Audit exit conference – Board of Selectmen Roselli, Clark & Associates April 22, 2015

 Presenter:  Tony Roselli, Partner  Introduction  Highlights  Economic trends  Informational items  Findings and recommendations  Operational reviews  Questions 2

 Bond rating increased from Aa2 to Aa1; next step is Aaa  Completed and submitted Comprehensive Annual Financial Report (CAFR)  Airport findings resolved  Wannacomet and Siasconset findings resolved  OPEB awareness increased through dedicated annual budget source  Health insurance subscriber audits in process 3

 Protest of IRS garnishments resulted in refund of $360,000; further protests underway  Health Insurance Internal Service Fund errors have been corrected  Fixed asset project complete; Town now captures fixed assets as they are purchased or constructed  Efficiencies made to the Purchase Order system  Internal audits being scheduled 4

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 Financial trends are excellent  Metric exceeds the high end credit rating floor of 15%  Metrics exceed State averages significantly  Town has been rewarded with positive credit rating of Aa1  Places Nantucket in top 15% of communities with respect to investment appeal 7

 New Pension Standards  Bond Rating 8

 Maintain reserve ratios above 15%  Establish financial policies and procedures  Reserve policy  Investment policy  Capital policy  Debt policy  Prepare 5 year financial projection 9

 Unemployment Filings submitted incorrectly  Caused back charges and a $236,000 deficit in 2014  Segregate employer and employee portion of health insurance trust  Review old personal property, motor vehicle and boat excise receivables  Those over 15 years old aggregate over $400,000 10

 Receivable reconciliation  Eliminate unnecessary timing items  Bank reconciliations  Clean up numerous reconciling items  Closing process  Streamline process to avoid errors  Capital projects  Review old balances that exceed $250,000 in total 11

12 IRS reporting General Ledger Payroll System Transmittal Forms Timesheets EmployeesDepartment HeadsPayroll DepartmentTreasurer

 Timesheets  Transmittal sheets  Payroll System  Other Items  Leave Accruals  +FLSA  Personnel Action Forms  Employee Step Increases 13

 Public Works  Roads  Sidewalks  Parks  Bike Trails  Chapter 90  Landfill (solid waste)  Commercial User fees  Tipping Fees  Sewer  Usage fees  Permit applications  Privilege fees  Septic waste disposal fees 14

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 $3.3 million handled by the Public Works Office.  Represents over 30% of the total revenue.  These are individuals who do not possess the accounting and financial skills or qualifications to oversee such a significant volume of complex revenue transactions. (High Risk)  Landfill revenues initiated with Waste Options Nantucket (WON)  Operating under a 25 year agreement executed in 1996 and approved by the 1997 Town Meeting.  Receipts are collected, managed and held at the Public Works Office (High Risk) 16

 Largest risks are revenue not accounted for and incorrect classification of revenue.  Findings and recommendations:  Lack of formal policies and procedures  Absence of video surveillance  Surprise cash register checks not performed  More control and security over cash collections maintained overnight  Lockbox collection process not used (High Risk)  Insufficient management of receivables (High Risk)  Revenue reconciliations are not performed to the General Ledger or Treasurer’s Cash Book (High Risk) 17

 User fees (billed and collected by the Water department)  Application fees (permitted and collected by the Public Works Office)  Privilege fees (assessed by Assessor and collected by Collector)  Septic waste disposal fees 18

 Septic to sewer user conversion process not adequate  Application fees are typically $2,000  Collected by the Public Works Office  An excel spreadsheet with permit numbers, customers and dates is maintained but is seldom used (High Risk)  Turnover form to the Treasurer is not complete (High Risk)  Reconciliations are not performed to the General Ledger or the Treasurer’s cash Book (High Risk)  Receipts are held for 2 to 3 months at a time prior to being turned over to the Treasurer (High Risk) 19

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