Town claims "allocation error" but we still have $3 million less than we thought we did
By
Stephen Hoff, Charlestown
When Charlestown’s outside auditors issued the FY 2021 financial statements earlier this month, they revealed an undeniable failure. It was an indictment of our financial management systems and will require additional taxes that will ultimately fall on the backs of Charlestown’s taxpayers.
Although the FY 2021 audit was accurate, it showed that our Unassigned Fund Balance is $3 million less than the Town expected. Why would the Town have expected the $3 million to be there if our financial management systems were functioning properly?
How could the Budget Commission have recommended spending $6 million of our surplus over the past 2 town budgets if they didn’t have a solid understanding of how much was actually available to spend?
Our outside auditor acknowledged in January 2022 that Charlestown’s FY 2020 financial statements were wrong, but that they had been unaware of that error for the past year.
Also in the dark for the past year were the Budget Commission, the Office of the Treasurer, and the Town Administrator receiving $150,000 of compensation annually who supervises the Office of the Treasurer.
You can imagine the excuses being made and the fingers being pointed. There is plenty of blame to go around. The Budget Commission claims no responsibility and will not be investigated. The Town staff will investigate itself as well as the outside auditor. It is now time for the Town Council to step up and demand an independent investigation.
If it was a small amount, it would have gone unnoticed, but $3 million isn’t an immaterial amount. It will have major future tax implications for taxpayers but is being called just an allocation error.
But this is not a simple allocation error. When your spouse accidentally spends $3 million more than was in your budget, it is not an allocation error. Cash went out the door to vendors, and it must now be recouped from the taxpayer’s pockets. This will cost us!
Where were our professional staff and our appointed officials on the Budget Commission whose responsibilities include managing our Unassigned Fund Balance? Simply blaming the auditors is not good enough because there are other parties who share in this apparent case of negligence.
At the Budget Commission meeting on January 28th, the Chair Richard Sartor made the most amazing rationalization I have heard in a long time to justify Town Council’s approval of its draft Fund Balance Policy in February.
Sartor claimed that if their proposed new Fund Balance policy had been adopted a year ago, it would have prevented the $3 million debacle from ever occurring, because the Town staff would have been responsible for identifying the problem and informing the BC.
This is just utter nonsense because under Charlestown’s Charter, Town staff are already responsible. So is the Budget Commission. Bad internal financial controls are just that, bad internal financial controls.
Charlestown needs to seriously consider a different way of budgeting. We have been using Unassigned Fund Balance cash to pay for large long-lived capital projects whose benefits extend decades into the future.
Instead, we should have been using that cash to pay off our large unfunded liabilities whose benefits expired years ago. Issuing bonds to pay for our recent large long lived capital projects at historically low interest rates would have been a wise financial decision. This would leave the Unassigned Fund Balance just for emergency uses.
Wouldn’t
this be the advice we would give our children and grandchildren? Pay for what you have consumed before you go
out and buy a bunch of new stuff.
