Town still working to fix books

Accountants update leaders

SHIRLEY » The town’s financial statements have been in reconstructive disarray for four years because of gaps in the reconciliation process, and the problem isn’t solved yet, although Town Administrator Mike McGovern said repair work is underway and almost done.

Richard Hingston, of Giusti, Hingston and Company, the accounting firm the town has worked with for many years on its annual audits, spotlighted the issue in his presentation to selectmen at their Sept. 28 meeting, noting “deficiencies” in the town’s “internal control” procedures.

Specifically, reconciliation. “We

consider (it) a material weakness,” he said. He also said that two key jobs now occupied by interim hires — accountant and treasurer — should be permanently filled.

Reconciliation means balancing the books: cash and accounts receivable, respectively. Ideally, it’s done monthly. But for some time and for various reasons, that didn’t happen.

The reconciliation gap on the cash side dates back three years, Hingston said and two years on the accounts receivable side. “These are fundamental elements of the internal control structure,” he said.

“If you don’t reconcile, you may think you have money that isn’t really there.”

The problem persisted as a succession of town accountants and treasurers have come and gone, and at one point during the period Hingston cited, both positions were empty.

Selectman Debra Flagg asked why, after doing the audit for 20 years, he found it a pressing issue now.

“It wasn’t always like this,” he said, citing “turnover” in key positions and “work that got behind.”

“It’s a full-time job just to stay current,” he said, citing routine tasks the account and treasurer must deal with while trying to “catch up” on the books, such as paying bills and payroll.

Over the past four years, the town has had two treasurers and four accountants, McGovern said.

He said those jobs shouldn’t be permanently filled until the reconciliation issue is straightened out.

Hingston has a different take. “The past won’t change,” he said.

At issue now is ensuring that reconciliation gets done, consistently, from now on and that past mistakes are not repeated, Hingston said.

Contacted after the meeting, McGovern said work is ongoing, with significant progress otherwise, the state would not have certified the town’s free cash, he said.

Free cash is money left in town coffers at the end of each fiscal year, after the bills are paid. But before those funds can be used by the town, the balance must be certified by the Department of Revenue.

Reconciliation is a key part of the certification process. But it has remained a stumbling block as the town continued doing business as usual for the last few years and even launched revenue-enhancing initiatives, such as clearing the books of uncollected back taxes and selling off tax liens in bulk.

“Last year’s conversation concerned 2018,” McGovern said. At that time, the town had almost $1 million in free cash for the next fiscal year. Good news so far. But on the flip side, a $120,000 local aid payment from the state wasn’t credited. “That was bad,” he said. The question was, how did it happen?

Clifton and Larson, a financial consulting firm, was hired by the town to help sort things out.

The consultants started with fiscal 2018 and when called back this year to look at fiscal 2019, they spotted “bigger issues” to fix, McGovern said, adding: “We’re catching up.”

As for the vacancies and deficiencies Hingston raised concerns about, the accountant and treasurer positions are both temporarily filled. The town’s “receivables” have been reconciled through March 2020, and the cash piece is done, McGovern said. “Things are being fixed.”

But he’s made similar statements before. Asked about previous assurances that the books, which he has called “a mess,” would soon be in order, McGovern said it turned out otherwise.

“In May, 2020, we figured we were good to go, but it didn’t work out that way,” he said.

“We’re on the right path now,” he said, with “…two competent people” on the job. The interim treasurer, for example, has a proven track record and 15 years’ experience.

About filling those positions permanently now, McGovern said the quick hires didn’t work out in the past and “it makes no sense” to do it again. For now, the goal is to clean up the books, train people inhouse, and maybe “promote from within,” he said.

McGovern also took issue with Hingston’s suggestion that the books were too muddled to fix going back, and it would be better to move on.

“He pushed us last year to pick a date and start from there” McGovern said. At the recent meeting, Hingston still seemed to think that was the best bet.

McGovern disagrees. “We may be only a week or so away … from resolving the issue…” he said.

“In theory, we’re three months behind,” McGovern said.

However, he said the interim hires should stay on for awhile.

“These are experienced professionals,” he said and it saves the town money, since they don’t get townpaid insurance benefits.

The treasurer has said she can stay as long as needed, he said.