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May 16, 2006 Minutes of Joint Meeting Town Board and Finance Committee
Minutes of Joint Meeting Town Board and Finance Committee of May 16, 2006 The joint meeting of the Town of Delavan Town Board and Finance Committee was held on Tuesday May 16, 2006 at 6:15 p.m. in the main meeting room at Town Hall, 5621 Town Hall Rd., Delavan WI 53115. Chair Pelletier called the meeting to order at 6:15 p.m. PRESENT: ALSO PRESENT: Chair, Pelletier Treasurer, Wisniewski Supervisor, Larry Malsch Clerk, Colleen Endisch Supervisor, Wayne Polzin Donald Vilione, Virchow Krause Supervisor, Bill Endisch Richard Burnes, Resident Gary Dean, Resident EXCUSED: Supervisor, Dolores Nowak Chair Pelletier declared a quorum present for doing business. Communications There were no communications. Comments and Suggestions of Citizens Present There were no comments of suggestions of citizens present. Old Business None New Business Presentation and discussion of the 2005 audit report presented by the auditing firm of Virchow Krause: Chair Pelletier told the board the Don Vilione is here from Virchow-Krause Auditing to tell the board how the town did last year. Mr.Vilione reported the audit went real well, Shari and Colleen do a fine job for the town. As of 12/31/2005 the town had approximately three million dollars in assets, with two million financed with taxes, approx. $ 300,000 from the state and rest from internal sources, i.e. licenses, building permits, park revenue, etc. Vilione stated the Town is in very good financial condition. The town added to the town’s fund balance again this year and has good borrowing capacity, with a strong position to borrow. Vilione explained the process for the audit, including the experience of the audit team with governmental accounting. He described how the team develops an audit plan, comes into the Town office, reviews system controls, tests the controls and verify documents to controls. These are the first steps and they complete the audit in the early part on the next year and draft the final documents and do the report for the financials. Vilione gave details on the three basic areas of internal controls that had inherent weaknesses. He said that in a small office where a few people handle all the transactions some controls are difficult to maintain. Vilione stated he isn’t telling the Town to change anything, but that they should on an on-going basis monitor the financial affairs of the town. The areas pointed out were some time cards not signed in the payroll processing, the procedures for the fire dept. cash receipts and journal entries prepared by the Shari, that aren’t edited. The process for the fire dept. is that not all dispersals are being approved and on the journal entry issue, he thought Shari could prepare an edit list to present to the finance committee monthly. Shari responded there were fourteen journal entries for April, primarily for money transfers from one bank acct. to another, NSF checks and EFT transactions. Shari has provided the Town Board with a summary of these entries. Mr. Vilione reminded the board that money that was borrowed two years ago has to be spent by August of 2007. If not the money is not spent in the time frame, the town would have to rebate dollar backs to the government. He added this is a costly endeavor to do, the calculation is very complex and the town would need to hire someone to calculate the amount. Treasurer Wisniewski responded she didn’t see any problem as the lake projects would deplete the borrowed funds. Mr. Vilione stated the board should help guide the treasurer on where to invest money. At the end of 2005 the town had $ 7,000,000 in cash and investments, which would be the maximum the town, would ever have of the seven million, four million went to other taxing units and the town ended up with three million. The monies are currently in three different accounts and Mr. Vilione pointed out that only $ 500,000 is covered by insurance and asked if the town felt comfortable with that. He added it is not unusual to have the amount of money at year-end. Vilione focused on various portions of the financial statement, highlighting Pages 6, 27, 28, 29, 30 and 33. Vilione explained about the accrued sick leave from the Public Works and Police Department, which has accumulated to around $ 750,000 and how this could affect the town. Vilione pointed out the town’s borrowing capacity if $ 44.2 million, but the town generally doesn’t have a large need to borrow. Vilione gave details regarding fund balances on pages 29 & 30. He reported the General fund has a total fund balance of 4 1.6 million, $ 391,000 designated for specific purposes and $ 1.2 million undesignated which represents 45% of the Town’s total operations. The Debt Service Fund has $ 148,000 fund balance; the Delavan Lake Rehabilitation Project has $ 323,000 and the Capital Project borrowed money fund has $ 320,000 committed for the police safety building contract obligations and $ 670,000 for various projects. Vilione explained how the Income Statement compared to the Budget in that the Town projected to use $ 102,500 of fund balance but actually added $ 178,000 to fund balances. He added the Town at budget time should look at their operations and could again use 100K to balance the 2007 budget. He also said the Town could use the $ 150,000 debt service fund and could eliminate in three years. Vilione explained the Town’s debt goes out to 2013, there are very good records kept and if they weren’t he would be talking to the board about that. Richard Burnes spoke about the surplus and the budget. He believes that department should do more aggressive budgeting and cut down so that $ 178,000 isn’t charged to the people in town. He would like to see the finance committee really scrutinize each budget this next cycle and ask if these are really the numbers you need. Vilione responded that $ 52,000 was just the change in interest rates to which to town has no control Richard Burnes remarked that no internal control system is going to be effective unless you have people that are enforcing it. Your can make an effort to hire the best people and people you trust, but based on his experience that doesn’t always happen. Burnes added his theory in auditing is trust no one, primary rule. There are always potential to work around the system. Burnes stated the issues with the fire department and their cash receipts and disbursements comes up year after year. Burnes has some concerns that Town Board hasn’t done something about that. Chair Pelletier responded the fire and rescue department did make some improvements this year. Pelletier added we need to remember these are all volunteers and we don’t need to make their lives more difficult. Pelletier remarked if we had paid full-time staff it would be one thing, which would cost the town four or more times in budget. We have to trade off the risk, but he does take Burnes point, but can’t see exercises the point for $ 1,000 to $ 20,000. Burnes responded he still believes the town should be taking a hard line on the issue, because if the Town continues to identify weaknesses, the review of the controls is meaningless. Mr. Vilione responded be believes controls are very important and in his 30 + years of auditing the first twenty-five years had almost no fraud, but in the last few years the rate is much higher. He isn’t saying people aren’t as honest, but that a lot more challenges and influences on people to misappropriate funds if happening. Chair Pelletier responded, yes and the Town did have that experience, it is very real here. Chair Pelletier thanked Mr. Vilione for meeting with the board and finance committee. Adjournment Supervisor Polzin made a motion to adjourn the meeting with a second from Chair Pelletier and the motion carried unanimously. Chair Pelletier adjourned the meeting at 6:59 pm. ATTEST: APPROVED: _________________________________ ____________________________________ Colleen Endisch, Town Clerk John Pelletier, Town Chair