Town of Bridgewater

Audit exit conference – Board of SelectmenRoselli, Clark & AssociatesNovember 17, 2009

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Contents

Presenters:– Tony Roselli, Partner– Terenzio Volpicelli, Manager

Introduction

Comparative data to the peer group

Informational items

Findings

Conclusion

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Introduction -

What is an audit?

Performed in accordance with GAGAS (Yellow Book).

Requires review of internal control over major transactions.

Requires risk assessment and enhanced procedures in identified material areas.

Clean opinion verse qualified opinion.

Prior audits (2003 – 2007) did not have clean opinions.

Caused concern with bond rating agencies.

Current audit cures this concern.

Peer comparisons

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Peer group comparison Criteria to be designated as part of the peer group. (1)

- Must be a Massachusetts community. - Must have a population between 20,000 and 27,000. (2)

- Must have average annual household income between $55K and $75K. (2)

12 total communities met this criteria. Total residential tax levy by community was compared. Average total residential tax levy of the group was compared. Residential tax per household was compared. Commercial, industrial and personnel property taxes were deducted for purposes of this

analysis. Expenditures for critical services in total are compared. Average of expenditures for critical services is compared. Bond rating is compared.

(1) Tax levy data was obtained from the Massachusetts Department of Revenue, Division of Local Services – 2009 At a Glance Reports.(2) Per US Census 2000.

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Peer comparison – Tax levy

2500

3000

3500

4000

4500

5000

5500

Average tax per household

Dedham

Walpole

Easton

Canton

Mansfield

Stoneham

Danvers

Sandwich

Wakefield

Wilmington

Bridgewater

Saugus

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Peer comparison – Tax Levy

15.017.019.021.023.025.027.029.031.033.035.0

2009ResidentialTax Levy

Average ofpeer group vs

Town

Average($34.4Million)

Bridgewater($26.2Million)

3.0

3.5

4.0

4.5

5.0

2009 average taxper household

Average($4,525)

Bridgewater($4,033)

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Peer comparison – critical services (2008 expenditures per Massachusetts Department of Revenue Division of Local services web site)

2.02.53.03.54.04.55.05.5

Police

Danvers

Dedham

Saugus

Walpole

Wilmington

Wakefield

Canton

Easton

Mansfield

Sandwich

Bridgewater

Stoneham

1.0

2.0

3.0

4.0

5.0

Fire

Dedham

Danvers

Canton

Sandwich

Wakefield

Saugus

Wilmington

Walpole

Mansfield

Easton

Stoneham

Bridgewater

15.0

20.0

25.0

30.0

35.0

40.0

Education

Mansfield

Wilmington

Walpole

Dedham

Sandwich

Easton

Danvers

Wakefield

Canton

Saugus

Stoneham

Bridgewater

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Public Works

Dedham

Wakefield

Saugus

Danvers

Wilmington

Mansfield

Walpole

Canton

Stoneham

Easton

Sandwich

Bridgewater

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Peer comparison – critical services

1.0

2.0

3.0

4.0

5.0

Police

Average

Bridgewater

1.0

2.0

3.0

4.0

5.0

Fire

Average

Bridgewater

10.0

15.0

20.0

25.0

30.0

Education

Average

Bridgewater

0.0

1.0

2.0

3.0

4.0

5.0

Public Works

Average

Bridgewater

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Peer comparison – bond rating (per Massachusetts Department of Revenue Division of Local Services web site)

Canton Aa2

Danvers Aa2

Wakefield Aa3

Dedham Aa3

Walpole Aa3

Mansfield A1

Sandwich A1

Stoneham A1

Easton A2

Saugus Baa1

Bridgewater

Baa2

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Peer group comparison conclusion

Bridgewater had the lowest total residential tax levy in 2009 for the peer group. Bridgewater trailed the peer group in this area by 23.9%. Bridgewater ranked next to last in the peer group when comparing average real estate tax

per household. Bridgewater trailed the average of the peer group on a real estate tax per household basis

by 10.9% or approximately $500. This has resulted in a reduced level of critical services. This in turn has resulted in the lowest bond rating of the peer group. (Only 1 community in

the entire State has a lower bond rating and only 3 others are equal to Bridgewater.) Moody’s also cited in a recent bond down grade that, lack of financial leadership,

reductions in critical services and lack of annual audits has contributed to the reduced bond rating.

The lack of a material commercial and industrial presence is also adversely impacting Bridgewater.

The residential taxpayer is not leveraging this void like other similar communities with a lower commercial and industrial presence like Easton and Stoneham

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Informational items

GASB 45 - OPEB

SAS #112 – Internal Control

Consideration of fraud and theft

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Findings

Lack of documented internal control policies (Significant deficiency)

- Cash receipt handling and turnover at the department level.

- Payroll and benefit policies

- Purchasing policies

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Findings - continued

Overall organizational structure and layout

- Eliminate elected Treasurer/Collector and create appointed combined position.

- Consider creating a Finance Director position.

- Town Manager verse Municipal Administrator.

- Physical layout of operations.

- Data processing improvements.

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Findings - continued

Internal audit function.

Annual audits (significant deficiency).

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Findings - continued

Authorization of payroll warrants.

Payroll processing controls.

Fidelity bonds.

Use of volunteers.

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Findings - continued

Treasurer/Collector

- Automated processing

- GASB 31

- Quarterly billing

- Lock box

- Tailings

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Findings - continued

Ambulance

Transfer station (Significant deficiency)

Golf course

Foreclosed properties

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Conclusion – Blue print for improvement

Policies need to be documented.

Enhance revenue through override or other means to close gap between Town and peer group.

Financial infrastructure needs to be improved to make it easier to attract talented individuals who will not resign abruptly.

Appoint consultant. - Handle day to day responsibilities.

- Document policies and procedures.

- Assist with system conversion.

- Assist hiring new financial personnel.