BOARD OF FINANCE
FEBRUARY 28, 2006
SPECIAL MEETING
1. CALL TO ORDER
The Regular meeting of the Board of Finance was called to order at 5:49 P.M. in the Conference Room D-172 at Simsbury High School. The following members were present: Chairman Paul Henault, Peter Askham, Candace Fitzpatrick, Nicholas Mason, Anita Mielert, and Kevin North. Also present were Finance Director/Treasurer, Kevin Kane; BOE Business Manager, David Holden, Blum Shapiro representative Vanessa Esposito; and other interested parties.
2. AUDIT REPORT 2004/05
Mr. Kane introduced Vanessa Esposito, the auditor from Blum Shapiro. Ms. Esposito indicated that Blum Shapiro completed the audit of the financial statements of the Town of Simsbury and the federal and state single audit and the Town has received a clean unqualified opinion on the audit and financial statement and on internal control over state and federal awards and of the compliance on state and federal awards, which is the best opinion to be received.
Mr. Askham asked if the grant audits included a grant for the Performing Arts Center. Mr. Kane indicated that there was a $500,000 state grant, which was addressed in the State Single Audit Report on page 4 under “Small Town Economic Assistance Program ECD”, with $355,537 being used in the 2004/05 fiscal year and the remainder in 2005/06. Mr. Askham asked if this grant was considered a major program and tested as such and Ms. Esposito replied that it was.
Mr. Henault asked about the “Special Education Cluster” amount of $378,239 which was addressed in the Federal Single Audit Report on page 3, specifically where does this money go and when is it received. Mr. Holden replied that it goes directly into the Restricted State and Federal Grant Funds and is received on a monthly basis based on cash requests that are submitted. Mr. Henault asked if this is a partial amount for that year and Ms. Esposito responded that, since it is a two-year grant, it is probably the second part of the two-year grant that started a while ago. Mr. Holden indicated that this is a rolling two-year grant and that the grant that ends in 2007 is for $893,000. Ms. Mielert asked if these expenditures were approved by the Board of Finance and Mr. Holden responded
that the funds are restricted for use based on the application made and subject to a compliance audit.
Mr. Askham asked about the Clean Water Fund Grants and Loans which were addressed on page 4 of the State Single Audit Report and if they applied to the sewer plant. Mr. Kane replied that the $1,270,939 is a grant and the $4,506,057 is a loan, that the money is coming in currently and at the end of the project certain monies could be re-allocated or re-classified. Ms. Esposito confirmed for Mr. Askham that, since these funds were over $100,000, they were audited for compliance.
Ms. Mielert stated that she was surprised at how few funds had been expended and Mr. Kane indicated that the project did get delayed at the State level and that spending is currently happening.
Mr. Mason asked Ms. Esposito if any difficulties were encountered and at what point is a management letter generated. Ms. Esposito stated that a suggestion that the Board of Education fixed assets be accumulated in a more expedient fashion would be in order as the auditors were held up by this issue. Mr. Mason asked if this problem was due to a lack of programs, staff or software and Ms. Esposito stated that it was the vendor that the Board of Education and other municipalities have hired to do this for them not providing accurate information on a timely basis. Mr. North asked what the alternative solutions would be. Ms. Esposito stated that one is to speak with the vendor to see what can be done; another is to purchase depreciation/fixed asset management software or use outside sources. Mr.
North asked if the reason this vendor was chosen was that it was the most cost efficient. Mr. Holden indicated that that had been the basis of the decision and that the vendor has been advised that they need to correct the problem by April or the Town will buy an outside package and do the work in house. Until the problem is corrected, the vendor is not being paid.
Ms. Mielert asked how the schedule of various assets’ useful lives on page 34 of the Annual Financial Report was determined. Ms. Esposito explained that these lives were determined by management and, although there was not an established standard, most towns’ useful lives of assets are similar. Ms. Mielert asked if these useful lives could be used for purposes of financing and Mr. Kane replied that financing periods are based on IRS and Bond Council guidelines.
Mr. North noted that there was approximately $3 million in depreciated assets and about the same amount was brought into capital as new assets (the remaining assets were work-in-progress that were not yet capitalized or depreciable). Mr. Askham stated that from a budgeting standpoint, depreciating an amount that is equal to what is added on as new reflects a “maintaining of assets” policy. Mr. Kane noted that rating agencies take note if the addition of capital assets falls below the level of depreciation and would say that a town is not maintaining its assets.
Mr. Mason noted that there was either an error in addition on page 6 of the changes in net assets column for 2004 or that one of the figures was incorrect. He also noted that this is the first time he has ever seen a restatement of assets and Mr. Kane indicated this was due to GASB 34, which is a whole new concept. Ms. Esposito suspected that this error stemmed from the previously discussed problem with the Board of Education because the report that came from the vendor for the year ending 2004 was incorrect so they had to make a prior period adjustment to make the beginning balance correct. Mr. Mason felt that footnote 5E (referred to on page 3 under the discussion of “Financial Restatements”) provided inadequate detail. Ms. Esposito and Mr. Kane both stated that the footnote is
supposed to be right to the point and is only required to disclose what the adjustment was, what the previously recorded balance was, and what the new balance is and is not supposed to refer to detailed specifics.
Mr. Henault stated that there were a few things noted that showed that the Town is susceptible to certain things that happen in the State or outside of the town environment other than GASB 43 and GASB 45, such as the under-funding at the state level of teachers’ retirement that could potentially be shifted to the towns down the road. He also noted that the “Management’s Discussion and Analysis” section of the Comprehensive Annual Financial Report is a great document for members of the public who want to know what is going on in Town. Ms. Esposito concurred that the Management’s Discussion and Analysis is a very good summary of what has happened in the Town during the past year.
Ms. Fitzpatrick stated that last year she used the Town of Simsbury Capital Fund and had to do a line by line analysis for one of her classes and that both the Town of Simsbury and Blum Shapiro got high marks both for presentation and quality of financial management.
3. AJOURNMENT
Mr. North made a motion to adjourn the meeting at 6:20 PM. Mr. Askham seconded the motion and it passed unanimously.
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Paul Henault, Chairman Debra L. Sweeney, Clerk
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