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  • Good morning and welcome – I’m ……. This is the breakout session on Audit committees, finance committees, and joint municipal/education committees.. We are going to discuss: the differences between and the similarities of the various types of committees. Why you might need, or want a committee The benefits of a committee The concerns about a committee
  • Before we get started – how about some introductions. Could I see a show of hands – how many of you have regular town audits, have been audited, or are familiar with the audit process? Also, how many towns where there are issues over management? Finally, how many of you have some form of over-sight committee? So why all this talk about audit committees? Thanks Enron, TYCO, and World Com Sarbanes-Oxley Act of 2002
  • Let’s consider three common types of committees… there are others like a job candidate selection committee … or any specific topic committee But we’ll look at these three today Audit committees Finance Committees Joint municipal/school committees
  • Authorized is the key word Usual make-up: No town officials – no town or school employees Typical duties: Oversee the financial reporting – could also assist treasurers with monthly budget reports Monitor the effectiveness of the town’s internal control procedures – or write them if none exist Review audit findings and corrective action steps required to correct audit findings
  • Should have principal oversight responsibility with respect to town financial matters. Again, without some authority to act, they have limited value Brattleboro example: Their committee is appointed from volunteers at town meeting of citizens who are not office holders or town employees. They review the budget and financial reporting to the select board.
  • Like a finance committee - with a planning function Rockingham example: One each: selectboard member, village trustee BF&SR, school board members K-8, HS, Supervisory Board School Superintendent, Town Manager, Town Finance Officer, School Business Officer, Public Library Board, Total of 11 ….plus Tom as facilitator Fair Haven example: 8 + Tom: Current selectboard, former selectboard, 2 town auditors, 4 other citizens: a committee established for a specific purpose - surplus Townshend example: 4 total … the owner of NEMRC, a town auditor, a CPA, a citizen ….. To hire a bookkeeper
  • The financial disasters of Enron, Tyco , etc. resulted in the Sarbanes-Oxley Act of 2002 which mandated that all companies publicly traded have an audit committee The same concerns over internal controls, fraud and ethics have gotten attention at all levels of government. Therefore the interest in government audit committees Show of hands – how many of you have written policies covering personnel, purchasing, accounting, and conflict of interest That is something such a committee can do Every town is different with different needs and wants – but the potential for fraud, waste and abuse are present in each one – maybe more so in smaller town – Internal controls prevent fraud, waste and abuse Internal controls not only protect the town – they also prevent honest errors from going undiscovered, settle disagreements, and often prevent embarrassment and protect reputations
  • Every government – especially small ones It is important to clearly establish: the purpose of the committee what authority, if any, it is given how they carry out their work How/to whom they report on their work
  • The list of things any of these committees can do is endless The next few slides list some of the more common duties … . But…… It is up to the management to define the purpose and duties of any of these over-sight committees They can be whatever you agree they should be
  • The benefits again can be endless – if established to meet specific needs of your town government Often overlooked is the fact that a committee can help protect the reputations of the town, and individual town officials by providing a mechanism to find and address errors, settle disagreements, etc.
  • For any over-sight committee to be effective, it has to have some authority – which means that someone or everyone must give up some of their individual control That’s hard to do – but think of the benefits
  • With examples of fraud, waste and abuse on our TV screens every day in both the government and the private sector, the public…. that’s you, me and everyone in your town ….. will be demanding more accountability and transparency in all government financial activities. Which means that some form of an over-sight committee will be coming your way…. be ahead of the curve.
  • Again - the make-up of the committee has to meet your needs and the resources you have available ….. But here are some guidelines for an audit committee Important – avoid any conflict of interest situations
  • Transcript

    • 1. Do You Need An Audit Committee, Finance Committee, or a Joint Municipal/Education Committee?
    • 2. Today’s agenda:
      • New thinking on audit, finance & oversight committees:
        • What are they?
        • Why do we need them?
        • Who should have one?
        • What do/can they do?
        • What are the benefits?
        • What are the drawbacks?
    • 3. What Are They?
      • Audit Committee
      • Finance Committee
      • Joint municipal/education Committee
    • 4. Audit Committee
        • Volunteers – with sufficient expertise and experience who are authorized to oversee the financial reporting, internal controls, and policies to prevent fraud, waste, and abuse
        • Supervise the audit process
        • Appointed by the management of the governing body
    • 5. Finance Committees
      • Oversee the preparation of the annual budget and financial statements
      • Oversee the administration, collection, and disbursement of the financial resources of the organization
      • Advise the board with respect to making significant financial decisions
    • 6. Joint Municipal/ Education Finance Committee
      • Financial oversight plus long-term planning
      • to maximize use of local tax dollars and
      • facilitate more effective capital expenditures
    • 7. Why do we need them?
      • To prevent fraud, waste, and abuse
      • To provide transparency to the public concerning financial and operational activities of the town
      • To improve effectiveness of local government
    • 8. Who Should Have One?
      • GFOA says that audit committees are as important for smaller governments as they are for larger ones
      • GFOA urges every governing body, no matter how small, to establish an audit committee
    • 9. Typical Responsibilities
      • Report regularly and promptly to the Board regarding matters within the scope of the Committee charge
      • Oversee the financial reporting and disclosure process
      • Review the financial statements of the town with the auditor
    • 10. More to do…
      • Monitor the effectiveness of the town’s internal control procedures
      • Ensure the Town has policy and controls to prevent fraud, waste, and abuse
      • Review the conduct and adequacy of the audit
      • Review audit findings and the corrective action steps required to correct them
    • 11. And more…
      • Investigate audit issues that appear to need investigation
      • Other duties the Select Board may determine
      • Create an annual report to the Select Board of how the committee discharged its duties and met its responsibilities
    • 12. Benefits
      • Audit committee can focus specifically on issues related to fiscal accountability, internal controls, and financial reports
      • Increases communication between auditors and governing boards about audit objectives and results
      • Helps preserve objectivity and independence of the financial statement audit
      • Can also monitor corrective actions for Board.
      • Small towns – assist in segregation of duties issues
    • 13. The Concerns:
      • Possible higher audit costs due to extra time required from audit firm
      • May be hard to find qualified volunteers
      • More staff time likely for treasurer and other staff
      • Less control of audit by management
      • Open meeting law for committee would be a concern to some
      • Might slow down audit
    • 14. What about you?
      • Do you have an audit committee?
      • Most cities and towns do not – yet.
      • UVM does. Vt. State College system does.
      • State of Vermont does not.
      • How about other types of committees?
    • 15. Recommended Audit Committee Make-up
        • Members should possess experience in Accounting, Finance, Law or General Management
        • A majority of audit committee members should be selected from outside of management
        • No officer of the town or member of any board, commission or other committee of the town, whether elected or appointed should be a member of the committee
        • No town employee or school employee shall be a member of the committee
        • The committee should be small enough to operate efficiently – no fewer than 5 and no more than 7