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Financial audit shows town has good fiscal management

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PEPPERELL — An audit of the town’s finances reveals no problems.

Town treasurer Michael Hartnett and town accountant Theresa Walsh went before the Board of Selectmen this week to report on the audit of the town’s financial statements for the fiscal year ending June 30, 2007.

“We secured a clean unqualified audit opinion with absolutely no exceptions that needed to be addressed,” Hartnett said.

The audit, performed by the accounting firm of Giusti, Hingston and Company, included a four-page “management letter” containing observations and recommendations for the town.

The letter described recently published accounting standards that “place a heavy emphasis” on internal controls and documented procedures.

“This particular management letter comment is showing up on every management letter in every municipality within the state,” Hartnett explained.

The report noted that that the town accountant and town treasurer “have very good internal control procedures in place and do a very good job of recording and reconciling financial transactions.”

Walsh explained that she is already implementing standard operating procedures to document the internal controls she already has in place.

Other recommendations included implementing additional reconciliation procedures, such as the town accountant reviewing and initialing the treasurer’s bank statement and other financial documents.

Noted in the report was a concern over the reconciliation of the Water and Sewer departments’ accounts receivable.

Walsh noted that there are numerous segregated accounting systems in the town including the town treasurer, the town accountant, the ambulance service and the DPW. Walsh explained that the DPW’s new system was the third they have tried in recent years.

“It doesn’t make sense that we have five accounting systems in this town,” Selectman Joseph Sergi said.

“Any system that pretends to cover all areas of town government is inevitably going to have some portions of that system that are better than others,” town administrator Robert Hanson said.

“There are always nuances that make one system better than another,” Sergi noted.

Sergi suggested that the town was doing itself “a disservice” by having multiple systems with multiple maintenance and upgrade requirements.

“What do you see as the biggest obstacles facing the town in the next year?” Chairman Lyndon Johnson asked.

“Lack of money,” Walsh said flatly. “It’s going to be really tough this year. We’re spending down our reserves.” She pegged the deficit at $1.4 million but explained that the town’s stabilization fund held $752,000 with free cash at $892,000.

“In terms of addressing that deficit, all things being equal, is it a practical strategy to look at a three-pronged approach using some of those reserves, cuts, and very potentially looking at an override,” Sergi said.

“The question is, what is a reasonable amount to propose for an override?” Hanson asked.

“Until we have real numbers, I find it very difficult to say what is a reasonable way to proceed,” said Finance Committee Chairman Diane Gaspar.

The FinCom is expected to provide guidance to all departments this week.

“With zero going forward, you are going to see a decrease in services,” Gaspar said. “You just can’t have the same level of services for less money.”

“We really cannot afford cost-of-living increases,” Gaspar added, referring to non-contract employees.

Should an override be placed before voters in the spring, Hanson noted how Shirley recently put an override before its citizens using individual line items that could be either accepted or rejected.

“It’s a creative way of getting some of it to pass,” Johnson noted.