Thomas Scanlon of Scanlon & Associates goes over the agreed-upon-procedures after reviewing the town's financial policies.
CLARKSBURG, Mass. — The Selectmen were warned Thursday about the importance of getting procedures in place to control the town's cash flow.
"You do have some significant issues that do need to be addressed," Thomas Scanlon, of Scanlon & Associates, told the board on Thursday night.
The certified public accountants have been reviewing the town's books to address accounting errors that have delayed the town's free cash filings and to straighten out its books.
The town needs to put in procedures for recording in the treasurer's cash book, reconciling bank statements and tying back into the accountant's general ledger entries.
"We couldn't find the proper cash book for the year 2012," said Scanlon, referring to the receipts for the month and the warrants signed by the Selectmen. "Those should be listed down and tied out to the bank statement and at the end of the month, the bank statements are tied back with the individual balances on the cashbook."
According to the draft for agreed-upon procedures presented to the board and Finance Committee, the town's receipts and investments were not being properly reconciled between the treasurer's cash book and the accountant's general ledger.
"The absence of having timely and proper cash and investments reconciliations between the treasurer's records and the town accountant's general ledger significantly increases the risk that misstatement due to the error or fraud may occur and not be detected, prohibits the safeguarding of assets and does not provide for accurate and timely financial reporting."
The accounting errors led to a delay in scheduling town meeting and uncertainty in how much free cash the town had on hand.
Scanlon & Associates was asked to review procedures to determine what policies the town should put in place to rectify the problem. Accountants from the firm spent several days over the last couple weeks looking over the books and developing a report.
They found that the treasurer had not maintained a proper cash book for fiscal 2012, that individual items had not been properly documented or reconciled between the treasurer, accountant and the banks.
There was a variance of $39,233 between the treasurer's records and the general ledger, with the ledger being higher, for fiscal 2012. The accountants found a variance of $53,522, in part because of year-end procedures were not done right.
A student activity fund was noted in the treasurer's account and not the general ledger and a tax title account was not being documented or maintained separate from other tax accounts.
"Also, there are older outstanding real estate accounts that tax title takings have not been done. An accurate tax title receivable balance and tax title takings are critical to protecting the town's interests as the town pursues the collection or possession of these receivable accounts."
Scanlon said SoftRight was a good accounting software but it can be difficult for those new or still learning the application.
"I talked to [Treasurer] Melissa [McGovern] about starting one," he said. "You have SoftRight but if you don't understand what a cash book is you can't jump right in there."
He and McGovern said she had been given an Excel spreadsheet that they working with at this point. Both McGovern and Town Accountant Christa Marsh said they had also been getting advice from Scanlon and some long-distance aid from SoftRight representatives.
Finance Committee Chairman Mark Denault said he was relieved to hear some training was occurring, although his committee had not been informed of it. The Finance Committee has been critical of what its members have perceived as a delay in fixing the problems to date.
"I think it would be more helpful to have this person on site," he said, noting the town had set aside $1,400 at town meeting for training.
Selectmen Chairman Carl McKinney agreed, saying "we need to work together and tie this together."
Scanlon suggested that the town not try to certify its cash until early December, after it had been able to fix its accounting procedures back to July 1. If the variance remained the same — or if any changes could be properly documented - it could then determine if it wanted to go back to July 1, 2012. Depending on how that turns out, the town could go to the state ask for a fund correction next year.
"You should go back 15 months but with the records you have and the situation you're under you have to start getting procedures in place," said Scanlon.
"You can get out of it but you have to start somewhere," he said.
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