Speaker 1: Meeting to order at 5 32. This is a joint meeting of the audited advisory committee and the select board. Mr. Chair, would you like to call your meeting to order? Sure. Speaker 2: This is the meeting of the Natick Select Board, along with the Auditor Advisory Committee. And it's 6 0 3. Speaker 1: Okay. We're gonna do a joint public speak and Speaker 3: You need to take attendance Speaker 1: 'cause you have a virtual member. I have two virtual members. Yeah. So taking attendance of the audit committee, Mr.
Water here. Ms. Goeth Speaker 4: Here, Speaker 1: Mr. Perowitz And Ms. Alrich appears not to be here. So this is gonna be the, any votes taken by the audit advisory committee will be by roll call. We're gonna do a joint public speak. If there's anybody here for public speak, any individual may raise an issue that is not included on tonight's agenda, and it'll be taken under advisement by the appropriate board. There'll be no opportunity for debate during this portion of the meeting due to the requirements of open meeting law,
this section of the agenda is limited to 10 minutes, and any individual addressing the boards during this section of the agenda shall be limited to three minutes. Is there anybody here for public speak? Seeing none. We're going to the discussion and decision portion of the agenda. Oh, I should re remark that the meeting's being recorded by Pegasus and Mr. Walsh has agreed to produce many meeting minutes for both the committee and the board. So onto the discussion and decision.
Thank you, Pegasus. By the way, we're starting with a presentation of the FY 24 budget findings. If you folks from Cbis could introduce yourselves, and then we'll give you some time to present your findings. Speaker 5: Hi everyone. I'm Jessica Green. I'm the director involved with the, Speaker 1: Is your green light on? Yes, Speaker 5: It's okay. You hear me? Can you hear me now? Yeah, Speaker 1: That's better. That's better. We have new, we have new new A, B, C. Speaker 5: I'm Jessica Green. I'm the director on the town's audit engagement. Been with SIBI since we merged in with Markham about a year
and a half ago, and with Powers and Sullivan before that for about 10 years. Speaker 6: My name is Todd Ick. I am the managing director slash shareholder on the engagement. Just to, just for the record, just to get it out there. We are, so it's correct that we kind of have two hats. We're employees of cbi, but we're here under the, under our role as shareholders in the audit firm known as cbi, CPAs, pc, that's where your contract is.
We started out as just as em, and then when C BZ bought Markum out the attest side went to cbi, CPA's pc. So that's all the reports that you have in front of you with audit opinions are under the CBI CPA's logo branding as opposed to cbis Inc. There is a distinction between the two. Not probably German remains for this discussion, but just for the record, if any minutes reflection of minutes, it's to cbi, CPA's, pc. So without further ado, there are three,
three sets of documents in, in front of you here. And, and, and they're, this, essentially the hard copy of the PDFs that were in the agenda document that I took a peek at online earlier today. One one bound copy. You have the town of Natick's financial statements, audited financial statements for the FY 24 period includes all activities of the town, your enterprise funds, and the Natick Retirement system, which is considered a fiduciary component unit.
Obviously there's a separate governance structure there, but because of the funding, the funding mechanism between the town and the retirement system, it qualifies for inclusion as if it was a town activity. So that's one document you have. There is another document for the reports on the federal award programs. Probably. Have you seen that before? It's just a, the town's required every year to, since you expend more than 750,000 a year to present a schedule of expenditures of federal awards. And then accordingly we're required to come in
and render their few audited opinions relative to that. And then the last bound document you have, and we'll be touching upon each of these to, to some degree, the last document you have is a, it's a, it, it it's a supplemental that relates to the Nat Contributory retirement system because there are two employers involved essentially in, in the, in the system, the town, and then the housing authority. Each of those employers then have to go back into their financial statements and,
and record a net pension liability relative to their share of participants in the system. And this schedule essentially takes what the actuary has that's hired by the retirement board, takes that product, and then we audit the element of, of how the actuary is saying to divvy it up. Yes. Speaker 1: Just I wanna mention for the members of the public that might be viewing this, those documents that Todd has just mentioned are available on peak under the select board agenda.
Speaker 6: Okay. There is another document included in that online version. I didn't, I did not bring a separate hard copy with it. That was an oversight on, on my fault. But there's all, there's a separate communication. I, I wouldn't, it's not an audit opinion per se, but it's re a required WR written document that the A-I-C-P-A and the auditing standards boards requires any auditing firm to produce this letter at the, at the end of each engagement. And it basically goes through a variety of items of,
you know, did we discuss or did we encounter any extreme difficulties during the audit? No. Were there any instances, or were you aware of any instances where management may have been trying to opinion shop? You know, if, if, if our team said, gee, we think you might have a potential misstatement here, you know, we're not aware of any instances that they contacted another CPA firm to try to, so, so that did not happen. And there weren't any material misstatements noted in the financial statements.
So e everything was, was pretty clean in, in terms of the financial statements themselves. There were some findings relative to what goes on behind the scenes in terms of the internal control environment that supports the financial statements. Those are presented in more detail in the, in the report on federal awards. And then there was, there were, I believe, three findings relative to the major programs that we audited. Major federal port programs that we audited based on our analysis of the cfa a audit opinions themselves on the financial statements were
what we consider clean means. They're unqualified except for the Morris Library Institute. There, there's a, a component relative to that library that gets included and presented as what's called the discreetly presented component unit. Those financial statements are included, but, but it's sort of outside the town's numbers, so to speak. Those financial statements were not audited in accordance with governmental auditing standards. They were audited by a separate firm.
And so this opinion just says, Hey, the numbers are there. This other firm has audited and said that they're, they're good, but we're just not, we're not accepting responsibility for that, which is kind of, it's, it ha that that's sort of standard course, as you could say, when you have, when you have an outside auditor auditing the component unit. And it's sort of outside our scope. So there's really no alarm overall in terms of the financial statements themselves, you know, and again, whatever's easier on your end. If you have questions along the way as I go
and wanna discuss 'em, that's fine too. If you wanna save 'em to the end that whatever the board chairs choose. So I'll just start with the ex federal award program first, just 'cause that, I think it's probably gonna be more than meat. Meat and potatoes a little bit. Yeah. Speaker 1: I'm gonna stop after you get through that to Okay. Collect questions. We'll stop after. Okay. Reasonable stopping points for questions. Speaker 6: Okay. So in total, the town reported about $6.9 million of federal expenditures
of federal awards during the year. Some of that may not necessarily un under the federal guidance. It may not necessarily all be cash disbursements. For instance, under the school lunch program, the feds donate what's called commodities. It could be food products, it could be it, it could be certain preparatory stuff that goes on behind the food prep scene. That, so those are considered expenditures and they go on the CFA as well. And I believe that is actually the only, what I would consider non-cash expenditure on here.
So about 6.9 million of expenditures. The special education program cluster reported about reported expenditures of about 1,000,005. And the state and local fiscal recovery fund, recovery fund commonly, you know, referred to as arpa, the ARPA funding that total about 3.5 million. So between those two programs accounted for about seven 75% of the total expenditures. And there, there's a whole ma matrix of decision points
that are put out by the federal guidance that drives us and our team, all the audit teams to figure out what program needs to be audited in a year, ver versus another. So in terms of compliance with the federal programs, clean, right, there were some findings, but it didn't change our opinion on the programs themselves. In terms of the federal programs, there were three findings. One, actually, I believe two related to, one related to procurement. The way certain procurements were done relative to
expenditures under the ARPA program. The, and, and it's detailed out in that report, I think it's like a third finding essentially. There was, there was an, at one point there was an emergency procurement declared, passed the hurdle with the, at the state level. But the work kind of continued past the past, the emergency period, so to speak. In other, they addressed the emergency, but then work continued and under, under the procurement guidance, you crossed every bid.
That in a nutshell, in a nutshell, the other finding also related to the ARPA program was with the, with the way expenditures were reported to the US Treasury, the town has to make, you had to make quarterly, right? There was a, yeah, quarterly reporting. It varies depending on the, the amount each community was awarded. There was an instance where certain amount of our funding was authorized for a specific project
that then triggered what's an interfund transfer in and out on the, on the ledger. The, the problem with that was, you, I'm just, I I'm making a number up. You voted a million bucks to be transferred from ARPA to this other project. The accounting ledger reflected that funding switch. But when it was reported to treasury, it was assumed as if the mil, the whole million dollars was fully expended when it wasn't. There was, there was a little bit of, a little bit of a reserve. So it, it didn't change it, you know, you, you, everything charged to ARPA was proper either by, you know,
review of invoices or payroll, potentially if there was payroll charge there, or in the case of okay, you booked the inter fund transfer, but it was duly authorized through your governance structures here. So it, it, it's, I would call that an administrative, both of those administrative things that will probably be rectified when we come and look at it again as a follow up in the 25 audit. And the last finding relative to federal awards was, it's really an overarching,
overarching finding, not specific to any program. It was in terms of general policies and procedures. And, and we see this in a lot of places, actually in, so it's not something unique to Natick by any means. And MA Massachusetts communities are, are used to adhering, to guidance promulgated by, you know, the state oversight agencies and, and general best practice to sum it up, when the uniform guidance came out a few years back, you know, that was okay to and preferable to have that written policy document,
but it spo it, it should have been looked at to incorporate the required elements of the uniform guidance. And that's pretty much what that finding's speaking about. And in terms of the corrective action, because of these findings, management had to basically come up, you know, express what their, what their corrective action's gonna be over the forthcoming period. And, and those are included as well in the report. So those, again, that those should be rectified by the time.
Well, if, if we don't, yeah, probably with the timing it may be rectified by the end of the 25 audit, certainly in the next year, depending on the nature of it. And I know it's being worked on based on discussions I've had with management. So, so those are the three findings regarding to the federal awards themselves. There's, go ahead. Go ahead. Okay. Speaker 1: I was gonna, if, if you're gonna move on to off of federal. Yep. I'm gonna stop here for questions on the federal in thing.
Any questions from the audit advisory committee folks on Zoom? If you could raise your zoom hand if you have questions, questions from the select board? Yeah, Linda, Speaker 7: This isn't a question for you per se, but it, I guess it's more a question for Arian and his team. Is this, is this report something that you agree with and some of the deficiencies noted are there, are there active plans to address them? Speaker 1: So the, if you look at the, Speaker 8: The, the single audit findings, you'll see the management response we feel in most of,
in every one of these cases. We have that covered there a couple. This is some of the inconvenience that happens a little bit when you have a, an audit for a period that was a couple years ago. So there, there were actions that were taken by staff policies and so on that we felt addressed most of these findings. Speaker 1: Thank you. Speaker 6: Alright, Speaker 1: Mr. Gillenwater, Speaker 9: Just one quick thing. However, given the timing of this being 24 and 25 is obviously closed for any corrective action. So we can expect a recurring findings on almost any
of these 2024 issues. Speaker 8: We believe that we can go one by one if you want, but we believe that we have the federal awards covered with, with action that we've taken Speaker 9: Within 25. Yeah. Speaker 8: Okay. Yeah. Yeah. Speaker 1: And the ARPA funds were expended Speaker 8: Before 25 the ARPA funds. Yeah, that's, in a way it becomes moot to some degree as well. Right? Yeah. Speaker 1: Anything else from anybody? Alright, you're Speaker 6: On again. Okay. Just keeping on the topics of findings, right? So those were the federal awards. There's two findings relative to the, what I referred
to earlier, the internal control environment relative to the financial statements. And those are also presented in this same document. One matter was a significant deficiency and one matter was, so one matter was a significant deficiency and that one relates to data, data management at the pension system. I, I'm trying to get my time right. I, from what I, what I understand, what we understand is
that at the end of calendar year 23, so December 31, 23, which is the fiscal year end for the pension system that's included in the financial statements. The board at the time voted well, it would've occurred subsequent to I guess the year end, but there was a vote made that once they reached the end of calendar year 23, they were gonna switch to a new accounting provider, accounting ledger software provider. They, they do their accounting in-house with their own staff. But this speaks more to the ledger.
There was, I guess some hiccups along the way that things didn't go as smoothly at the end of the day. The, the, I guess the financial, the financial data was okay, no loss of data on that end. They, they were able to file their annual report with prac timely. So that wasn't the issue. The issue was access to census data. So every active employee, active member of the system, and every retiree, even inactive members, including the beneficiaries, there's, there's a whole matrix
of attributes that go along with this person. And that data is, well, they're required to maintain it under law, but it's, it's highly critical that an actuary obtains that census data so they can then go and project out what's the total potential unfunded liability relative to this person. The data was in the data supposedly made the conversion from the old system to the new. However, the retirement system couldn't access it.
They're having extreme difficulty getting to it. I, there's probably more reasons out there than was made known to me. But, but in a nutshell, I just, I just think what it's that speaks to is the, a lack of an IT oversight at, at that department to that would've prevented this, you know, and, and would've prevented, laid the path for a more documented and regimented data trail. So, so that the fact
that the retirement board cannot access its own actuary, its own census data to give to its actuary and caused significant delays in this whole process. I believe it wasn't until late summer, early fall that I believe the audit team finally got, finally got the census data files. 'cause we have to audit that. And it was probably a few weeks after that that, you know, it might've been early November by the time we got the actuary report, you know, we're talking this past this, this past quarter of calendar year 25.
So, you know, you, you're, you're talking a big number that goes on, on the town's financial statements as a liability. That was, it was significantly delayed. So that's, that was reported as a significant deficiency in internal controls. And, and you can read the, you can read the, whoever's interested can read the more finite wording in there. Obviously the data came about. So going, going forward, the con you know, the concern of follow up is gonna be, be, alright, well what controls are now in place to make sure this doesn't happen again. You know, that that's sort of what our job will be.
Then there was, there was talk actually, I think, of doing a new, another evaluation. Again, at least when I, my conversations with the actuary that they might have be starting a one now they did two back to back, back to back. So, so we're gonna have ample opportunity again to sort of repeat this process. My, my guess is at this point it's going to be resolve like a, a one and done thing, assuming the overall IT environment is where it should be and if not, it might repeat. So, okay. So, or, or you'll get a different finding
Speaker 1: Question from Ms. Coughlin Speaker 10: With reference to that finding the recommendation is to recommend that the town strengthen its controls over data management, given that the town has no control over the retirement board's data management. Should that read the retirement board? Speaker 6: Yeah, you, you can maybe make that argument. It, we, we we're sort of commenting on from the aspect of the town, the, I get where you're coming from, from the legal right, there is a legal separation, but f from a financial statement reporting perspective, you're all one.
So that it's, you know, I I guess it's yeah, nomenclature, what's the right nomenclature. You could infer it to me. It, it obviously is a retirement board related as opposed to something coming out of the town, you know, the school department or the town treasurer's office or collector's office. But collectively from purpose of the financials it, year one, it's the town. I own it. And actually, yeah, ex officio you, there's a direct link. I, it's, it's, yeah. Yep. So Speaker 1: Anything else? Any other questions while we're here? All right.
Speaker 6: Okay. The only other finding relative to the financials, again, it focuses on the retirement system and, and that one we, it was in the management letter that the prior, prior auditors had for fiscal 23. And it relates to availability of census data side availability of audit information. There were the retirement system, I guess hired an outside consultant
to help them reconcile cash. Their cash balance isn't, dollar wise, it looks immaterial to the overall total investments in cash that the retirement system has. But there's, there's a lot of activity going through it. You know, that's where they're, that's where the town and the housing authority are sending their required contributions. That's where all the withholdings from the employees on both sides go through. That's where the pension benefits are paid off. So it's dollar wise, it looks small, but in terms of activities, there's a lot going through there. And through no lack of effort
of trying on our part and calling and begging and pleading, it couldn't be located that 12 31 23, 12 31 23 banks cash bank account. We have the statement. They could produce the statement and they could have produced the statement after and before, but there was no reconciliation to say, you know, these are how many outstanding checks are out there. This is a, or this is a deposit of transit that, you know, should be reflected. So because of the fact that it was, it was sort
of a recurring matter, that's why we felt it was, it was necessary to elevate it up to an mw a material weakness, sorry, talking shop jargon. So Speaker 1: Any questions up to now? Speaker 11: Yes, Speaker 1: Ms. Pope. Speaker 11: Thank you. Can you help me understand the, the re the recurrence, you said it was a repeated recurrence, is that correct? Speaker 6: Yeah, so in the, in the management letter, I, I just have a copy of it, obviously we didn't produce, it was a prior firm.
There was a comment relative to the retirement system office. And at that time they had made note of considerable delays in receiving information from the office. Various investment statement and reconciliations were not retained, not made available for review. And there's a few other bullet points, not specifically related to cash and investment management and reconciliation, but so it, it was out there under the heading of yeah. Retirement system office. So this one,
this we're just headlining a little bit more differently just to focus on what the real matter is. Speaker 11: Thank you. Speaker 1: Are you done? Yes, Ms. Wolfer. Speaker 7: So I'm curious if you expect that this to be fixed anytime soon based on your conversations? Speaker 6: I've been given assurances, let's put it that way. I haven't been given assurances, but No, but no definitive, definitive. I mean, you know, and, and obviously we haven't, you know, we're not engaged tech technically yet to audit 25. So it's not like we can go out
and start kicking the tires on that. Speaker 1: Okay. Who actually is in charge of re of doing those reconciliations? Is it dimension fund themselves? Yes, yes, yes. Yeah. Okay. So it's not our controller doing this? No, we Speaker 8: Have, correct. Yeah, the only, only actually we have is that Michelle is ex-officio on the retirement board, but they, they are an autonomous entity. Speaker 1: Right. Did you have something Mr. Evans, captain? Yeah, I know, I saw Mr. Gil water. Speaker 9: It's not unusual to take a look at follow on periods
and subsequent statements as you're doing reconciliations. Did you, having seen that there was a material problem producing the, the 1231 Yeah. Bank rec, any chance you looked at? Yeah, the January Feb, the first quarter of the following year. Yeah. Are are they doing bank recs at all, or is Speaker 6: Yeah, so, so that's, we didn't necessarily follow it down the bank rec trail at that point. It becomes a matter of, okay, you know, it's sort of, you set out the audit plan of this is the optimal thing that we're going to, you know, that,
and then everything will be good. Absent those reconciliations, then it becomes a, a matter of discussion point among the engagement team of, okay, what's the alternative procedure that we're gonna do? And so yeah, then it becomes, all right, let's at least get the January statement. Let's get a look at what's pumping through the ledgers, see if there's anything wacky. You know, so we did the al we did those alternative procedures to assure ourselves Is that, that we're good to say that, you know, cash is, you know, reasonably stated. Speaker 9: So the, so the, the follow on period, you, you check those
and you're, does it seem like just the December statement missing was just bad luck and everything else? Speaker 6: Yeah, I, I, I think, well, I think there's a systemic issue going, going, I think there's a systemic issue, you know, from that point back, obviously, you know, it manifested itself in the prior year. I do believe when we started there was, right, you changed executive directors, I believe Yes. During the audit. So, so I think that will help. Speaker 9: So, so if the retirement board asks for bank recs at their next meeting, do you feel like that
is this material weakness? Can Speaker 12: We, yeah, so, right. They are, the, the statements in question are with the third party and we cannot obtain them back. That's what our issue is. We're having difficulties getting the information back ourself, but now it is done in-house and they have it there. So it's there, we see it every month. We get the statements when we go in and we know what they're spending. We have to authorize it all. So it, it is there, it just we're missing stuff that it kinda being held ransom somewhere else
and we're just trying to get it back. Not for a lack of trying Speaker 9: What's, what's the ransom Speaker 12: That's about, I don't know. I don't know. We've all called, we've had, several of us have, have had discussions with the gentleman that has it and it's always, oh yeah, we'll I'll send it next week. I'll send it next week and Speaker 1: Okay. Speaker 12: It never shows up. Speaker 1: Alright. Anybody else? Ms. Coughlin? I have Speaker 10: A couple of questions. So, on the bank recs couldn't, and this sound, I mean, I, this may be naive, but couldn't the board reach out to the bank since they are bank statements to get copies? Speaker 12: I believe we had the statements.
It was just the reconciliation that wasn't done. I see. So yes, someone probably could have re reconciled it. I see. And come up with the information Speaker 10: For, for members of the, for members of the public. Just wanted to emphasize that the town, the town comptroller, the town administrator has no control over the retirement board. It's a separate legal entity and, but, but the town indemnifies. So if there's a loss, if there's a lawsuit, if there's a, a loss in the part of the retirement board, the town is responsible for indemnifying.
That, having said that, I'd like to strongly encourage town administration to reach out again to the chair of the board to set up a meeting with the chair of the select board. This is something that we had talked about doing about a year and a half ago. And I understand that the chair does not live in town. It's not easy to, we can do these by Zoom. I know he attends the retirement board meetings by Zoom. And I'd really would like to see closer collaboration. I know that's not for a lack on our part, meaning the town's part, but I'd like to see a closer collaboration so we can
perhaps avoid findings in our audits. That's all I have. Speaker 1: Anybody else? Anybody? SA or Elise? You all set? I'm all set, rich. Thanks. I'm good. Thanks. Right, you're on. All right. The hard part's over. Yes. The bad news has Speaker 6: Been delivered. Yes. So, yeah, so, you know, happy, always happy to discuss, you know, to dissect the financials as detail as you want to get.
However, what I like to do is assuming I might force some people and put some people to sleep, I try to keep it a little more at what I think and based on my experience of doing this, of what I think is the, the big, the big items to discuss. So we can start off with the budget, which is on page, on the, the, the thicker bound copy you have. It's on page Speaker 5: 78. Speaker 6: Thank you. Thank you. 78. 78. 78. Yes. Speaker 1: Seven, eight. Speaker 5: The financial statements more or less read from back to front in terms of the,
the actual statements themselves. Speaker 1: Yeah. Probably wanna bring the mic closer to when you speak, Speaker 13: Sorry. Speaker 6: Yeah, the governmental financial statements are definitely unique. 'cause yeah, there's, there's three bases of accounting. You have the budgetary basis, which is this schedule. This is what, what the finance team lives and breathes every day. It's what the finance committee is focused on, budgets at your formal it, it's all focused on the statutory basis of accounting. What, what's promulgated from state finance law and then further directed by
the division of local services, the, the sub subgroup with inside DOR. So, so this is a schedule that we, although technically under the audit standards, it's not audited itself. It, it's reviewed in relation to the financial statements themselves. But we like to really beat this up 'cause it helps us understand things when we get onto the other, other sets of financial statements. So you're in FY 24, you end of the year with about $203 million of, of,
of an appropriated budget between direct transfers, transfers out to other funds, users of fund balance, that, that sort of thing. And this budget was obviously funded by a like amount of various revenues from real estate taxes, local receipts taking money in from other funds potentially by stabilization, right? 'cause under Massachusetts law, each city and town is required to pass with the, call it balance budget. So every dollar you spend, you have to have a revenue source behind it.
Yep. So your actual receipts were greater. You budgeted revenue, straight revenue itself of about $175 million. You took in a little over 179 million. So your actual revenues came in about three and a half million dollars. Actually wrong figure, $5.2 million greater than what you had expected. And most of that was due to conservative budgeting on the investment income side, which led to obviously better than expected investment income. And then your excise taxes were
trended higher than, than what was budgeted. And on the other side of the ledger were the expenditures, your, your total between what you actually expended, expended in terms of cash disbursements plus any encumbrances that funds that were reserved for services rendered through June 30th. But the invoice just hadn't occurred yet. You, you, you're about 1,000,005 less than estimated amounts. So Speaker 1: Hold, hold on one second. For any town meeting members that are listening, free cash is not included in the revenues in this financial statement. It's both old, it's below the line.
And another fund balance a use of funds. So this is not the way you're used to seeing revenues and expenses. I just want to alert you to that. It's not incorrect and nor is what's presented to town meeting incorrect. They're just two different presentations of the same information. Speaker 6: So your and debt service, just another thing I like to poke on a little bit. That that was about 8% of, of, of your general fund budget. So that's the rating agencies like to see, you know,
the less things have changed recently than, and the news hasn't caught up with me, but generally they like to be within the five to 10 range so that that shows a healthy level of investment in your physical assets, which is, which is favorable to them. So, and then moving the other statement we'll just talk about briefly in terms of the general fund itself. So, so that, that RSI schedule is just general fund only. The other statement we'll talk, talk about next is the, it it's on page,
Speaker 5: The p and l, the balance sheet. Yeah. P page 23. Yep. Pages 21 and 23 for the balance sheet too. Speaker 6: Yep. Yep. Speaker 1: Hold on Ms. Ger. Speaker 7: Thank you. Just a question. So in, in looking at this, and I have a question again, for the finance department, do these numbers differ from the amounts that we have been reporting for actuals for FY 24 and you know, in the various budget books, et cetera? No, I don't believe so. No. Yeah, no. Okay. So you think they're the same? Yes. Yeah. All right.
Thank you. Speaker 6: Yep. Yeah. Speaker 5: Yeah. There are no audit adjustments or anything Yeah. Applied to those balances in the budget, actual schedule in the back. Speaker 6: Yeah. So, so this set of statements that we're looking at, these are the governmental fund statements, which include your general fund and, and which I'll talk about here as well. And then any other, what's governmental type fund? So any other fund that's not pension that's not related to your golf enterprise or your water sewer enterprise. So any capital fund, any special revenue grant
that, that that's all somehow presented in one of these columns. Your affordable housing trust is there as well. This, this is where numbers will depart a little bit from the schedule you just looked at because this statement, some people call it modified cash, it, I call it modified accrual. I think it means the same thing. But it's, it's sort of, that's where you start looking out beyond the end of the fiscal year and say, okay, what, what invoices did I pay potentially in July and August and September that are material that relate to that fiscal year that we're auditing
and are material enough that you have to accrue it back. And then same thing on the revenue side as well. You're obviously in the summer months, most communities are still collecting on the LA the prior year real estate commitment, potentially motor vehicle commitments. So, so those revenues tend to get accrued back. There's also, it doesn't affect the bottom line, but there's also additional revenues recognized for MTRS con contributions to the MTRS and there's also an offsetting expenditure for the same amount.
It's not cash related. It doesn't, it's not something that you cut a check for, but with the teachers, they aren't covered under your local or regional retirement system. They're covered by mass teachers retirement. Okay. And the commonwealth actually makes a contribution on behalf of each community in the state for their, for their share of teachers. And so there's, there's an adjustment as to be recognized in these statements for that. What, what was the about, yeah, it was about 15, looks like 15.5 million was the adjustment.
Again, adjusted revenue by that amount. You adjust the expenditure by that amount. Similar to nonprofit accounting, if anybody's familiar with that. When you talk about donated goods and services, volunteer efforts and that sort of thing. So your total general fund balance here is about $48 million. A little bit over $48 million. That's almost double than the balance, the fund balance that we're showing on the other schedule we looked at. Big difference here is your stabilization fund. Although legally under Massachusetts law,
it's a separate fund in and of itself, right? You vote annually potentially to make deposits in or take money outta your stabilization it, so it leaves your general fund and it goes off into this other stabilization trust under GSB statement 54, your stabilization fund is considered a component of, of your general fund. So that gets rolled back in. You're also setting aside funding for potential ope, you know, OPE payments. But because the tru the trust was not adopted as of the end
of 6 30, 24, there really wasn't a, a legal trust for it. So that is sitting on reserve in the general fund in these statements as well. It's shown as a restricted amount. I'm sorry, I can't, I can't read from this far away $6.1 million. There you go. So, so that's a little bit of a, of a difference. So, and overall on this basis, you're unassigned a fund balance of about 26.4 million, represented almost about a quarter of your FY 24 expenses.
So, so that's, you know, between your stabilization fund, you know, once you adopt the EP trust that money on reserve will get deposited into the trust and get recognized officially that way in the financial statements. So, you know, you're, you're kind of in a good position relative to other communities. You're certainly not the only one in this range. I, I've seen a few others peaking up into this percentage during FY 24, but there's others that are still, you know, that might be in the high teens. So, so it, it's,
you're doing a lot better than most in that regard, even if you back up the funds that really are restricted for EP questions. Yep. Alright. And then I'll, yeah, I can touch briefly on the water sewer enterprise. Not much really there to talk about, you know, you had an increase and this is, this statement on page 25 Yep. Is a, it's what we call full accrual. So this is where fixed assets get brought into the equation.
It's where long-term get debt gets brought into the equation. Any other long-term liability that I'm not thinking off the top of my head right away. This, this is it, it's not equal to commercial type accounting, but it's as close as you're gonna get in the government sector 'cause it's sort of fully costing everything. All that said, your, your net position, your water sewer enterprise increased about two, $2.3 million. About $600,000 of that is a, was a capital grant. Those are recognized relative to some sort of construction project. So you sort of got a free gift there.
And then the balance of that increase was, was just your, your operating revenue is just exceeding your general, general operating expenses, which includes the positive change in the net o your net oped liability in your net pension liabilities. So, so that was another good return on, on the town this year. And just quickly, we can talk about the net pension liability and the net opep liability. Various on both. There's, there's various actuarial assumptions
that are built into these measurements. The EP trust I would say is, is tech is the one that the town controls, right? The, the EP valuations, you can management can control what is inputs go into the actuarial assumptions. Those are discussed regularly. And then your net pension liability, you could, you might be able to exert some sort of influence, but you can't really control it because again, it is, as you refer to, it's a separate entity governed by a separate four that adopts its own actuarial assumptions and,
and directs its actuary to, to calculate the, the liability based on those metrics. So at the end of FY 24, you had across, across all segments of the town, you had a pension liability of about 4.4 million, 44 million I should say. And that compares to a liability in the prior year of a little over 66 million. This is on the pension piece. That is, that is basically, so that flux between the two years is basically indicative
of investment evaluation returns between 12 31 22 and 23 time, time flies by, i, I don't know what my 401k did between that time period, but it probably had a similar, similar similar path. And then your EP liability at the end of FY 24 was about $187 million across, like I said, across all segments. The water sewer enterprise reports a segment for EP and pension, and then the rest of it gets reported
as what's called a on the governmental activities. So a hundred, about 180, 87 million at the end of 24 as opposed to about 174 million the year, the year before that. And again, that, that was, that was in invest assumed investment rate of returns on that. You know, one went up significantly on the pension side, but you're, you have that six month difference in the reporting periods. So, and those are, there's significant disclosures on the pension liability,
well on the pension liability and the op liability beginning on page 63 Pension goes from page 63 to page 69 and the liability goes from page 70 to 74. So there's a good, there's a good 11 page run to look at if, if you want more de detail into that gets into the actuarial assumptions, the details that are used, so on and so forth. Speaker 5: Additionally, there's required supplementary information that's also reported at the back of the report starting on page 79, starting
with the pension system and then the opep, which kind of gives you a more summarized version of the, the footnotes in a 10 year schedule if available. Speaker 1: Questions. Anything else? I'm good. Mr. Skye, did you want to add anything before we move on? Speaker 8: No, I appreciate, we're, we're very pleased to get the, the 24 audit in. We're anxious to get 25 going as soon as possible. Speaker 1: Good. Okay. Next item on our agenda is we're going to, we have a chance to talk as a, as a pair
of boards with CE about the process that they used and, and expect to use going forward. So I'll open it up. I'm gonna start with the audit advisory committee if there's anybody wants to ask questions or comment. Mr. Gilland water, Speaker 9: I have kind of broad and general questions on engagement management. Setting aside the challenges with the retirement board and data access on all of that, what were some of the challenges you had in first year startups are usually a little bit more intensive
than, than a, a running multi-year engagement. But this even seemed a little bit more challenging than I think a lot of us expected. Speaker 6: Yeah. So the, you're, you're right. The first year is always the toughest one. 'cause you're spending hours sitting with various department heads and finance people and you know, what is it that you do? And you know, we're we're, we're writing it down, right? And then it gets to this stage of well prove it, you know, so let's look at an invoice and let's look at the, you know, walk through the various cycles. Also, we, we have to communicate with a predecessor auditor,
you know, anytime you have a change in auditors, there's, there's that communication going on and you know, so it's, you know, they obviously sign off on the FY 23 report. We see their numbers. Okay. You know, then it gets down to we're required to trust but verify. So we have to become comfortable with's considered to be the opening balances, right? They signed off, I'm picking up a number that you have $200 million of net fixed assets. Okay? How, how is that valued? How is that determined? Are we good there? Are we good with debt? That's a significant number.
Our eater, I should say by the time you're done with that. What also factored in is for whatever reason, the contract, getting the contract executed. I know, I know having a merger in there between the two, like it was right smack dab in the, that that delayed things between the attorneys on both sides. You know, the, we got part of the way there through Markum, the town's attorney I think, and, and our attorney and under Markham was okay. And then you had the merger and it's got kind of get filtered through.
So, so that was part of it. And then y you know, yes, the, hopefully the issues with retirement, especially with the data loss don't reoccur. But we, you know, as, as soon as we got the contract signed, we were out here, we were in meeting in one of those rooms with Michelle and Ian and RV's a predecessor. And that was right at the end of January. And we kind of started diving in end of February and March.
But then you hit this wall of, okay, we're going good and then, and then, and then we're not because of the, the, the, the issues over there. So then it became of, okay, you guys gotta figure this out, you step aside and then, you know, and then when the, when they, they raised the thing and say, okay, we're ready to bring this completion, well then it's all right Jess. And I said, all right, let's round the troops back up and, and it doesn't happen overnight at that point. So I don't think anybody's expecting a repeat on the
retirement side this year. That's gonna slow things down. If, if we're retained again as the auditors for 25, obviously we don't have to go back and get comfortable with our own opening balances 'cause we know what they are and, and it's, you know, the, the, our investment in that first year. Not all of it's gonna recur, I guess the best way to put it. Speaker 9: Okay. And, and maybe some of, some of my questions might be for the, for the in, you know, our internal discussion, but, but okay. So setting aside startup and contract
and retirement board challenges, did you have any, did you have any impediments or challenges in just the general engagement that we should be aware of as would be likely to reoccur in a 25 audit? I know that there were some challenges with communication and timing and follow up of where's the reports, where's the report? I mean, it gets, the, the ends of the engagements
and the wrap up have a tendency to do the, the sentences get shorter and a little bit more urgent and that generates some concern. Speaker 1: So, yeah, and correct me if I'm wrong, there was a partner who left it the, in the middle of the audit as well, right? Signed partner. He what? Speaker 6: Go, Speaker 5: It was a senior manager that was on the engagement. He was just part of the audit team, but we were always on the engagement the whole time. Speaker 1: Okay. I just wanted, 'cause I, I remember hearing something about that and that caused, I believe that caused a little bit of, of a delay as well. Speaker 6: Yeah, I I had forgotten about that piece.
You're, you're right. That was, I don't know why I forgot, but yeah. 'cause then that, you know, ed just left. Yeah, I guess I tried to blank that outta my memory, but yeah, so that's a key piece that I don't, Jess isn't leaving, I'm not leaving, so, so we're Please don't, yeah, so we're, we're, we've kind of already have it staffed, you know, sort of in the office dartboard if you will, shouldn't say dartboard, make it sound willy-nilly. But we, we have time scheduled out internally for assuming
that things will, it'll be a happy day here and we'll get reengaged for 25. I think actually if, you know, if paperwork could get, you know, firmed up timely in the next few days. We actually I think have some time towards the end of next week to start the administrative stuff. Then I think there's another three week run starting sometime. I forget when now in April. I believe it, it's in April. I forget if it's early April or or mid-April. I should have wrote the dates down. Speaker 1: Okay. Thank you. Yep. Anything else Todd? Mr. Baral or Ms. Goeth? Goeth?
I'm good, thanks. I'm good, thanks. Okay. Select board. So I have a question. I always chair always goes last, given that we're almost a year late delivering the 24 audit and the, according to the contract, the 25 audit should be delivered into weeks, which will not happen. Right? Safe bet. What's that? That's a safe bet. Yeah. Should we engage you for 25 and subsequently for 26? 'cause the, what, what assurances do we have that we'd actually at least get caught up
and get beyond time for the 26 audit? Speaker 6: That's a good question. If we're operating, this isn't just us, the group we're operating to get our 20 fives done by the end of June. So if that hap when that happens, obviously by that point we'll then be able to dive into typical planning for 26. Speaker 1: Yeah. And of course the numbers won't be available till September anyway. Speaker 6: Well, right. But there's a lot of stuff we can, you know, we can, we can do beforehand as far as, you know, we still gotta go through transaction testing.
We, we will still at least be able to see the raw data to know how many cash receipts were posted, how many invoices were posted. We still gotta walk all that through Speaker 5: The retirement system information would be ready hopefully six months before the town information as the year end is different. So we could, so things like that we can do in the interim. We typically also can start looking at the federal grant audits earlier in the year. So we typically do that type of testing earlier. And then once the year end numbers are available, that's when we kind of jump in and do that work. Speaker 14: Can I just, just clarify, so, so the current should be engaged, you know, in the next couple days
for FY 25, then the expectations that, that ought to be done by the end of June, that's what I'm hearing. And then 26 can continue, well can sort of start right afterwards with some of these preliminary things and then the, when the book's closed September timeframe, that'll then just continue. And then the typical timeframe would be the completion really around January, December, January. Speaker 5: Yeah. So the reports are required to be filed with the Federal Audit Clearing House by March 31st. So it has to be at leased by then. But assuming all information is available
during our scheduled time, then that shouldn't be a Speaker 6: Problem. Yeah. If, if everything goes smoothly, you know, you know, and a lot of the, obviously the responsibility is also from the town side too. Understood. Yeah. Assuming everything goes smoothly from that end, you know, we're, we're not gonna sit on a report for three months of a already issue. We want to get it out, Speaker 14: Which we appreciate. Okay. Yep, yep. Speaker 1: Any other questions? Any comments from administration? Questions, comments? Speaker 14: No comments? I'll just echo as on the front lines
of the contracting issue. That was a huge challenge in the beginning. I'm glad we got through it and I'm confident that that won't happen this time because we're already through that and the mergers already happened. That's well as the front line of a lot of the other things that happened. But it was an unfortunate, I think, series of things that happened for FY 24. A lot of it outside of many of the people around the current tables control, but still happened. Speaker 1: Anything else anybody wants to talk about or ask about before we move on to the next topic? Okay, so the next topic and the last topic is that we're gonna discuss
an approval for or, or not for cbis to commence the FY 25 audit. And the way we're gonna do this is the audit advisory committee is gonna start and decide whether to make a recommendation to the board and then the board can make a decision from there. So we're gonna start with the audit advisory committee. Any comments on whether we should continue the engagement with CVIS at this point? Mr. Barlo? It's okay, Speaker 15: Mr. Sydney, everyone, I think we should, you, you want my opinion is right now, is that what you're saying? Speaker 1: Yes. Speaker 15: I think we should continue with c Bs.
And should we, could we even consider perhaps a two year contract? You know, would that, that may be in both our both parties interest. Speaker 1: The current contract is a one year renewable twice, so it's in effect we can make another decision after the FY 25 audit is delivered, but the contract would remain in force if we decided that. So the next contract negotiation would be after FY 26 if we went two more years.
Ms. Goeth go I'm sorry. Go ahead Mr. Speaker 15: Yeah, I say say as I said, I think we should continue with them. Speaker 1: Okay. Ms. Goeth, any comments? Speaker 16: Yeah, I agree. I see no reason not to Speaker 1: Mr. Gil Water, Speaker 9: I'd like to discuss realistic alternatives and if there aren't any, I'll, you know, that sort of makes the decision, but I, I don't know what, what, what, what, what's the alternative to this conversation? Well, Speaker 1: That's a question for Mr. Sky, so I'm gonna put you on the spot, sir. Speaker 8: Well, To be fully
transparent as this process was rolling out, you know, I, I've been here for six months and Cbis has been front of mind for that entire time or where the audit has been. And so while that process went on, we're trying to figure out where we are and how things are going. There were, you know, I did look at break glass options that would take some effort on the part of the town. I think that if we were in a situation where we had to go to a different auditor, we could probably arrange that. I can say it would be done without any kind of hiccups. There are a advantages to be had by staying with the current auditor, considering they have the,
as I said, the, the basis all laid out. You know, you'll be starting from, from from zero. But, so it really becomes a sort of a, a, it becomes a sort of a, a resistance progression kind of choice as to whether you decide whether it's, whether the situation is bad enough that you want to walk away. I don't think it's a procurement issue. We have the, the contract in place and that was a bid that was a competitively bid contract. So, you know, in by, under normal circumstances after the 26th was done, you'd probably be going out to bid again anyway at that point.
So you, I think I will follow the direction of, of, you know, of the body of course, but you know, we feel we can work with Cbis and try to keep it moving. Speaker 9: Alright, well then, given that if asked for my opinion, I would, I, I don't, don't see any realistic non break glass alternatives. So I would support a, a one, the, the FY 25 extension and more attentive follow up
and rep a feedback loop on leading up to hitting the June proposed issuance of FY 25. You know, get a couple of interim updates on how we're doing with that and that really kind of being a, an important factor in whether or not the next engagement comes around. And how, realistically hitting calendar Q1 the following year for the, the,
the follow on year's audit. I'm kind of in the, let's keep moving forward with c bz, but with a much closer reporting and feedback loop on how things are going. 'cause I still think that there were some challenges in unanswered follow up on, you know, communication challenges and where's this, where's that? That sort of thing. So I, I think that we should probably inform our future contracting decisions on, on hitting deadlines
and how painful hitting those deadlines are. Speaker 8: I'll take a motion from the audit advisory committee. Oh, hold on Mr. Chairman. May I say one thing? Oh, sure. Sorry, I apologize. Yeah, so I don't think anybody at this table believes that the situation that we're in right now is an optimal situation. You know, this audit should have been done about a year and a half ago. And the and 25 audit is also, you know, late now, although not as much. So, so the discussions that I've been having with c Bs and we do meet regularly, weekly, as a matter of fact, I have been to emphasize the importance of getting it done
as you know, and as the committee have been communicating with the chairman on, on progress as we go along on this and, and then pivoting to 25 as soon as possible. 'cause that's the only way we're gonna get ourselves on schedule. And there are down, there are downside effects to the town involved being late. We managed to avoid some of the worst ones this time, but not by much when it comes to our upcoming debt sale and so on. So, you know, it is, it is front of mind. I can only speak to anybody before me or how they handled this soon, but I can tell you that since I've been here, I've been
choosing this as a high important imperative priority. Speaker 1: And I can, and, and as the committee knows, Mr. Skye has been communicating with me. I've been giving fewer updates to the committee because some of them were, it's coming, it's coming and I didn't wanna fledge you guys. Speaker 9: Yeah. My, my, my hesitancy and concern is, is not, with all due respect, it's not necessarily focused on natick's ability or engagement or bandwidth or anything like that.
I mean, it's a, it's an interaction between two companies. But I we're, we're being asked to extend a contract for, for one side of the equation. So that's really kind of Yeah. Where I'm focused. Speaker 1: So yeah. And to be clear, we can make another decision after FFY 25 as to FY 26. Right? So, or even before FY 25 is complete, frankly, if it goes really badly, which we all hope it doesn't. So I'll take a motion from the audit advisory committee, Mr. Gil Water,
Speaker 9: I move that we recommend to the select board a one year extension for the FFY 25 audit. Be awarded to whichever legal entity we're talking about. Cbis, pc, cbi, CPAs, PC them. Speaker 1: Have I got a second? Speaker 2: Second. Speaker 1: Okay. Roll call vote. Ms. Goza? Speaker 2: Yes. Speaker 1: Mr. Reitz? Speaker 2: Yes. Speaker 1: Mr. Gil Water? Yes. And I'm a yes. So that's 4 0 0 by roll call. Mr.
Chair, do you want to take on the discussion and decision by the select board? Speaker 2: Thank you, Mr. Sidney. So what we have is a proposed one year extension to CB CPA's, pc, if I've got that correct. So any discussion from the select board? Ms. Pope? Speaker 11: Thank you. I appreciated Mr. Gillum Water's comments about the feedback loop and the touch bases, and I really appreciate Mr. Sky's work. Like he said, he's been here for six months and he's just really been all over it to make sure
that we are back on track. So I ditto Mr. Gillum Water's guardrails, I would say and appreciate Mr. Skye's and the administration's work. Speaker 2: Thank Ms. Ger. Speaker 7: Thank you. Ditto to all the things that my colleague said, but I also have an ask for the audit advisory committee during this next year as we evaluate the progress on the FY 25 books. If there are things that are concern, I would really like that to be documented.
I'm hearing some things that tonight, but I don't have a, we don't have a report from you guys, and I would like that in advance so that we can really think about it, about what goes ongoing forward. You know, we have, we got these, thank you very much. But I would like something from the audit advisory committee in advance to really understand if you know, what, what some of the potential deficiencies are, how, if you're happy with, with CBS if there are problems.
And so that we could know in advance to potentially be able to answer Mr. Gil Water's question because we really, at this point, I think have no choice. So, I mean, I'm certainly gonna recommend in favor, and this is, has no bearing on, on the work that we feel that you've, that you've done, which, you know, as far as I can tell is, is very thorough and competent. But from our role as the select board, I'm just asking for more information in advance to be able to make an, an informed decision next year. But I'm in favor of the extension. Speaker 1: Yeah, I just want to address those comments
because I think they're very valid. Mr. Skye has been very communicative with the, with me as chair of the Audit advisory committee. And as you know, I've been giving the board as much as I can as chair of the audit advisory committee and also a member of the select board. My term on the audit advisory committee ends in June. The board is gonna have to appoint a new liaison. I will attempt to track as much as possible and keep the board advised through the end of my term. And, you know, Mr. Sky and I will stay in contact
and, you know, we'll do the best we can. And I assuming, I mean, Mr. Sky's been very forthcoming with his concerns right along. So I don't anticipate that you'll, you'll continue to be so, so I think just to address those concerns, I think as you know, the, I've been very forthcoming with information about what the audit advisory committee has been doing to the board. So, and as, as far as any comments as a board member, my, I think my vote on the audit advisory committee speaks to itself.
Speaker 2: Thank you, Mrs. Thank you, Mr. Sidney. And thank you Ms, that was a point I wanted to raise as well. I think we're, we're looking back on the, the prior year. I think everybody, I think Jamie said something along the order, this was a perfect storm of events where, you know, if you could throw as many monkey wrenches into its as, as you could. We did it in the, the last year. I think I'm comfortable with the fact that we've gotten
through the growing pains of, of the new relationship with this relatively new firm. We have a new director of finance who's, who's actively engaged in this. I liked Ms. Coughlin's suggestion of getting with the retirement board sooner rather than later to make sure that we are on track for this coming year 25. We're gonna get done quickly, hopefully. And I, I, I think a lot of this is going to be
behind us and I'm, I have comfort in doing the extension for one year and then reassessing, you know, having that structured as a one year contract, renew renewable at least one more time. So I'm definitely comfortable with going with cps. Speaker 1: Yeah. And Mr. Chair, just to clarify, it's not a calendar year or a fiscal year contract. It is an audit contract for a fiscal year. Okay. Right. So that's just to be very clear, thank Speaker 2: You for explaining that.
Speaker 1: That's, you know, from whenever we award this FY 25 audit till the FY 25 audit is complete, Speaker 2: It's received. Okay. Speaker 1: In June. We hope Speaker 2: In June. Thank you for that. Speaker 1: I just, I wanted to clarify it's not Yes. Right. It's when we say a year Yeah. Extension. It's not anything that we would see on a calendar. Okay. Speaker 2: Right. So, yeah, thank you for that. That, that definitely cleared that up. Okay. So we need to take a vote, which is, Speaker 1: We need a, you need a motion first. Speaker 2: So it's moved to adopt a recommendation.
Speaker 1: Actually you're recommending to the administration to continue the contract. Speaker 2: Okay. Move to recommend to town administration, a one year extension with CBS CPAs. Pc Speaker 10: Second. Speaker 2: Okay. Speaker 10: Could I make a friendly amendment? Speaker 2: Yes. Speaker 10: Instead of moving to recommend the administration just move to ask them to execute a contract Speaker 2: That Sure. It is much better. Speaker 1: It's execution as a one year extension. Yes. We already have Speaker 2: It. You like to execute Speaker 10: Well, yes. I'm just saying not to recommend
that they get around to doing it. It to ask, ask them to execute it Speaker 2: Directly. Yeah. So noted. All all in favor, please say aye. Aye. Speaker 1: Aye. Aye. Speaker 2: 5 0 0. Speaker 1: Alright, I think, does anybody have any last minute comments or questions before we move on Mr. Gil and Water? Speaker 9: I have a series of questions for our next meeting, however constituted on this is I have a series of questions related to the retirement board.
So, okay. It's probably the, I know that's probably the, just wanted to get it down. Is this, this, I, I wanna discuss more pieces of Sure. Where I think some of the Speaker 1: Problems might be. So just a few logistics. I will figure out a time for the audit advisory committee to have another meeting. I know Ms. Goeth can't meet at lunchtime anymore, so it'll be another evening meeting or a late afternoon meeting and we'll figure out a time and an agenda for that. So, I'm sorry you guys, you're gonna have to stay a little late again. We're quite used to it. Yeah,
but you shouldn't have to be anything else. Speaker 10: I'd like to channel my inner Richard and move to adjourn. Speaker 1: Second. Okay. So that's a select board. All Speaker 2: In favor say aye. Speaker 1: Aye. Aye. And five zero Audit advisory Committee. I'm looking for a motion. Speaker 9: Motion to adjourn. Speaker 1: Second. Second. Mr. Reitz, roll call vote. Ms. Goeth? Yes. Mr. Reitz? Yes. Mr. Gillenwater. Aye. And I'm a yes.
So we are adjourned at six 50. 6 52.