CHARLESTOWN — Members of the budget committee are demanding answers from the city auditor on why the company reclassified aspects of the undesignated fund in a final report without telling city staff and why it created a new major fund account for the acquisition of open space.
The commission this week instructed city staff to prepare questions for the city’s auditor, Cayer Caccia LLC of Warwick, regarding changes uncovered in a final copy of the recently completed audit for the coming fiscal year. is completed June 30, 2021. The changes were made after City Administrator Mark Stankiewicz and Treasurer Irina Gorman approved another draft copy, officials said.
The changes involved transferring about $3 million of the city’s undesignated fund balance to a separate designated account. The money never “ran out,” staff said, but the reclassification resulted in a noticeable reduction in the unrestricted fund, which fell from $8.7 million in the staff-seen project to $5.7 million. million dollars in the final audit report.
The issue has been identified as “a reclassification issue,” both city staff and commission members said, and there are no concerns about misuse or embezzlement.
“It must be clear, the city has done nothing wrong. It wasn’t city staff,” commissioner Arthur Haskins said. “It was a problem where the auditors were taking money out of the unrestricted balance and putting it into a restricted balance. The accounting wasn’t the problem, rather it was the reporting of it.
Committee Chairman Richard Sartor, Vice-Chairman Linda Philips and Haskins each expressed frustration during a committee meeting this week that the changes to the reports occurred without the auditor’s staff contacted the city. They said knowledge of the changes could have impacted the committee’s decisions regarding both the current budget and the 2022-23 budget process, which is already underway.
Stankiewicz said much of the confusion stems from the perception that the money has been misused or is missing.
The auditors were within their scope to reclassify items as they had, but Cayer Caccia staff’s decision was not in line with company practices in previous years. The confusion caused by the reclassification led to a significant reduction in the balance of unrestricted funds and caused officials to sound the alarm about possible audit problems.
Complicating the issue, the company also incurred a larger expense for acquiring open space in the 2020-21 fiscal year and created a separate account. The city has spent on open spaces since winning permission to seek bail in the city’s referendum, and Sartor said he was confused and dismayed that auditors are only now splitting it into a different account. .
“My understanding is that the open space referendum was passed many years ago and has always been handled in a certain way,” Sartor said. “This year there is a separate fund with no explanation or discussion with the city, and no prior indication of errors in the reports. Who was wrong? Who was wrong before? Did the auditor make the mistake ?”
Sartor and Haskins said that after seeing the changes and trying to review them, they were puzzled as to what caused the different process this year. The city had made larger purchases during the 20-21 fiscal cycle than in previous years, spending more than $700,000 on open space acquisitions, which staff said likely played a role. role in reclassification.
Despite the concerns, the city will be able to absorb the unexpected change in the undesignated fund balance and maintain the fund at 15-25% of the city’s general fund, as suggested by the risk analysis study of the Government Finance Officers Association carried out last May.
At its current level, the undesignated fund represents approximately 18% of the general fund and is considered a healthy balance.
Stankiewicz said Thursday that the current issues also expose the need for a more formal written policy that the city can use moving forward regarding the maintenance and use of the undesignated fund balance. He said the proposed policy is expected to be presented to city council in February.
“That’s why we need this more robust written policy,” he said.
The commission is expected to receive draft questions and should direct city staff to move forward with written correspondence at the commission’s next regular meeting, scheduled for today.