Article 8 "To Eliminate the Locally Elected Auditors Of

[JLB]

Article to Eliminate Locally Elected Auditors’ Office
   
The Fairfax Selectboard has decided to put forth a warned article to be voted on at Town Meeting to eliminate the office of locally elected auditors.  The intent is to hire a Certified Public Accountant to perform the annual audit.   The action of contracting with a CPA for an audit is a valid and timely decision.   It is wise for the Town to periodically have a professional audit performed.  While on the surface it may seem logical to eliminate the local office and incur the expense of a professional audit each year, residents should be cautioned against permanently eliminating the office of locally elected auditors.     There are pros and cons to each side of such a decision.  

The citizens should be aware that it need not be one or the other.   Fairfax is in a difficult situation because the Town’s “books” close December 31st, which leaves roughly 22 business day to perform the audit and issue a report with accompanying financial statements in time for publication of the Annual Town Report.   Most CPA’s are not able or willing to commit to such a tight deadline.  Most CPA firms are very busy this time of year preparing taxes for established clients.  Some say the time frame for a professional audit in Fairfax is nearly impossible.    There are 14 cash accounts.   Of these the most extensive audit is that of the General Operating account.   My concern is that a CPA firm can not be located or may not be able to finish an audit in time for the publication of the Town Report.    

For a few reasons I recommend maintaining the Local Office of Auditors in Fairfax and contracting with a CPA firm to perform a periodic audit.
     1. The local auditors can perform sufficient work to “sign off” on the bank account balances in time for publication of the Town Report when a CPA firm can come in later in the year when it is feasible and perform a thorough audit to ensure all transactions were recorded in accordance with Generally Accepted Accounting Principles and Governmental Accounting Standards.     Eventually hopefully the Town can, like most towns have done, change its fiscal year to end June 30th rather than December 31st.   At that point it would be much more feasible for a professional audit to be done in time for the Town Report which must be distributed 10 days prior to Town Meeting.  

  2.  If the Local Office is eliminated, the writing and assembling of the Town Report becomes the responsibility of the Selectboard.   The annual town report would thus in essence be filtered through the lens of those governing.  The annual report is considered to be an important document as it should form the basis of electorate’s decision.   It is the job of the local auditor’s office to be independent and objective in assembling the report in the format that is easily understood, is in layman’s terms and provides sufficient information to voters.   The local auditors work with both the School and Town officials to compile a comprehensive and historical report.


In preparation for this year’s Town Report, I have done extensive research on the functions of municipal auditors in Vermont.  18 towns were identified in Vermont that are approximately the same size as Fairfax.    While most of these towns are employing a CPA to perform the annual audit, not all towns have eliminated the Locally Elected Auditor’s Office.    In some towns the Audit Committee is considered to be an active part of the local government including giving a short presentation at Town Meeting and attending Selectboard meeting.   In some cases it is viewed as a joint effort with the auditors conferring with various town departments, with each seeking input and feedback from the other.    


Lastly for informational purposes I noticed the cost of a CPA firm ranges between $5,000 and $8,000 for Towns whose population is between 3,000 and 5,000.    If a Town has implemented a full accrual accounting system, including the capitalization and depreciation of fixed assets as required by Governmental Accounting Standards #34, a CPA firm is then required to perform a Management’s Discussion and Analysis.   The MD&A can be a very useful tool.   It requires another level of service and thus added costs.   For the local Fairfax auditors to perform sufficient work to “sign off” on account balances, the cost is about $2,500.  Last year the town spent $2,732.00 for the Local Auditors Office.  

  Respectfully,  Jackie Bruning

[JLB]

I have received a few questions to clarify the above article I posted.    I am sending along the below to assist.  

The Town Report was never the responsiblity of the Listers Office.   The Listers did not put the whole town report together.  

The Town Report is the responsibility of the Auditors.   In the past the Town Treasurer handled this responsibility  as a matter of necessity.    

Statue requires an audit. The Town must notify the residents of the audit results 10 days prior to Town Meeting. This is all statue. It can be done by either a CPA or locally.

There is no law that says we have to have a CPA audit done on any basis. It is just healthy business practice to have one done periodically.

The main concern is that there is not enough time for a professional audit to get done in January so that it can be ready for Town Report. I feel for the next few years it would safer to keep the local office.

If the fiscal year is changed, then it certainly is alot more understandable to eliminate the local office. Assuming folks are ok with the Selectboard putting the Town Report together.

I hope this helps.

Jackie

[JLB]

FYI:  The 2005 Town Report will be going in the mail Feb. 16, 2006
We have made a concerted effort to make it easier and more comprehensive to read.

There are a few new additons and a few pie graphs to help the reader more easily to absorb all the information.   We realize parts of it can be overwhelming.  


Among the new reports are:
Senators Report - Franklin Cty
District Representatives Report

Sherriff's Report
Emergency Manager Report

School Board of Directors Report


We encourage all residents to contact us with feedback.   We are here to serve you.    If you need help understanding any page in the report that the Auditors prepared, please do not hesitate to contact us.  

Contact:
fairfaxauditors@yahoo.com
Mail Town Office, PO Box 27
Or leave a phone message with the Office Assistant, Stacey Wells and we will gladly contact you.

[cestreet]

Hi Jackie,
Thanks for taking the time to provide all of this information.  I know next to nothing about this issue, and now that it's on the ballot and you've provided information, I have additional questions.  How many auditors does the town currently elect, and for how long is the term?  What qualifications are required to act as an elected auditor for the town? Could someone like me, who knows only enough about accounting to balance my own checkbook, decide to run and be elected?  I get the impression that ou think it's a drawback to have the Selectboard publish the Town Report.  If so, why?  Again, thanks for taking the time.

Clarice Streets

[JLB]

Clarice,
I am glad you wrote.   You raise some very good questions.

Term/Office: Statue requires 3 locally elected auditors.   Statue allows the town to vote to change that to 2 auditors.   The term for each much be 3 years.     Typically Towns set up the 3 positions in staggering terms so that only one new auditor is elected each year.  (ie, 2006, 2007, 2008...)   This allows in theroy for  one experienced auditor to be on board at all times.

Note I am not opposed to re-evaluating eliminating the local office in a few years.   Fairfax is in a unique situation with the fiscal year ending Dec. 31st.   That leaves 22 business days for a CPA audit to be completed.   If the Town can prove that a CPA can perform the job in time for the Annual Report, then I believe the Town is in a safe position to consider eliminating the office.    To propose eliminating the local  office knowing the circumstances, I believe puts the Town in a vulnerable position.    It is possible no audit may be done on the 2006 books in time for the  publication of the Town Report.    Statue requires the residents be notifed of the results 10 days prior to Town Meeting.

Qualifications:  If the Town Audit Committee, completes the audit as outlined in the Handbook for Locally Elected Auditors, it is my opinion an auditor needs to have some solid bookeeping experience.    The Handbook states "there is no requirement for local auditors to be a CPA or professional accountants; however, it does make sense for local auditors to have a basic comfort level with income and expense statements and balance sheets.  With a basic understanding of accounting procedures."

It is very helpful to have some understanding of how municipalities function.    The Audit Committee does elect a Chair person.   From a working standpoint this individual should have higher level of experience and/or education/training.  The Auditors also need to be able to work under the pressure of a tight deadline and not afraid to ask questions.  Again this is assuming they do the audit as outline  in the Handbook.   It contains a 4 page checklist of procedures to perform.

Anyone can run for office.   Usually in small towns they run unopposed.  Reality is there is little to no check on weather that individual has the needed skills.    In small towns elections are often by  popularity or just simple name recognition.

Again I am not opposed to reevaluating this issue in a few years.


Selectboad holding the responsiblity of issuing the Town Report.  
1.   The Town would loses an independent and objective anaylsis.   The Town Report would thus be filtered through the lens of those governing.    

An auditor who lives in the Towns is aware of the needs of the town, is aware of the concerns of the residents, and holds a vested interest in the Town.  We are required by Statue to hold a public meeting before commencing on the audit, to allow the public an opportunity to ask questions, etc.

A CPA firm is not accessible.   Their report is addressed to the Selectboard.    A CPA's primary function is to produce financial statements that are in accordance with Generally Accepted Accounting Principles (GAAP), including the Governmental Accounting Standards.

I worked for a bank as an internal auditor.  (I have a degree in Finance.) We had a department of 6 individuals.   In addition to that the bank annually had the  CPA firm come in annually to audit the books and prepared the financial statements  for the stockholders.   The CPA's focus is to determine if all transactions are recorded in accordance with GAAP while an internal auditor looks at more than accounts.

In many Towns, including Fletcher, the local auditors are expected to do a short presentation at Town Meeting.   If a CPA firm is the only source in Fairfax, it would be the Selectboard who may ask the Treasurer to speak as well.   Here again it may be filtered through the lens of those governing.   I am not making any accusations.   I truly believe those in the Town Office have very good intentions  and the Town's best interest at heart.

It is my opinion relations between the Town and the School are somewhat strained.   As local auditors, we with work with both to gather sufficient information to help the average layman understand the whole town's  position.  

Lastly I believe the Selectboard has an increasing amount of responsibility that requires a greater time committment.   January is an extremely busy time for the Board.   They have the usual business to attend to.   Plus prepare the Town Budget. Plus their own Selectboard report.   Plus entertain  and decided on various articles to warn (ie:   Sheriff,   Rescue Squad,  Fire Dept,  Recreation Dept,  and about 20 Requests from non profit agency asking for donations.....)   Eventhough they have an Administrative Assistant, I feel the Town Report would out of necessitatity be lower on the list of "To Do" items. And thus may not get the full attention I think it deserves.   This is not a criticism but just an opinion on the order things must get done.   Again I do believe the best intentions are there.


Unfortunately I will not be attending Town Meeting.  I made plans a few months ago to take the family to Florida during the school  break.   Had I known about this Article I certainly would have postponed our plans.   I am sorry I won't be serving the residents as I would like to for this issue.        Please do not hesitate to contact me in the meantime.   I wondered about holding an Auditors Public Informational Meeting the week before (the 17th).

Sincerely,

[JLB]

Below is a section from the Handbook for Locally Elected Auditors written in 1999:


“Working with Professional Auditors:  Although some of Vermont’s local governments only infrequently employ professional certified or public accountants to audit their books, the statutes specifically enable the voters of a town to decide whether to “employ a certified public accountant to aid the work of the auditors.”  V.S.A. § 1690.”  
However, unless the town has voted to eliminate the office of auditor under 17 V.S.A. . §  2651b, the hiring of a professional auditor will not relieve the town of its obligation to elect auditors and, in turn, will not relieve the auditors of their statutory responsibilities. 24 V.S.A. § 1691."

It is envisioned that elected auditors will be able to use the results of the professional audit in formulating their audit report to the town.  In such cases the primary responsibility of the locally elected auditors is to aid the accountants by collecting and presenting to them relevant information and then to digest and use the professional audit report to create a town report which is clear, complete and easy to understand.  It is rarely necessary for the local auditors to duplicate any of the work of the professional auditors.  However, the local auditors in these towns often speak with the professional auditors prior to beginning the audit and again as they review or have questions or comments about the professional audit report."

[JLB]

There appears to be some confusion over what the Town Auditors role is when it relates to the School District.

The Town Treasurer is also the School District Treasurer. The Treasurer records all receipts and income as well as disbursements.   The School Business Office processes all bills and does all the bookkeeping work related to keeping track of income and expense.   The Treasurer makes the bank deposits for the general fund and signs all checks that are issued out of the general fund.

The CPA firm that audits the School District, audits all the records of the Business Office.     As we undertand it the CPA firm is not reviewing the work of the School District Treasurer.     If you look at page 100 in the 2005 Town Report, you will see the School Treasurer's report.  The locally elected auditors are the ones auditing this report, not the CPA firm.    We suspect that since the CPA firm is auditing copies of bank statements to records of the Business Office, they feel it is not necessary to also review the Treasurer's cash receipts journals.      

If the locally elected audit office is eliminated, it is unclear as to whose responsibility it will be to review the School Treasurer's records.



Lastly in preparing the Town Report, the Audit Committee is charged with the responsibility of gathering sufficient information on the School and presenting it in a format that is easily understood by the average person.       If the Local Audit Office is eliminated, this area may be lacking.

Again please do not hesitate to contact us if you have questions.

We hope you will find this year's Town Report helpful in your decision making process.