Commissioner Agendas & Minutes
COMMISSIONERS SPECIAL MEETING
Audio recordings of the meeting are available upon request
Commission Chairman, Steven E. Joy called the special meeting of the Hancock County Commissioners to order at 4:01 pm on Wednesday October 12, 2016 in the conference room of the County courthouse located in Ellsworth, ME with Commissioners Brown and Blasi in attendance.
TREASURER: Presentation of the 2015 General Fund Audit by Runyon, Kersteen & Ouellette
Parker Madden, Senior Auditor for the Hancock County 2015 audit, represented RKO in the audit presentation. Madden began by stating that the auditor issues only the auditor’s report, and that all other information is provided by management. Madden explained that the County of Hancock received an adverse opinion due to 6/30 jail service fund year end, that it was not included in the 12/31 financial statements. As a result of leaving out this fund, their opinion was modified, it was not due to reporting errors. Commissioner Joy stated that the jail service fund year end has changed to 12/31, and asked how this change would affect the audit another year- Madden said this will result in the removal of the adverse opinion.
Madden then spoke about the single audit report, and that there are 2 levels of deficiencies: material weakness and significant deficiency. He said it was important to note there are no material weaknesses noted. Madden reported that there are three significant deficiencies this year. One is related to the preparation of the financial statements. Madden said RKO assisted Hancock County with the preparation of the financial statements, which is a common practice. CA Adkins has significant experience in this area, which will probably take this deficiency down to a statement next year.
The second significant deficiency is the extradition cash account- Madden said this needs to be rolled into the County’s financial statements. All activity needs to be flowing through the financial statements. Commissioner Brown pointed out that the extradition cash account used to be under Hancock County.
The next significant deficiency is titled significant audit adjustments. There were a number of correcting/adjusting entries that were required. Madden said this could be improved by reconciling monthly. Cash has been reconciled monthly. The pieces that are missing are accounts receivable, fund balance, posting directly to fund balance, accrued expenses, and capital assets. He suggested a checklist would be good to implement, for CA Adkins to verify that these have been reconciled monthly.
Madden then explained the other report included, the report required by uniform guidance. He said in the past this has been known as A133. He said the Federal government changed the A133 as of 12/31/15. He explained the essentials of the change dealt with procurement policies, the federal testing threshold increase, and the risk assessment has been changed slightly. Madden stated that Hancock County had been high risk due to the finding the prior year, which was related to Davis Bacon, a federal law having to do with construction projects and payroll certification. Madden said he was happy to report that the County received no findings under this federal audit.
Madden then reported on the Management letter- areas that can be improved upon within the control structure. These are suggestions for improvement. One was related to journal entry approval. CA Adkins has implemented an approval process and Madden expects this comment will go away next year. RKO did not find any journal entries that were indications of fraud. Another item is related to outstanding checks in restitution account- these should be sent to unclaimed property.
The next area Madden reported on were the audit adjustments. Madden said they had adjustments related to A/P and A/R. When they requested a listing from management, they were unable to produce them, or they didn’t match what was recorded in the accounts.
There were several entries within the fund balance. Madden said it has been a common practice for many years in Hancock County to post directly to fund balance. As a result RKO has to take those entries out of fund balance and report them as revenues and expenses. If HC wants entries outside of budget process HC should provide a schedule of those to RKO.
Another major entry is booking health insurance charges after year end back to 12/31. There are claims outstanding at year end, in order to find these claims RKO has to look at cash payments after 12/31. It requires work, but in the past management has provided a schedule. This is just a normal entry that will probably continue.
One larger area requiring reconciliation was related to the transfer holding and deeds surcharge accounts. These accounts had significant activity unrelated to them, RKO had to determine which entries were accurate. In the past when management was unsure where to post an entry, those entries have been posted to these accounts. At year end, these accounts stand out.
Madden stated that when the auditor has to make multiple entries this produces problems with independence- it appears that they are auditing their own work. He suggested that HC consider a “pre-audit”- this would allow for a much quicker turn-around. HC would also avoid extra charges based on the amount of work needed.
Madden then reporting on upcoming GASB’s that would potentially affect the County as of 12/31/16:
GASB 72- Fair value measurements. Madden said essentially this affects cash and deposits footnotes. Currently this will not have an effect on the County, since everything is cash or cash equivalents. However, if the County was to move money into an investment account, there would be a significant amount of disclosure related to this GASB.
GASB 77- Tax abatements. This provides for clearer disclosure of TIF agreements. Essentially now the disclosure requirements are fairly loose, with only basic information needed. Going forward this will be greatly expanded. This is not going to affect the reporting of the TIF, but the TIF disclosure will require more information from management.
CA Adkins asked about the specific GJ approval process that Madden recommended. Madden suggested having lower level employee prepare the adjustment and provide backup, without posting. CA Adkins would review, and if he’s comfortable with it, sign off and post.
If the Treasurer needs to post monthly interest- she may not need to follow this process. This is more about correcting journal entries.
Commissioner Blasi asked Madden to elaborate on the first sentence of the Management letter, page 4, particularly where the revenue/expenditure accounts are on the GL. Madden said when you run a GL through TRIO, there are no rev/exp accounts. The GL still recognizes rev/exp reports, however in TRIO they must be run separately.
Madden spoke to why there were additional charges. Commissioner Brown asked about the original cost of the audit, the Treasurer reported that it was around $22,000-$23,000. Madden said HC essentially had a full year without a finance director, the longer the numbers move away from accuracy, the longer they take to fix.
Madden ended by thanking the Commissioners and CA Adkins for working with the audit process.
Commissioner Brown stated that he typically liked to get the audit done early- the first couple months of the year. Would that be a problem? Madden said he did not expect that to be an issue, and referenced health insurance, if HC wanted to cut that off in February, that would get the audit going in March. He said ideally an audit at latest should be presented 6 months after year end. The only issue is that the jail will require 6 months of auditing, then finally reported as of 12/31.
Commissioner Blasi asked about Machias Savings Bank deposit insurance coverage, if Madden had any opinions or advice, if HC should amalgamate the sweep accounts into one fund. Madden said 70-80% of his clients use a “letter of credit”- he suggested the only issue would be to make sure Hancock County keeps up with renewing the agreement.
The Commissioners thanked Madden.
MOTION: to adjourn at 5:58 pm. (Blasi, Brown 3-0, motion passed)
Executive Asst. to the County Administrator