Commonwealth of Massachusetts | Public Employee Retirement Administration Commission
Five Middlesex Avenue, Suite 304, Somerville, MA 02145
Ph 617 666 4446 | Fax 617 628 4002 | TTY 617 591 8917 | www.mass.gov/perac
Domenic J. F. Russo, Chairman | A. Joseph DeNucci, Vice Chairman
Mary Ann Bradley | Paul V. Doane | Kenneth J. Donnelly | James M. Machado | Donald R. Marquis
Joseph E. Connarton, Executive Director
June 19, 2008
Mr. Robert Cunha, Chairman
Lexington Retirement Board
1625 Massachusetts Avenue
Lexington , MA 02420
REFERENCE: Report of the Examination of the Lexington Retirement Board for the two-year period from January 1, 2005 through December 31, 2006
Dear Mr. Cunha:
The Public Employee Retirement Administration Commission has completed a follow-up review of the findings and recommendations contained in its audit report of the Lexington Retirement Board for the most recent period referenced above. We conduct these visits as a regular part of the oversight process. They are designed to ensure the timely implementation of corrective action for the recommendations cited in that report. The results are as follows:
1. The Audit Report cited a finding that the Bank of America checking account did not appear on the System’s cash books. The audit report recommended assigning it a separate general ledger number and reporting transactions. The audit also cited that some checks had been outstanding for more than six months.
Follow-up Result: The Assistant Town Manager for Finance who is the Retirement Board Ex-Officio member and the Board Administrator have assured the auditors that proper controls are in place to monitor all movements into and out of this account, which should result in a zero accounting balance, thereby returning the same cash balances each month as currently presented on the cash books. They have declined to change the current practice of omitting the checking account from its monthly accounting ledger.
The auditors recognize that this cash account is separately reconciled and its cash movements are monitored by both the Town Treasurer and Administrator. However, generally accepted auditing standards and any objective evaluation of internal controls would dictate accounting entries reflect the source and destination of all cash flows. Therefore, we would continue to encourage the System to set up a separate ledger account and post transactions directly into and out of the Bank of America account to document the actual flow of cash and provide a more specific audit trail. Without a separate ledger account set up for such activities, this finding cannot be resolved in accordance with PERAC accounting standards.
The Administrator has resolved most of the outstanding checks and continues to work on the remaining few. We anticipate that the remainder of outstanding checks will be resolved.
2. The Audit Report cited a finding that two cases of improper coding of regular earnings for retirement deductions were identified. Lexington Housing Authority employees’ on-call compensation, deemed regular compensation by the auditor, was omitted when deductions were calculated, in addition a small reimbursement for the cell phone usage of another member was improperly qualified for retirement deductions.
Follow-up Result: The on-call compensation is now included in retirement deductions, and retirement deductions have terminated from the member’s cell phone reimbursement. This finding is resolved.
3. The Audit Report cited a finding that not all executed vendor contracts requested for review could be located by the staff.
Follow-up Result: All executed vendor contracts are now available for review at the Board office. This finding is resolved.
The Commission wishes to acknowledge the effort demonstrated by the staff of the Lexington Retirement Board to correct the deficiencies cited in the most recent examination of the system.
Thank you for your continued cooperation in this important matter.
Sincerely,
Joseph E. Connarton
Executive Director