This year’s draft management letter that accompanies the annual independent audit of Oak Bluffs finances outlines, in detail covering most of 12 pages, issues from previous audits that remain unresolved or partially resolved.
The letter, prepared by the certified public accounting firm Powers & Sullivan, also outlines new issues with recommendations for improvement and notes some progress in improving financial procedures highlighted in previous annual audits.
Oak Bluffs selectmen got draft copies of the audit at their Tuesday meeting.
While some of the recommended changes include complex and obscure accounting procedures, others are discrepancies that seem obvious to anyone who handles a family checking account.
The latter include budgeting for vacation and compensatory time, large payments issued from handwritten invoices with little supporting documentation, and taxpayer funds used to cover losses from a handshake deal to use town property.
Town officials have blamed much of the town’s financial difficulties on their decision to allow several town positions to remain vacant, in order meet a substantial budget deficit. Among those positions was that of town accountant, which has remained vacant since since 2009. The positions of finance director and treasurer have been vacant since the untimely death of Paul Manzi in the fall of 2010. Mr. Manzi held both positions.
This week, selectmen hired Arthur Gallagher to fill the job of town accountant. Mr. Gallagher has experience as the city auditor in Lowell and town accountant in Weymouth, Framingham, and Bedford. He will begin work on March 27.
Town administrator Bob Whritenour said this week that among the goals he will set for Mr. Gallagher is to eliminate the repetitive deficiencies outlined in management letters year after year.
“A lot of the same recommendations were made in 2010 and 2011,” Mr. Whritenour said. “We’re not going to see them made again. I want to read the management letter and see where it says the progress we made, and implemented these changes.”
“We’re moving in the right direction with a new town administrator and a new town accountant,” Kathy Burton, chairman of the selectmen, said. “I have confidence that we’re gong to be able to clean up a lot of the recurring items.”
Selectmen did not discuss at Tuesday’s meeting the specific points made by the auditors. They said they will cover the audit in detail at a public meeting with the accounting firm in late April.
Time and time again
Among the 14 unresolved or partially resolved deficiencies outlined in the management letter are accrued and unused vacation and compensatory time in the police department.
“The police department is unable to provide officers with 100 percent of the vacation and compensatory (comp) time that they are entitled to in the period in which it is earned,” the auditors wrote. “It is not likely that the town will be able to grant this amount of time off to officers without incurring additional overtime hours.”
According to the audit, the town owed police officers $176,000 worth of unused vacation and comp at the end of fiscal 2011, and there is no money to cover extra overtime.
“We also recommend that management determine, possibly with the consultation of labor counsel, a way to fund the department through the annual operating budget in a manner that will not violate federal or state employment laws,” the auditors wrote.
The auditors criticized the town’s performance in collecting overdue payments for its ambulance service and the lack of a clear process for writing off overdue payments.
The audit shows that on June 30, 2011, the end of the fiscal year, the ambulance department had outstanding receivables of $1,284,000. Of that amount, $523,000 had been outstanding for more than four months. The town referred an additional $372,000 to a collection agency.
“The presence of such a large outstanding balance could signify potential structural deficits in future years,” the auditors wrote. “In the near term, the outstanding balance may be causing resources that might have been used in other departments to be funneled to the ambulance operations.”
The auditors noted that the town improved procedures to collect past due bills during the 2011 audit year, but said more action is warranted. “We also note that nothing has been done to address the dollar amount of long outstanding receivables,” they wrote.
The audit also noted that the town still does not have any policy regulating rental and use of town-owned property.
“In a prior fiscal year, we became aware of instances in which certain town special revenue fund and agency accounts were in a deficit position as a result of the town incurring costs on behalf of a third party who promised payment at a later date,” the auditors wrote. “As a result of not securing payment prior to the performance of services, or having a policy in place that would have guaranteed payment by the third party, the town is faced with having to fund deficits in these funds.”
In August 2008, Festival Networks staged a concert in the town-owned Ocean Park featuring the Boston Pops and singer Gladys Knight. Town officials say Festival Networks failed to pay for $21,000 in town services provided, mostly for police details. While the town is still trying to recover the costs, the auditors noted that there is still no policy in place to protect the town from a similar situation.
Among the new issues auditors highlighted was a deficiency in payment of invoices related to the dredging of Sengekontacket Pond. The town paid $415,000 for the project during the audit period.
“Of this amount, we reviewed one voucher, in the amount of $277,000,” the auditors wrote. “The only support provided were numbers handwritten on notepad paper; however, there was no evidence that the project manager of the town approved the invoice, nor was their anything to indicate the party that created the invoice.”
The same section of the management letter noted discrepancies in documenting travel and phone use by town employees.
“Monthly cell phone charges were submitted for reimbursement; however the phone bill that could support the amount was not attached to the reimbursement request,” wrote the auditors. “We encountered one situation in which an employee was reimbursed for airline fares for an out of state conference. The reimbursement was made prior to the conference being held. When we reviewed the related support we saw a handwritten note indicating the trip was cancelled due to sickness; however we were not provided with support that would suggest that the employee repaid the reimbursed costs.”
The article was updated to reflect a correction. Paul Manzi held the titles of finance director and treasurer, not town accountant.