Audit blasts Webster’s financial management

Oct. 06--WEBSTER -- An auditor gave a scathing review about the town's upkeep of its financial house during fiscal 2016.

Most notably, Tony Roselli, a managing partner with Roselli, Clark & Associates of Woburn, conducted a deep dive into the town's health insurance trust fund and found it was mismanaged.

The town is a self insurer and pays claims directly, with employees paying a 25 percent share.

The town once maintained a surplus in the account, but it didn't fully fund its 75 percent by about a half million dollars a year for four years in a row. This resulted in a more than $750,000 overall deficit, the auditor said.

As a consequence, town meeting voters will be asked to approve $455,301 for the fund, and the town will credit employees another $332,725 by way of a premium holiday, meaning they won't have to pay their portion of health insurance premiums for a month or longer, Town Administrator Douglas C. Willardson said.

Mr. Roselli presented to selectmen on Monday, with the health insurance weakness the most significant issue addressed.

Mr. Willardson, who began working in Webster in December, said he increased this year's health insurance budget by $900,000. Had he not, a $750,000 problem would have been closer to $2 million, he said.

The town is taking steps to move to state group insurance, which should result in significant savings, he said. However, a move would need to be negotiated with employees.

Maintenance of capital projects was the second most significant issue the auditor found. Some accounts ran negative amounts while others had excess money, and therefore many amounts have to be transferred between accounts for balancing, the administrator said.

"It'll probably still be a negative net amount," Mr. Willardson said in an interview. "We'll have to appropriate money to fix that at a later date."

Mr. Roselli also pointed to the town's recently completed $43 million elementary school project. The Massachusetts School Building Authority is reimbursing the town 77 percent of construction costs, with the remainder to be borrowed by the town.

But the town hadn't borrowed a $4.4 million portion when the funds were made available at a previous town meeting. Instead, it paid out of its general fund, resulting in cash flow issues and a "free cash" certification for fiscal 2015 that ran at negative $4.1 million.

The school issue was resolved earlier this year when selectmen authorized town Treasurer James Chauvin to sign bond anticipation notes.

However, the late borrowing resulted in an approximately 2 percent increase on the interest rate because it is now taxable, the administrator said. It equates to about $80,000 in additional interest during the first year. It is interest the town would not have had to pay had it borrowed for the project in a timely manner. The loan is for 20 years, the administrator said.

The auditor also noted a pair of town meeting transfers that occurred in 2007 but weren't recorded until 2017.

The report said town Accountant Pamela Leduc recorded two transfers that moved $530,000 from water retained earnings to water capital projects in fiscal 2017. Adjustments were made to state Department of Revenue balance sheets each year prior to submission, but they were never made to the original records, the auditor said.

Also, the auditor found deficiencies in internal controls, pointing out three reconciling items that were present in 2015 and 2016 that resulted in an understatement of $428,856. In other words, according to Mr. Willardson, no one has any idea why that money is in the bank.

It has resulted in a corrective action plan for the accountant and treasurer to reconcile cash on a monthly basis, effective immediately, the audit report said.

Mr. Willardson said of the report: "Certainly this is not something that we can be satisfied with. We have to fix these issues. We do have meetings every other week, where we go through each of the items that were brought up in this audit, and we're working to reconcile those and get them taken care of."

During the fiscal year in question, ending June 30, 2016, Mr. Chauvin served as the elected treasurer for a limited amount of hours, for no pay, while he worked as a town custodian. Ms. Leduc's roles were also split, as she served as interim administrator and accountant. The dual roles are viewed by some as a contributor to the financial problems.

On Wednesday, Mr. Chauvin and Ms. Leduc deferred comment to Mr. Willardson.

"There are positions in Town Hall that had some turnover, and the treasurer was not working full-time for a while, and that kind of led to some of these issues," Mr. Willardson said. "Definitely Pam doing both jobs did not help the issue."

Meanwhile, Mr. Willardson said, he has invited the state Department of Revenue to help the town analyze its financial condition and conduct an audit, with a report and recommendations expected in the next few weeks, Mr. Willardson said.

Asked for his view of the Roselli audit, Andrew Jolda, chairman of the Board of Selectmen, said in an email, "At this time the Board of Selectmen are working on scheduling a presentation by the Department of Revenue. We are hoping to have this presentation done in November."

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