Shrewsbury Creates Audit Committee Over Council Objections

Governing body votes 4-2 to create oversight committee to review financial controls

Shrewsbury's governing body has established an audit committee to review borough financial controls after much discussion and the objections of several members.

The Borough Council voted 4-2 at its regular meeting Tuesday night to create a three-member committee made up of council members who will convene at least quarterly. Councilmen Michael DeNofa and Peter Meyer voted against the resolution.

Councilman William Dodge, who moved the resolution to a vote, characterized the creation of the audit committee as a common-sense move that would enable the governing body to have more information on the borough's financial condition.

"The point is to put this body in position to review the process of the audit," he said. "I feel so strongly this borough is lacking a serious audit function."

DeNofa, however, felt the committee wasn't necessary at all.

"We hired an auditor who's a professional," DeNofa said. "I don't see why we need another committee."

The borough reappointed auditor Robert Allison of the firm Hutchins, Farrell, Meyer and Allison Tuesday night.

Meyer was more critical, saying an audit committee would simply be "another layer of bureaucratic BS.

"You're auditing the audit," Meyer said. "We don't need an audit committee."

Meyer and borough attorney Martin Barger also objected to the original composition of the committee, which was to be chaired by a member of the public approved by the council who would serve alongside two council members and the borough CFO.

"This is fraught with tremendous liability to the town," said Meyer, who believed an unelected citizen should not be granted access to internal contractual information and confidential information. Barger agreed, saying "if you bring an outside person in... I think it's a violation of the Sunshine Law," which governs what documents are fully public information. 

Dodge relented, agreeing to keep membership to elected officials. 

"The purpose of this committee is not to conduct an audit of the audit," he said. "There's no need to fear anything."

Council President Tom Menapace said the idea of an audit committee "made good sense.

"At the end of the day, an audit committee is to identify... fraud," Menapace said. "It's a tripwire."

Dodge agreed, adding "also that policies and procedures exist to prevent fraud."

The mission of the audit committee will be to:

"Adopt, staff and oversee best practices necessary to create a system of compliant internal financial controls governing budgets, the accurate and timely reporting of revenue raised and monies expended, and the development and maintenance of a strong moral and ethical culture among all borough officials and employees."

The committee will be tasked with, among other items: 

  • Reviewing the borough's annual financial statements;
  • Reviewing the audit process, opinion and findings;
  • Seeking the approval of the Borough Council for the annual financial statements prepared and submitted by the independent auditor's opinion;
  • Recommending to council that internal control weaknesses and other recommendations cited by the auditor are promptly addressed.
R. Reyem January 24, 2013 at 11:05 PM
Audit Committees make great headlines but unless they’re comprised of accounting professionals, it’s a waste of time. I’ve been on one. Every municipality must undergo a yearly audit by a third-party, independent, certified municipal auditor. These audits are available to anyone who wants a copy because they’re considered Open Public Records. Even the town budget, line by line, is available for those that have an interest. You don’t have to be a councilperson. You don’t even have to be a resident. Therefore, putting a public member on such a committee adds nothing in the end. Regarding the liability that Mr. Meyer was referring to, one need only look at Enron. Enron’s Audit Committee had a former dean of the Stanford Business School, who was widely respected accounting professor, a CEO of a bank, a former U.K. Secretary of Energy, and a former Chairperson of the Commodity Futures Trading Commission. How’d that work out? Besides the loss of billions of dollars in shareholder value, you may remember that their auditor was Arthur Anderson. Remember them? Bankrupt, lawsuits, disgrace. In other words, always best to leave the liability with the auditor, who has the last word anyway.
R. Reyem January 24, 2013 at 11:05 PM
Councilpersons don’t have access to taxpayer’s money and probably the only way they can get in it is by owning a business that does work for their particular municipality. In New Jersey, the state runs background checks on such things and excludes candidates before they can even run for office. You also need to file a full accounting of your income and its source(s) to the state. The only other possible conflict could be if someone sat on both the finance and audit committees at the same time. I doubt the folks in Shrewsbury would let that happen. Finally, unless you live in Middletown, these Councils are made up of volunteers and don’t get paid a penny for their troubles. Doesn’t sound like a great gig to me.
Bill Dodge January 25, 2013 at 08:26 PM
Thank you for sharing your thoughts. If by waste of time you mean it won’t stop fraud and abuse, history is on your side. Still public officials must do all that is reasonable to prevent such events. The measuring stick for reasonable actions is the GASB which creates/defines best practices for state, local, and municipal organizations. Shrewsbury’s Resolution followed the general guidelines of the GASB. Success in managing to prevent fraud and abuse begins with the governing culture provided by Council –sets an example and provides direction. But the most important cultural environment the employees and Shrewsbury is blessed to have a trustworthy, trained, and certified staff led by its CFO. Municipalities that create a strong culture of best will reduce BOTH the risk of loss of taxpayer monies and legal and financial actions that could arise from an angry taxpaying public.
Bill Dodge January 25, 2013 at 08:28 PM
Just curious; "How would you feel if the Audit function was handled by the Finance Department, and independent of elected officials?"
Bill Dodge January 25, 2013 at 08:29 PM
Just curious; "How would you feel if the Audit function was handled by the Finance Department, and independent of elected officials?"


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