By Elio Gugliotti, Editor
PROSPECT — An independent risk assessment of the town’s internal financial controls concluded the town is lacking in several areas, but officials say steps have already been taken to address some inadequacies.
The town hired The Bonadio Group, a New York-based firm, for $39,750 last November to do an internal review of financial controls and procedures. The assessment was in response to the theft of about $294,000 total from the town’s Webster Bank payroll account from December 2017 to November 2018. The theft became public in January 2020, when state police announced an arrest in the case.
The key findings in the firm’s report, which was made public Aug. 17, included that the town hasn’t developed formal documented policies for many internal controls; there’s no documentation of controls performed, when they were done and who did them in many instances; and there’s little training of staff in accounting and internal controls.
(Town of Prospect Risk Assessment Report)
“There’s a lot of areas that need to be addressed,” said Town Council member Theresa Graveline during the council’s Aug. 17 meeting. “The council is determined to make sure that we go forward to address these issues and put more procedures in place and more policies in place to rectify what is sorely lacking.”
Mayor Robert Chatfield said, in a subsequent interview, a policy and procedure manual was put in place early this year, while the assessment was underway. Officials started working on the manual with the town’s legal counsel before the assessment started, he said.
Chatfield added officials now use ADP, a payroll and human resources company, to handle payroll for the town.
Chatfield said officials tried to fix issues that were brought to their attention during the assessment.
The report cited “multiple control gaps in the IT environment of the town,” including multiple users sharing the same login for computers and financial systems, and multiple users having access to the same email address. The report recommended the town perform a complete IT assessment.
Chatfield said town employees now have their own email addresses and login information.
The firm reviewed random samples of financial documents and information from June 30, 2014, through June 30, 2019, to make its assessment. In some cases, the documents showed controls were not consistently applied or weren’t documented to confirm they were performed.
For example, the report states there was no evidence the nine bank reconciliations reviewed were performed timely, and they weren’t signed by someone independent from the person who prepared them to show they were independently reviewed. In another instance, there was no evidence that a timesheet for overtime for an employee was reviewed and approved, according to the report.
In some cases, the report states, the town did not provide documentation requested by the firm. This included four reconciliation of cash receipts to tax deposits, one bank reconciliation, competitive bidding documents for eight capital assets, invoices for two capital assets, and documentation to show the review of payroll registers by someone independent of the person processing payroll.
Chatfield said the town had three or four people working to meet the requests for documents, but they were “overwhelmed” while having to perform their regular duties. He said the firm ended up moving forward with the assessment without all the documents requested.
The firm recommended the town consider implementing a retention policy that addresses where documents are retained, for how long and who has access to them.
The report states the town has a small staff overseeing financial operations and controls, and cited instances in the past where individuals had authorization, recording, reconciliation and custody duties for financial information.
The firm recommended the town consider creating a full-time or part-time controller position and segregate duties for all key controls to ensure that responsibilities are handled by different staff.
The town created a part-time municipal accounting assistant position a few years ago to assist with financial duties. The position works out of the mayor’s office.
“There were things that were brought to our attention that we have to keep up on,” Chatfield said about the report.
The council is expected to discuss further what to do to address issues identified in the report at its next meeting.
“The report certainly shows there are some shortfalls that are immediate that we need to address,” council member Megan Patchkofsky said at the Aug. 17 meeting.