It was good news, bad news at the Dec. 3 Milton Town Council meeting.
The bad news: for the second straight fiscal year, auditors could not issue a clean report on town finances. The good news: officials from Pigg, Krahl & Stern CPA are confident the upcoming fiscal year 2012 audit will be perfect.
Leslie Michalik, a manager at PK&S, said Milton's foggy beginning balances carried over from 2010, so the company had to issue a disclaimer of opinion on revenues and expenses for the fiscal year 2011 audit.
“We were unable to satisfy ourselves with the beginning balances of fiscal year 2011, and we weren't able to determine if the financial statements were used consistently between the two years,” she said.
The town's finances were in such turmoil following the 2010 fiscal year that the state auditor's office agreed to perform the 2010 audit. In August, Kathleen O'Donnell of the Auditor's Office also issued a disclaimer of opinion, meaning she could not endorse the accuracy of the town's finances. At that meeting, O'Donnell said the state Auditor's Office was likely saving the town a lot of money by taking on the audit. Traditionally, the state Auditor's Office audits only municipal street aid grants, leaving it to town governments to hire an outside accounting firm to perform an audit. The goal of state assistance, O'Donnell said, was to get the town to closing balances in order to move forward.
Michalik said she wasn't confident enough in the opening balances of 2011 to issue an opinion, but 2012 should be clear.
“We anticipate that report will most likely be a clean, or unqualified, opinion,” she said.
PK&S is working to complete the 2012 audit and should present its opinion to town council in the coming months.
PK&S issued an unqualified opinion on the town's assets and liabilities. The group also identified weaknesses in the town's controls related to a lack of segregation of duties, caused by the small staff at town hall and a lack of proper reconciliation. Changes were made since fiscal year 2011, Michalik said.
“Since then, management has made substantial changes in personnel and procedures and has improved the controls of the town and the management oversight of the accounting records,” she said. “Our 2012 report is going to look at that and reflect any changes that have been made.”
As part of the PK&S report, audit supervisor Ginger Heatwole presented a breakdown of the town's revenues and expenses. In 2011, Milton received more than 66 percent of its revenue from taxes and assessments, up from 60 percent in 2010. Just over 12 percent of revenue received was from intergovernmental revenues, such as grant money, and 10.3 percent was from licenses and permits.
On the expenses side, nearly 51 percent of money spent was on public safety, up from 41.8 percent in 2010. More than 31 percent of expenses went to general government, leaving the final 18 percent spread out among public works, code enforcement, parks and recreation and various capital projects.
Councilman Norman Lester, a certified public accountant and owner of Lester and Co. in Milton, said PK&S' opinion was not unexpected. He said the 2012 audit will likely verify the work he and Mayor Cliff Newlands have done to clean up the books and implement better accounting practices.
“We've made a lot of changes since Mayor Newlands came in, and I think we're in good shape,” he said. “This audit should be on time. PK&S has got a good staff. They really know their work.”