TOWNSEND — The town is working to address the withdrawal of its credit rating and material weaknesses in its financial system, but some are concerned the problems won’t be easily remedied.
Bond credit-rating agency Moody’s Investor Service withdrew Townsend’s bond rating on June 12 due to the town’s failure to provide verified third-party financial statements.
According to Moody’s website, it can withdraw a rating due to “incorrect, insufficient or otherwise inadequate information.”
Townsend is one of seven towns — and the only town in Massachusetts — whose ratings were withdrawn on June 12 due to insufficient information.
Town Administrator Andrew Sheehan said he expects the bond rating to be restored as soon as the information is provided, which he expects will be soon.
“It’s not something that we’re pleased about, but we’re also confident that it’s just a temporary withdrawal of our rating,” Sheehan said. “I don’t expect it will result in a downgrade of our credit rating, but it doesn’t impose any problems in the near term because we have no imminent plans to borrow money.”
At a Board of Selectmen meeting on Aug. 27, Sheehan briefed selectmen on the withdrawl of the rating.
“We have every reason to believe that once we get the fiscal ’12 audit done and Moody’s gets a copy, our AA3 rating will be restored,” Sheehan told selectmen.
He added that the withdrawl is not indicative of major problems with Townsend’s financial system.
“We’re in very good financial shape,” he said. “We have good reserves and strong, consistent management in place.”
Sheehan said the lack of information is due to a delay in the town’s audit reports from previous years. He said selecting a new auditor, Melanson, Heath and Co., as Townsend did for fiscal 2011, can lead to delays.
“They were requiring additional information that wouldn’t normally be necessary in order to get a full understanding of the town,” Sheehan said. “It required a lot of documentation on our end.”
At the meeting, Sheehan also discussed steps being taken to address each of four material weaknesses identified in the fiscal 2011 audit, including segregating financial duties within the Water Department and using new financial management software that helps with reconciling accounts.
A recommendation to improve the cash-reconciliation process is under way, Sheehan said, but was slowed slightly because of the need to train staff members in a new financial-management software system.
“It’s pushed us back a little bit, but it’s been beneficial as it forces us to ensure we’re up to date as we move into the new system,” he said.
Melanson, Heath and Co. also identified the Water Department as being a problem because the same people are responsible for many different financial functions, including issuing bills, collecting money and handling abatements.
The Water Department is working on segregating duties among different staff members, Sheehan said.
“It’s good processes that we’re trying to put in place,” he added.
The Water Department will also begin offering online bill-paying beginning with the next billing cycle.
Sheehan said the town accountant is working on developing a formal risk-assessment policy to be presented to selectmen in September or October.
The auditors’ final recommendation, that the town maintain tax-title accounts, will be accomplished through the new financial-management software, which employees are still being trained to use, Sheehan said.
Sheehan also said he expects to present a plan for a formal risk-assessment procedure to selectmen in September and October.
“We have taken steps to address them, but it’s not something we can do in one fell swoop,” he said.
Some are concerned, however, that the problems may not be being adequately addressed.
Finance Committee member Carolyn Smart said several factors have combined to raise questions about the town’s financial system.
“I’m concerned about the financial indicators of not being able to reconcile the accounts, the four material weaknesses, the loss of our credit rating with Moody’s, and the lack of financial projections and information being sent to the Finance Committee,” Smart said in an interview.
Smart said that although the town’s financial situation is far from dire, with a healthy stabilization fund and consistent revenue, the concerns need to be addressed to ensure long-term stability.
“It’s very important that we look at the long-range impact on financial planning and its implications for the town, especially in light of projects like building the new school and possibly fixing the roads,” Smart said.
“This isn’t about us — it’s about the town and the taxpayers.”