could be close to full implementation of new software by 2013.
POLICIES AND PROCEDURES
TA: “A great time to update policies and procedures is when you convert to a new system. Do dept. heads know what 30-B is? You have a certified purchasing officer in your new director of finance. This will be a culture shock to many dept. heads. Starting now, funds must be certified available before checks are written.
Selectman Lee Jenkins asked what the Town should do about cash.
TA: “A lot of towns don’t accept cash, although you have to accept it. It’s legal tender. In my town the school lunch can be paid online. I put $100 in their bank and the cash flow is better, it eliminates cash going back and forth. Schools pay on their end, there’s a $1.75 service charge on $50 payment at Silver Lake. When bill comes in, they scan the bill which has a bar code and it’s automatically updated everywhere.”
WATER AND SEWER
“You had an 84-page report from the Special Water and Sewer Auditor. We’d like to see Enterprise Fund Accounting – all accounting activity should be in either a Sewer or a Water Fund. Draw downs are difficult to understand because you need to track how many times you’ve drawn it down: expenses vs. draw downs. The water department increased the rate a little to cover expenses. It’s usually nickels and dimes, not $500,000. Bonding generated a $500,000 bonus for the water department.
They increased rate a little to cover expenses. It’s usually nickels and dimes, not $500,000. Bonding generated a $500,000 bonus for the water dept. The money was used to absorb debt, as a funding source. Had this no t happened, water deficit would have been much bigger – bigger by a half million dollars. The Department of Revenue forgave the town for having done this.
The initial 40% water loss has been revised to a 28% loss due to new information submitted by the water commissions. That’s still above the acceptable rate, but better than 40%.
FRAUD policy – needs to be addressed. Cannot borrow turkeys from school cafeteria, even if you’re intending to put the turkeys bac
SURPRISE AUDITS. Quick and dirty audits should be done by the Town Accountant. Make sure if you’ve got 100 building permits at $30.00 a permit, you’re getting that money. It’s a preventive measure and it keeps town departments on their toes.
We found 3 instances of checks being counter-fitted, a money gram was created and $16,000 was taken from town. A second situation involved a wire. The bank alerted the Town that someone was attempting to wire money out of a bank accountant. The Treasure’s user name and password was being used. Either someone from outside has hacked into your system through a crack in your firewall. Or it happened internally. The Treasurer was on vacation at the time. Town needs to work with software vendors. Work with IT person. This should be addressed immediately. Cash hasn’t been reconciled – so we don’t know what is happening.”
The Town Manager noted that 3 of 4 of the lost fund instances had been recovered and are referred to in his report
HUMAN RESOURCE ITEM
The TA said: “We tested 25 employees, W4‘s missing, Ethics tests – 10 missing. I-9 forms missing on some employees. Prior to 9/11 the I-9 forms were required. Protecting social security numbers. We need to set up policy showing how we protect sensitive data. We have over $70M in debt and no one really has a handle on it. How much is outstanding, how will we schedule it over the next 30 years? The Director of Finance needs to have this.
“Also, payroll warrants are missing. The Town did inventory several years ago but a lot has happened since then. You need to know what you have for fixed assets. Town is liable for any equipment borrowed by town employees; in fact, town employees cannot borrow town equipment. TA: I was asked to do presentation at a conference. They had me research regionalization. If Towns got together could create a human resources dept and share the costs with other towns. Towns need to reach out to each other.
“The Town is required to have an actuarial study done every 2 years to see what you’re paying. $27 million is normal for a town this size. It’s not a liability today, but it will be at some point. Massachusetts pays generous benefits to their employees. We contribute 60-80 percent of employees’ health insurance. I don’t see this in other states.
“Cohasset has put some money away 130,000 – recognizing that we have to save. To be recognized as fully funded, you’d need to put away another $1 million. If you did this, your liability would go down dramatically. $913,000 is the number we have to look at. The TA noted that Housing Prices in Cohasset are now 25% lower and that taxes will need to be increased.
“I would say we found significant deficiencies. They could have been material deficiencies…but let’s see what can be done in a year.”
Interim Town Manager Steve Lombard told Selectmen he was preparing the way for next town manager. “It’s been challenging to prepare a budget. We now have a budget. Advisory board is doing their due diligence. I want to thank the board for allowing me hire a finance director, because there was a real need. In November, we put a spending freeze on every department and the freeze is still in effect today. The Interim Town Accountant is working 12 hours a week putting things together. We took all unauthorized people off the system and reconciled the debt. Today we have budget schedules for every department. Our new director of finance has been here for 30 days and we are now up to date in all receipts. We have a good base to finish the year.
“All bills to be paid by department heads, not the clerk. No one enters the Treasurer’s office unless they are authorized. Information must be secured. After July 1 all money will be encumbered and the Town will be required to use purchase orders for everything. The new accounting system will not be in place until much later.”
Lombard said after an evaluation of the finance department, he plans to look for a treasurer collector with strong skills. “I’ve increased the assistant town accountant’s hours to 30 hours a week. And I’m moving offices around. The Director of Finance and the Treasure’s office will be closer together. The need for human resource officer is critical. There are no records of comp time, sick time, and vacation time. We’ve encountered many problems; their solutions will require the commitment from the board of selectmen. We’ve been working on this, diligently.”
Quigley said, “The Town owes Steve a great debt of gratitude. He’s had quite a formidable task and he’s accomplished it professionally and with good humor. A great deal has happened during the past few months, more than has taken place in years.”
The Town Auditor agreed: “I’ve already had 4 meetings with Steve and 30 phone calls.”© Copyright 2011 Tanna K, All rights Reserved. Written For: Tinytown Unleashed