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Finance director reports $1.4M ECHIP shortfall and ledger discrepancies; auditors to be notified
Summary
Finance Director Cherie Trahan told the Finance Committee that the town’s health-insurance pool (ECHIP), combining town and Board of Education claims, is about $1.4 million short and staff are reconciling roughly $1 million in unposted revenue on the general ledger; Trahan plans to notify auditors and the committee discussed whether legal review is necessary.
Finance Director Cherie Trahan told the Town of Coventry Finance Committee on May 11 that the town’s health-insurance pool (ECHIP) is facing a reserve shortfall and the department is working to reconcile recording discrepancies in the general ledger.
"Currently, the account is in the hole approximately $1.4M," Trahan said, referring to combined town and Board of Education claims for March and April. She added that May and June remain in the plan year and that the shortfall will effectively be an internal loan against the general fund unless reversed by later activity.
Trahan also informed the committee that approximately $1 million in revenues was not yet posted to the general ledger, stressing that the funds are not missing from bank accounts but are not accurately recorded. She said staff are reviewing postings daily to identify and correct the discrepancies and that she intends to notify the town auditors about the condition.
Committee members discussed whether formal legal opinions are required to document internal transfers and the accounting treatment; Trahan said she would notify auditors and recommended tracking the transactions through audit records. Town Manager James Drumm said the town would not treat the internal transfer as an external contract but as an accounting entry reflected in the audit. Members asked whether bond-rating agencies would require a repayment plan; Drumm and Trahan said they would want to see a plan to repay over time.
Trahan said reserves available to cover health-insurance shortfalls stood at $1,172,000 (she described this as a first option) and that she plans to set up the new Cigna Direct fund separately so the old ECHIP fund and the new fund can be tracked independently. The committee asked for a draft memorandum of agreement with the Board of Education before the June finance meeting if possible.
The committee did not vote on a corrective funding action at the May 11 meeting; members directed staff to continue reconciliation and to provide updated figures at the next meeting.
