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
September 17, 2008
Mr. Fran Delano, Chairman
Swampscott Retirement System
25 Railroad Avenue, Suite 4
Swampscott, MA 01907
REFERENCE: Report of the Examination of the Swampscott Retirement System for the two-year period from January 1, 2005 through December 31, 2006.
Dear Chairman Delano:
The Public Employee Retirement Administration Commission has completed a follow-up review of the findings and recommendations contained in its audit report of the Swampscott Retirement System 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 examination addressed several specific findings and recommendations included in the audit report for the period referenced above. The results are as follows:
1. System Administration The Audit Report cited a finding that large IRS penalties were assessed due to late filing of Form 945 federal tax withholding deposits.
Follow-up Result:
This issue is still unresolved. Additional late filing penalties of $27,547.04 were assessed by the IRS for the Tax Year 2007. The penalty is approximately $2,300 per month. The Board paid the penalty and has submitted a letter seeking clarification on the filing procedure. The Board believes they are in compliance with IRS filing regulations.
The auditor strongly urges the Board to consult with a CPA firm in order to seek professional guidance to resolve this important issue, and get some of the penalties and interest refunded back to the Swampscott Retirement System. Furthermore, the Board should consider hiring a professional payroll services firm to process the monthly payroll and administer the federal tax deposits.
2. Expenses Charged to the System Credit Card The Audit Report cited a finding that Board credit card charges did not have adequate supporting documentation.
Follow-up Result: The issue has been resolved. The Auditor reviewed 2008 Board credit card charges and observed that proper backup is now being attached to support the payment voucher.
3. Travel Expenses The Audit Report cited a finding that travel expenses are not submitted on a formal travel expense reimbursement document.
Follow-up Result: The issue continues to be unresolved. The Board has not yet developed the requested travel expense reimbursement form.
4. Bank Reconciliation The Audit Report cited a finding that the Town Treasurer is not preparing the Board’s bank reconciliation.
Follow-up Result:
This issue has been resolved. Based upon review of the 2008 bank reconciliations it was observed that the Treasurer approves and signs the reconciliations.
5. Affidavits The Audit Report cited a finding that the Board was not withholding benefit checks for retirees who did not comply with filing the affidavit verification forms.
Follow-up Result:
This issue has been resolved. The retirees who have not complied have been discontinued from receiving their monthly pension benefit.
6. Membership Supplemental Schedule The Audit Report cited a finding that there were numerous negative member balances in the 2006 Membership Supplemental Schedule.
Follow-up Result:
Although there has been some improvement in cleaning up these negative member balances, the auditor observed that five members on the 2007 Membership Supplemental Schedule had negative balances ranging in value up to approximately $3,300. This issue is still unresolved.
7. Accounting The Audit Report cited a finding that the Staff Salary account was understated on the general ledger and the Administrative expense account was overstated due to a lack of proper utilization of other general ledger accounts.
Follow-up Result:
This issue continues to be unresolved. The 2007 Staff Salary account balance contained only half a years worth of salaries. Furthermore, charges for software service support and fiduciary insurance were not classified to their proper general ledger accounts.
The Commission wishes to acknowledge the effort demonstrated by the staff of the Swampscott Retirement Board in their attempt to correct the deficiencies cited in the most recent examination of the system. However, since a majority of the deficiencies remain unresolved, PERAC auditors will conduct an additional follow-up visit to ensure appropriate progress is being made in those areas that have not been corrected adequately at this time.
We anticipate your continued cooperation in resolving this important matter.
Sincerely,
Joseph E. Connarton
Executive Director