Audit Clean Despite Education Overspending, Material Weaknesses

Brookfield will need to take steps to be in compliance with statutes but auditors give "unmodified clean opinion."

Auditors John Bauer (left) and Michael VanDeventer (center) and Town Controller Bill Leverence (right) at the Jan. 8 Board of Finance meeting. Photo Credit: Aaron Boyd
Auditors John Bauer (left) and Michael VanDeventer (center) and Town Controller Bill Leverence (right) at the Jan. 8 Board of Finance meeting. Photo Credit: Aaron Boyd
The Board of Finance (BOF) received a draft of the 2012-13 audit Wednesday night, in which the auditors are giving an “unmodified clean opinion” of the town’s financials despite finding a number of material weaknesses in internal controls and almost $1.18 million in overspending in the education budget over two years.

“From our perspective, we have proposed adjustments, so although you do have material weaknesses we will give an unmodified clean opinion on your financial statements,” auditor Michael VanDeventer explained, noting that the bottom line for the financial statements were correct, even if best practices were not always followed.

VanDeventer and John Bauer, of the firm Mahoney and Sabol, went through a number of policy recommendations to tighten internal controls on both the municipal and education sides of the budget and suggested the town go through a formal fraud risk assessment.

“The board might think that everything is squeaky clean,” VanDeventer said. “But we recommend that the board look at certain areas that might not be significant to the town where certain things could occur, such as fraud.”

The auditors also discovered approximately $707,000 and $471,000 in the education financials that were attributed to the 2012-13 and 2013-14, respectively, but should have been paid in prior fiscal years.

“Probably going back for some period of time, there are certain costs that were reported in the subsequent fiscal cycle,” VanDeventer said. “My thought is that there’s probably a certain amount of monies associated with that practice but given other constraints through the year that amount increased to about $707,000” by the end of 2011-12.

No vendors are owed and there are no outstanding invoices, according to the district’s Director of Business and Technology Art Colley. However, because those expenses should have been included in the prior year, they constitute an overspending of the education budget for that fiscal year.

The district’s financials are sound, VanDeventer explained, though the town will have to hold a Town Meeting vote to retroactively approve the spending.

A similar issue occurred with the 2012-13 budget, which first brought the issue to the auditors’ attention. A health insurance payment of $471,000 was deferred from June — the end of the fiscal cycle — into the current fiscal year.

The insurance company, Cigna, agreed to give the Board of Education (BOE) a credit of $471,000, essentially clearing that accounting issue, which the auditors hope to confirm on the next billing statement.

First Selectman Bill Tinsley, an ex-officio member of the BOF, noted that “the credit isn’t being given because they over-billed us or because we overpaid them, it’s just negotiated: ‘We need some help and can you give us some money back.’”

Tinsley said he wanted to be sure that the credit was given without any conditions.

“I’m sure [Cigna is] hoping that [the BOE] will continue their relationship,” VanDeventer said. “But the town has the right to go out and shop around for insurance coverage. So yes, no strings attached.”

Had Cigna not offered the credit, a retroactive appropriation would have had to been approved for $471,000, as well.

“We have identified this, everybody has reviewed it at the management level — from our perspective the town has done everything we need them to do,” Bauer said. “So long as we have final resolution on all these amounts, I think we are satisfied that the financials are properly stated.”

“We’re going to take action and get this corrected properly,” BOF Chairman Phil Kurtz assured. “We’re not dumping this on the Board of Ed. We’re one town and we’re going to get this fixed, all of us are going to get this fixed.”

Tinsley said he is meeting with Kurtz, BOE Chairman Scott McCarthy and the town attorney Thursday morning to work out the next steps.
Steven R DeVaux January 09, 2014 at 06:40 AM
"People get the government they deserve" - Ayn Ran
Glenn Brown January 09, 2014 at 09:48 AM
Yes they do. http://brookfieldpatch.wordpress.com/2014/01/09/clean-budget-opinion/
Amy Lynn January 09, 2014 at 02:36 PM
"The School System of Brookfield is being run like a Mom and Pop operation" said the Vice Chair of the Board of Finance, Mr. Nepomuceno, last night.
Ernie Nepomuceno January 09, 2014 at 09:15 PM
Let's stay within context. The comment was made with respect only to the financial operations of the school system.
Josh January 09, 2014 at 10:32 PM
Perhaps I am missing something. Typically, when a payment is made timing does NOT matter except from a cash flow statement point. When an accrued item is paid it is merely reflected as a decrease in liabilities and a decrease in cash from period to period. The flip side is under accruals from year to year come through as expense. The end result in year 'future', is still a hit to cash but from the operating line and not due to changes in the balance sheet. No difference to cash, it still decreases. The tricky part is that if yr 1 had $3 approved, yr 2 had $4 approved and year 3 an approval of $5, the maximum expenses that can be paid for all 3 years regardless of how they were recorded cannot be more than $12. If the expenses were still $12 I can see that this is a cash flow timing issue and reflects poor accounting. However, if the expenses are actually more than $12 there would be an actual overspend. So to bring this back to a specific example, if the BOE in yr x, was advised by say Cigna that there would be an additional billing of $YY coming later that was not part of the initial budget two things should occur. First, a year end accrual for the bill would be made to avoid an expense variance in the next year. Second, if the budget did not have remaining funds from other lines, an overspend of the current year budget, the current year budget would be revised and increased to reflect the anticipated increased expense.
FairQuestions January 09, 2014 at 10:53 PM
All the comments about various issues in town and this issue, which will affect EVERY single taxpayer has just a few? Where are our priorities? Where is the outrage? I'm horrified at how people work so hard to pay their taxes, provide our schools with (let's be honest) more than they need and THIS is how they handle the finances? What a betrayal!!!! There had to have been reports stating the education budget was balanced yet this was uncovered? A million dollars & bonuses were given out, payments outside of regular payroll & better "control of the corporate credit card". Seriously?
Glenn Brown January 10, 2014 at 08:19 AM
Our kids, to be honest and in my opinion, are not getting more than they need. http://brookfieldpatch.wordpress.com/2014/01/10/democracy-in-action/
Emanon Emanon January 10, 2014 at 08:57 AM
Good to see the auditors are recommending the Town improve its fraud protection procedures considering who our First Selectman is.  Too bad the Town’s response was “we’ll consider it”.  Why is this not a priority?  Why is the BOF focused on an accounting entry and not on insuring Mr. Tinsley keeps his hands out of the Taxpayer’s till?
FairQuestions January 10, 2014 at 03:26 PM
I never said the KIDS were getting more than they need. In my opinion, if we have funds to give out bonuses to their staff & using a corporate credit card without very strict boundaries, they are getting too much.
Emanon Emanon January 10, 2014 at 03:43 PM
Because teachers are overpaid, greedy moochers who already get more than they deserve, and you'll be damned if they get a penny more?
FairQuestions January 10, 2014 at 04:37 PM
Seriously? You won't drag me into this foolishness. Bonuses? Spending with no guideline? Not good anywhere anyplace anytime. Don't try to put words in people's mouths. Please don't try to turn this into anything besides what it is.
Emanon Emanon January 10, 2014 at 04:43 PM
This "spending with no guideline" thing is bogus. Show me where that happened. But why shouldn't teachers or education administrators receive bonuses? I'd say they are far more deserving of a bonus (given the ultimately altruistic nature of their chosen profession) than many of the people who do get obscene bonuses without anyone blinking an eye. What's more important, a child's education, or a businessman's bank account?
John Doe January 11, 2014 at 12:33 PM
Brookfield breaks the law and violates charter by accounting like the state - See more at: http://www.raisinghale.com/2014/01/09/brookfield-breaks-the-law-and-violates-charter-by-accounting-like-the-state/
John Doe January 11, 2014 at 12:34 PM
Draft Audit Report Available on Town Web Site - scroll down and you will see the link on the home page under "News & Announcements": Draft (not final) Internal Control and Compliance report http://www.brookfieldct.gov/Pages/index Draft was posted on Town website within 24 hours of it's presentation at the BOF meeting.
Steven R DeVaux January 12, 2014 at 06:37 PM
Teachers aren't the overpaid greedy moochers. It's the non-certified para-professionals.
Steven R DeVaux January 12, 2014 at 06:39 PM
Another case of local government paying CPA prices for non-CPA levels of service. Like going to the doctors office and seeing the para-professional while paying the doctors prices.
Howard Lasser January 12, 2014 at 07:07 PM
@ John Doe and for anyone else who cares. What the Town has posted is only a small part of the Audit reports. What is posted is the Federal and State single audit reports. It is not the Comprehensive Financial report, usually about 70 pages, including management's discussion and analysis. This is the part of the report that would show the General Fund and what the Town has done with its local tax dollars.
Rob Gianazza January 12, 2014 at 08:09 PM
Thank you Howard. What the BOF reviewed on Wednesday evening was a draft report, not the finalized report. Too many posters are drawing conclusions and posting opinions, not facts. Facts are: there was a change in auditing firms. The hiring of that firm took place during your term of office, so you would be best qualified to explain the details. Another fact is that the accounting method also changed. This is what led to the over 1.1 million dollars of over posting. Next fact, the draft audit report does not indicate intentional foul play. What the draft audit does indicate is that tighter controls could be set up around the use of the credit card. This is a best practice comment, not an indictment of wrong doing. The BOF will discuss best practices in a open environment. Let's take advantage of the Patch and post real questions and share real answers.
Howard Lasser January 12, 2014 at 08:38 PM
Rob, the BOF is responsible for choosing the Audit firm not the BOS, even though the First Selectman must sign the contract. As you know from my email, despite my recommendation, when Rob Howard, the audit partner who has been our auditor for about a dozen years, changed firms, the BOF decided to follow Rob to the new firm rather than do an RFP for audit services. The only reason we have a new audit partner on the engagement is because of Rob's sad and untimely death. The fact that it is a draft that was reviewed is no excuse for not making the full report public so people can see what the BOF is talking about. I understand from talking with Phil that this will happen, in the meantime only posting part without clarifying that it is not the full report could lead to confusion on the part of those who do not have experience in this area.
Rob Gianazza January 12, 2014 at 08:56 PM
Time frame Howard, not who chose the firm. So much for facts vs. politics. I was attempting to keep this civil.
Howard Lasser January 12, 2014 at 09:18 PM
Rob, whether you meant to or not, you implied the selectmen had something to do with choosing the Auditor "The hiring of that firm took place during your term of office" . Perhaps I misunderstood that, though if you did not mean to imply that why bring up who was selectman at the time since it has absolutely nothing to do with it. I do not know why you are implying some political motive. I posted only to clarify the issue, I am not going to engage with you in an on-line debate.
Rob Gianazza January 12, 2014 at 10:32 PM
Howard, I never implied the selectmen chose the auditor. I graciously opened the door for you to explain the process. You chose to become accusatory. I indicated the time frame. Read all the words. Public comments accused Bill Tinsley of hiring the firm with certain directives. My point was illustrate that this was not remotely possible. You also mentioned not posting the full report. Which page is missing? Now it is you that is implying the Town of Brookfield is posting incomplete data. I maintain that it would be premature to post a draft of the Comprehensive Annual Financial Report. That is not the purpose of that draft as you well know. You did not clarify the issue, you muddied it. And you did choose to engage in an on-line debate. Let's try to keep the facts in context. So let's agree to drop the political posturing and actually answer community questions with responses that add value to the discussion.
Steven R DeVaux January 13, 2014 at 06:22 AM
Right you are Rob. People are entitled to their own opinions but they are not entitled to their own "facts". The BoE, holding closed door meetings with it's Superintendent and Business Manager ran completely contrary to the spirit of transparency and, since it wasn't a legal or a personnel matter - may have added Freedom of Information violations to the growing list of suspected transgressions.
Townie January 13, 2014 at 06:51 AM
To all posting on this article -READ the REPORT!!! Preliminary Audit Report excerpt: Page one -Posted on Town web site Jan 2013 However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described as finding 2013-1 and 2013-3 in the accompanying schedule of federal findings and questioned costs to be material weaknesses.


More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something
See more »