Friday, January 15, 2010
Town audit shows accounts up, debt down
The town audit for the fiscal year ending June 30, 2009 has been completed, and “We’re in a pretty healthy condition,” says Treasurer Larry Barton. “The town has done a good job of providing the resources to deliver services in a tight environment.”
In their report dated October 1, auditors Sullivan, Rogers, & Company LLC observe that Carlisle’s net assets and fund balances are growing, and bonded debt at $5 million remains well below the state ceiling. Audit Committee member Simon Platt adds, “Feedback from the auditors was that they were very, very comfortable with our people, our process, and our controls.”
Although the auditor’s job is to examine “internal control over financial reporting and … compliance with certain provisions,” and not to offer opinions on financial health, the Management’s Discussion and Analysis section notes:
• Net assets, the amount by which town assets exceeded liabilities, were $22.35 million and increased by $1.13 million over FY08, “primarily through conservative spending, capital outlay for infrastructure projects reimbursable by the Commonwealth and the acceptance of Carriage Way as a Town way.” Most town assets consist of buildings, equipment, and infrastructure that are restricted because they are needed for the running of the town. Of total net assets, $2.30 million is available and “may be used to meet the Town’s ongoing obligations to citizens and creditors.”
• Fund balances, including the general fund, special revenue funds and permanent funds, totaled $6.23 million, an increase of $0.68 million. Of the total, $6.11 million is available, though some may be restricted to specific uses.
• Total bonded debt decreased by $2.18 million to $5.51 million. This reflected the use of a portion of a lump-sum reimbursement from the Massachusetts School Building Authority to pay off $1.30 million of bonds from a past Carlisle School building project, as well as reductions from payments. The report notes that the state limits town debt to 5% of total assessed valuation, adding, “The current debt limit is $78.3 million, which is significantly in excess of the Town’s outstanding debt.”
• Short-term debt remained at $1.0 million, to fund a fire truck ($500,000), school boiler ($294,529) and miscellaneous projects ($3,140). These will be converted to long-term debt in the near future.
Frugality may protect bond rating
As a result of frugal spending by town departments, available funds (unappropriated general fund plus stabilization fund balances) as a percentage of revenues rose from 8.8% in FY08 to 10.8% in FY09. Barton explained that the Selectmen had requested all town departments under-spend their FY09 budgets to prepare for anticipated cuts in state aid. Over $800,000 was unspent or deferred, and when the state cuts were not realized, this had a very positive effect on town funds.
“This is important to bond rating agencies,” said Barton, noting that those agencies prefer a percentage in the 10% to 15% range. The town earned an Aa2 rating from Moody’s Investor Services for its most recent issuance of long-term debt in 2006, when the funds balance was 11.7% of revenues. A high rating means lower interest paid on borrowed money, and with two school projects in the pipeline, protecting this rating is an important financial goal.
Liabilities for retirement benefits recognized
This year the town implemented General Accounting Standards Board Statement 45, a requirement to report future liabilities for post-employment benefits other than pensions. Employees who retire from Carlisle and their spouses are entitled to continue group insurance at the same contribution level as when they were employed. The goal of GASB 45 is to track the Town’s liability for these future benefits based on the number of active employees.
For Carlisle, the result was an accrued liability of $6,883,708, which would render the town insolvent if reflected on the books. Fortunately, GASB 45 does not require this, “or all towns would be underwater,” says Barton. ”Every community has the same problem.”
“I’m not overly concerned about it at this time,” he adds. The obligation is spread over as much as thirty years and the calculation does not take into account circumstances that could reduce costs, such as employees who finish their service in another town. He notes that so far, bond rating agencies are ignoring it.
As far as managing the problem, the Selectmen could choose to set up a fund to offset the liability, says Barton. Reducing benefits is not an option, as, at 50% contribution, “we’re as low as we can be under state law,” he notes. Platt says the scope of the problem is beyond Carlisle’s to solve, “Every other town is facing this problem, and with bigger numbers. Something has to be done about the cost of healthcare.”
Platt notes that he and Deb Belanger comprised the Audit Committee, which met three times to discuss procedures, review a draft of the report, and discuss the final document. The audit was “smooth and very timely,” said Platt. “The books were closed efficiently, and the auditors had nothing but good things to say” about the process. He points to Barton and Accountant Priscilla Dumka as instrumental to the effective working of the town’s financial function, adding, “We’re very lucky to have them.”
Copies of the audit report are available to the public by contacting the Treasurer’s office at Town Hall. ∆
© 2010 The