The Loxahatchee Groves Finance Advisory & Audit Committee met on Monday, Oct. 28 to hear a report by the town’s auditor for fiscal year 2017-18 and receive and file the check register and expense detail reports for August 2018 and September 2018.
Present were Committee Chair Anita Kane, Committee Member Bruce Cuningham and Committee Alternate Bill O’Neil. Committee members Laura Cacioppo, Connie Bell and Ken Johnson were absent.
Town Manager Bill Underwood introduced Assistant Town Manager Francine Ramaglia, who has been working directly with the town on its finances.
“She actually set this whole thing up tonight,” Underwood said. “She’s in charge. I’m here as an introduction.”
Terry Morton, a partner at Nowlen, Holt & Miner, gave the CPA firm’s comprehensive annual report for 2017, noting that there were some problems with the accounting system the town is using.
“The procedures you’re using right now, as far as your policies and procedures, are from 10 years ago. You’ve got more funds now, and you’ve also got more employees now, so it doesn’t really work that well now,” Morton said. “All that being said, there still were some problems in addition to that, one of which being with the bank [reconciliations], which is still somewhat of a continuing problem.”
Morton pointed out that one reconciliation statement shows the accounts to be in balance, while another shows them out of balance by almost $170,000. Another issue that the town inherited from the Loxahatchee Groves Water Control District shows that the account is out of balance by more than $500,000.
“That shows that there are errors in the general ledger that need to be reconciled,” he said. “It’s not really an error in the bank statement.”
Kane asked Morton if he knew where the missing money is, and he did not know. “Those errors could be in checks that weren’t voided properly, or stuff like that,” he said, adding that the errors could be due to not understanding fully how the system works.
Kane, who served on the LGWCD board before it was taken over by the town, said that she is aware that the town has multiple bank accounts, partly due to the town taking over the LGWCD, but the reconciliations do not show which specific bank.
Ramaglia said that she and Morton have been looking at the accounts, and they show that the cash receipts have been captured, and there is also a monthly list of disbursements.
“What we’re doing now is we’re trying to go through the monthlies and look at the actual bank reconciliation to see if they’re making sense and in-sync,” she said, explaining that in January, there was a computer glitch that posted some statements twice, and the LGWCD has six or seven bank accounts.
“We rolled those forward from the beginning of the year so that the cash is accounted for, generally speaking, but now we have to go back and make sure everything is recorded properly,” Ramaglia said. “When you see these again, they will have a lot of correcting journal entries.”
Morton also recommended making daily deposits by scanning rather than weekly. “Then you don’t have to worry about the checks getting lost or misplaced,” he said, explaining that he had found some checks that had been held for a week or more.
He also pointed out that statements are supposed to be sent to the state by June 30, and due to some problems with the system, his firm did not get started until after that.
Kane said she was hearing several recommendations from Morton, including that the policies and procedures manual be revised.
“You probably pretty much have to scrap what you have now,” Morton said.
“It’s a huge undertaking, but it really is one of those things that has to get done,” Kane said.
Another recommendation by Morton was to post checks electronically, immediately, rather than delivering them to the bank, and to update monthly journal entries.
Morton explained that the person who made the mistake originally should not be the one who makes the correction.
“So, your third recommendation would be some better internal control systems?” Kane asked. “That would require more than one person with a strong financial background to be either employed by or working for the town… That would require at least two people in the finance department, or one person in the finance department, and then [giving] the town manager, who has a strong financial background, enough time to do that.”
Morton said another option might be the FAAC looking at the monthly entries. “At least you’ve got someone looking at them who’s outside,” he said.
Kane asked what will keep the same thing from happening next year, and Morton said the new system is up and running.
“And Francine’s here, who has a good handle on fixing stuff like that before it gets too out of hand,” he said. “Going forward, there’s not going to be two or three entries to fix one entry that was done wrong originally.”
Kane said she was not comfortable approving the bank reconciliations with outstanding questions remaining, and Ramaglia said the reconciliations are not labeled properly and are actually transaction summaries.
Cuningham said the FAAC’s role is not to approve, but to review the transactions
“We could call it, ‘we reviewed it,’ or ‘we were presented it,’ but we are not approving it,” he said.
After more discussion, Cuningham made a motion to receive and file the check register and expense detail reports for August 2018 and September 2018, which carried 3-0.