BOARD OF FINANCE
DECEMBER 29, 2008
SPECIAL MEETING
1. CALL TO ORDER
The Special Meeting of the Board of Finance was called to order at 6:00 P.M. in the Main Meeting Room of the Simsbury Town Offices. The following members were present: Paul Henault, Peter Askham, Nicholas Mason, Anita Mielert and Kevin North. Also present were Director of Finance Kevin Kane and Board of Education Business Manager David Holden.
2. MINUTES
Mr. North made a motion to approve the minutes of the December 16, 2008 Regular Meeting. Mr. Askham seconded the motion.
Mr. Mason asked for a clarification in the second paragraph of page 4.
The motion to approve the minutes as amended passed 5-0.
3. JUNE 30, 2008 CAFR
The Board discussed the inclusion of $18 million on both the revenue and the expense side of the financial statements that pertains to the State Teachers’ Pension Fund. The Board questioned if local Boards of Education would have ultimate liability for funding the deficit in this fund. Mr. Holden did not believe that there is any obligation on the local Board of Education other than to withhold contributions to the fund from teachers’ salaries.
Mr. Mason asked about internal controls. Mr. Henault noted that the audit provides “reasonable rather than absolute assurance that the financial statements will be free from material misstatement”. Mr. Kane commented that the best method for assuring internal controls is segregation of duties, but noted that, in a small shop such as the Town, that is not economically feasible as it would require more staff. As a result, the auditors require more testing. Mr. Mason asked if any new controls had been put in place this year in response to last year’s auditor comments. Mr. Kane replied that some new policies have been implemented regarding vehicle and cell phone use. He indicated that he also periodically reviews various functions such as payroll so that he is assured that, when
the auditors do their testing, they will be satisfied.
Mr. Askham asked if the auditors’ procedures included documentation of internal control policies. Mr. Holden stated that both he and Mr. Kane went through substantial questionnaires before the audit began as did each of their respective departments. He indicated that the auditors had not noted any weaknesses. Mr. Holden added that the Board of Education is currently updating its business policies as part of its three-year update process.
Vanessa Rossitto of Blum Shapiro joined the meeting at 6:30 PM. Ms. Rossitto explained that GASB 24 requires that in-kind contributions be recorded in the Town’s financials, but that does not imply any Town liability. She noted that the State’s contribution this year increased significantly. She stated that the Town has no obligation to fund the State Teachers’ Retirement Plan.
Mr. Henault asked if the $599,507 of encumbrances noted on page 11 had all been expended now. Mr. Kane stated that he was not sure, but that they would all be cleared by June 30, 2008.
It was noted that Westminster School continues to make a voluntary payment in lieu of taxes and that two such payments were received in the same fiscal year. It was also noted that Ethel Walker School does not make these payments. The Board discussed the practice of excluding residential homes that are owned by these schools (used to house headmasters and teachers) from property taxes.
Mr. North questioned the use of the word “required” relative to future purchases of Ethel Walker land on page 13. Mr. Kane clarified that the future purchases are options available to the Town that are required to be exercised within a given timeframe.
Mr. North asked why the Simsbury High School project is described as “active” as of June 30, 2008. Mr. Holden explained that the project will not be closed out until it is audited by the State.
Mr. Henault asked who controls the Student Activity Fund. Mr. Holden responded that it involves all seven schools, the principals at each school and the Student Activities Manager at the High School.
Mr. Askham asked if the Town pension funds had any exposure to the recent Madoff fraud and Mr. Kane replied that they did not. Mr. Askham asked Ms. Rossitto if they reviewed compliance with the investment polices and she replied that it was outside the scope of the audit. Mr. Mason noted that the Pension Committee’s investment policy is 16 years old and needs to be updated. Mr. Henault asked if other towns included a review of the investment polices in their audit scopes. Ms. Rossitto thought that it would be more appropriate to have these policies reviewed by an investment specialist rather than a CPA.
Mr. North stated that he continually remains concerned that the pension liabilities are managed by a group of appointees that have no accountability of a recurring nature to report to either elected officials or Town staff. Mr. Mason stated that the Pension Committee reports to the Board of Selectmen and, if information is requested, it is provided. Mr. North asked why the pool of assets or the liability was outside the purview of the Board of Finance. Mr. Mason stated that, at one point, the Board of Selectmen turned over both the insurance and pension responsibilities to an appointed board and then subsequently split the two boards into separate entities.
Mr. North asked Ms. Rossitto if it was typical of her clients to have accounts with such enormous liability outside the purview of the controlling fiscal authority in the town. Ms. Rossitto stated that she was not sure. Mr. Mason noted that a member of the Board of Finance sits on the Pension Committee. Mr. Askham stated that these committees are making decisions that will impact the financial statements. Ms. Rossitto stated that the role of the auditors is to confirm that the assets exist and audit the actuarial estimates that are being made for reasonableness within the market. Mr. Askham stated that the Board of Finance is not able to make the actuarial estimates and sometimes questions the rates of return that are used in actuarial assumptions. Mr. North asked if she would find it troubling if the
same actuary was using different rates of return for the OPEB trust vs. the pension fund assets. Ms. Rossitto stated that the rates should be similar.
Mr. Henault asked if a new policy had been instituted relative to uncompensated absences. Mr. Kane replied that the Board of Selectmen had re-affirmed a pre-existing policy that will be adhered to going forward.
Mr. Mason asked Ms. Rossitto if she had any problem with the proposal that the Tax Collector eliminate bills or refunds for amounts less than $5.00 and she did not.
Mr. Henault asked if the Town had any non-transparent funds and Ms. Rossitto responded that it did not. Mr. Kane stated that there are no hedge funds in the pension plans.
Mr. North noted that there is no description on page 50 as to how the retirement benefit is calculated for the General Government Pension Plan (as is done for the other plans) and asked that one be added in future financial statements. Mr. North also requested that percentages be added to the “Concentrations” section (page 53) in future financial statements.
Mr. Kane confirmed that the Town’s health insurance plans are now 100% self-insured.
Ms. Rossitto stated that the Federal and State Single Audit Reports indicate that Blum Shapiro has issued an unqualified (or clean) opinion both on internal control over compliance and non-compliance. They found no material weaknesses or inefficiencies and would not be issuing a management letter as they found that progress was being made in the reconciliation of the Board of Education fixed assets and the issue relative to property tax overpayments had been resolved.
4. ADJOURNMENT
Mr. Henault adjourned the meeting at 7:45 P.M.
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Paul Henault, Chairman Debra L. Sweeney, Clerk
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