Originally published in The Commons issue #395 (Wednesday, February 15, 2017). This story appeared on page 0.
VERNON—Although the town didn’t exactly pass this year’s audit with flying colors, Vernon received high marks from the Montpelier-based accounting firm Sullivan Powers & Company.
At the Jan. 19 regular Selectboard meeting, Chad Hewitt, a CPA with the company, told Selectboard members he gave Vernon a “clean opinion” on their Fiscal Year 2016 audit, noting “[you] can’t get any better than that.”
Hewitt presented highlights from his findings.
He noted the industry standard in auditing a municipality’s finances are to focus on four major funds: the general fund, the emergency capital reserve fund, the capital reserve fund, and the road upgrade fund.
Hewitt said all other funds in the town’s budget are “lumped into” a section called “other” or “non-major.”
Vernon’s general fund contains $406,000, “which is really good, but it’s all spoken for,” Hewitt said. This means two things for the town: There’s no unassigned money in the balance for emergencies, and “the true general fund is in the hole about $23,000.”
But this marks an improvement, Hewitt noted. Last year, he said, “the general fund was hurting.” Because of unexpected “windfalls” and nearly every department coming in under budget, the town got closer to climbing out of that particular financial hole.
More good news: by the end of FY17, it looks like the town will have money in unassigned reserves, Hewitt said.
“You should have two to 2.5 months of operating expenses as an unassigned reserve,” Hewitt said, noting this is true for all municipalities.
“Right now, you have zero,” he said.
Vernon’s emergency capital reserve fund and capital reserve fund are “very healthy,” said Hewitt, with $1.8 million in the former and $1.3 million in the latter. The town’s road upgrade fund contains just under $500,000.
Hewitt reviewed the second part of the audit: the assessment of internal controls. There are three categories of comments, in order of severity, Hewitt told Selectboard members.
In the most severe, “material weakness” section, Vernon had only one entry, Hewitt said. The town failed to properly record “some very unusual grant activity” from a Structures Grant, but correcting a journal entry will easily fix that.
The next section, “significant deficiency,” is meant for items that “warrant a lot of attention,” Hewitt said.
His only entry there was that someone needs to review Treasurer Cindy Turnley’s nonstandard journal entries. Hewitt said that person can be the town clerk or a member of the Selectboard or other official, but Turnley’s eyes shouldn’t be the only ones reviewing her work.
Although Hewitt had more than 15 comments in the “other recommendations” section, he said those are the least crucial and a “town can use them or not.”
Some of Hewitt’s “other recommendations” included an accounting and procedures manual for all departments that collect money, creating a fraud policy as part of the town’s personnel policy, and trash-bag sales reconciliation.
Hewitt reminded the Selectboard the audit’s “intent is to enhance the town’s operations,” not to “zing” the town for errors.
Selectboard Chair Chris Howe thanked Hewitt and Turnley, noting they did “an awesome job.”
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