‘I Think We Are Getting Close’: Audit Committee Details Course-Correction Plan


The independent auditors who sign off on the town’s financial statements—helping New Canaan maintain its AAA bond rating and fund major capital projects such as the Town Hall expansion and proposed building project at Saxe—need better internal controls in order to do their jobs responsibly, officials said Monday.

Auditors don’t actually “do real auditing,” but rather “rely on systems of internal control” in reviewing New Canaan’s financial statements, according to Audit Committee member Ed Kangas. And those systems themselves need substantial changes and shoring up, he said during a meeting of the Audit Committee, held in the Training Room at the New Canaan Police Department.

Because towns in Connecticut are set up where the municipality funds the schools, distrust between the two can develop and “I see it in spades here,” Kangas said.

“I think we are getting close to the place where we have an understanding that says we have to have good financial systems, good financial controls, good checks and balances. The Board of Education needs to allow for supervised but regular access to everything—records and contracts, whatever is necessary, on a supervised basis—and the town’s CFO and treasurer and first selectman should be able to sign a ‘Letter of Representation’ on the entire town. But let it be understood—and some of us, as you know are not very happy with the way this is going on—we do not think there is the right kind of internal auditing. There is not the right checks and balances. We have stuff un-reconciled between the town and the schools. It goes on for six months. It should not be that way.”

The comments come two weeks after the committee announced that it was suspending its activity Nov. 1, citing what it described as a poor relationship between the town and schools.

Committee Chairman Bill Parrett said the group’s purpose in announcing that it was suspending its activity was that required changes were not being made in a timely fashion, and if nothing was said, people might be surprised that the Audit Committee did not support the town’s financial statements.

At its meeting this week, the Audit Committee appeared to take a half-step back from suspending its work, offering more detail about what its members wanted done in order to feel comfortable that New Canaan could stand behind financial statements presented to auditors.

Those steps include that the Town Council will accept New Canaan’s financial statements on the recommendation of the Audit Committee, extended audit procedures in the tax collector’s office, more responsive and consistent follow-up on “whistleblower” items and the hiring next year of an internal auditor (on a part-time, full-time or consulting basis).

Parrett clarified that the Audit Committee has not found any missing funds or appropriations, and that concern arose among Audit Committee members when they felt resistance. Specifically, Parrett said, the problem of access was not particular to the town and Board of Education, but in “other areas in town where we need access and that access has been denied and we have had to intercede.”

“When there are people who have roles and responsibilities in a financial function, and they want to see things—sort of like the town wants to see in the Board of Education—you would expect that the person would be given access, particularly if they have a role and responsibility,” Parrett said. “And it took a while for some of that access to be given in a way that the individuals we are dealing with felt it should be given.”

Kangas said that the town treasurer, whose signature appears on checks for the town and schools, “has not been given adequate access to town records—unacceptable.”

Kangas commended the district for making “great strides” in terms of inviting town officials in to review its financials, but added that “the damn town doesn’t go.”

“I mean it’s a two-way street,” Kangas said. “If they say the door is open, somebody has got to walk through it. You can tell I’m not really happy with the way people are behaving.”

Parrett said that the Audit Committee has no reason to believe that there has been any misappropriation of funds in the tax collector’s department “and we have no reason to believe that that department is not working well.”

At the same time, an external auditor has cautioned New Canaan that controls there are not as strong as they can be, and “from a practice standpoint, if there is a loss of money in a town, it predominantly happens in that department,” Parrett said.

Kangas said he has been frustrated with the pace at which the town government has said it could implement the recommended changes in the tax collector’s department.

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