TOWNSEND — Townsend officials are considering approaching Standard and Poor’s for a bond rating, either in addition to or as an alternative to having the town’s revoked bond rating restored by credit rating agency Moody’s Investors Service.
The AA3 bond rating was revoked by Moody’s last summer because the town switched auditing agencies, resulting in a delay in the fiscal year 2012 audit. Without enough information to assess the town, Moody’s revoked the credit rating, and has not yet restored it.
Town Administrator Andrew Sheehan said he is considering pursuing a rating from Standard and Poor’s, but has not yet made a decision.
“Either one is regarded equally by bond markets, so going with Standard and Poor’s is not better or wosre than going with Moody’s. Some commmunities have ratings from both, so we’re not ruling that out either,” Sheehan said.
Sheehan said the delay in having the rating restored is not indicative of problems with town finances.
“We’ve got good reserves, we’re got a stable environment here, and we’re still regarded as a very good credit risk, so I don’t expect any problems getting that reestablished,” Sheehan said. “We’re not taking it lightly, but we’re also not ready to go out and borrow immediately, so it doesn’t have to be our first priority. We’re working conscientiously and making sure everything is in place to get a rating that’s truly reflective of our standings.”
Sheehan also said the town is making progress on improving the financial weaknesses that were identified during the fiscal year 2011 audit, which included problems with how money is collected in the water department and the lack of a risk assessment process.
“We’re making progress. The staff has been very good, working diligently on their own and together as a team to try to address these things. There were a lot of things that needed to be taken care of and we’re getting through those,” Sheehan said.
The recommendations made by the auditors were that the town improve the cash reconciliation process, improve controls over water department activity, develop a more formal risk assessment process and maintain tax title accounts.
Flaws in the cash reconciliation process stemmed from incorrect record-keeping that led to discrepancies between the treasurer’s cash book and the accountant’s general ledger, Sheehan said.
“Our new treasurer Kate Stacy has been working to get that resolved and to make sure that we’re fully reconciled for all of fiscal year 2014 and going forward,” Sheehan said. “We’re in good shape on that. There have been a few checks back and forth between the accountant and the treasurer, and they obviously have to work together going forward to make sure the numbers jive.”
Concerns about the water department resulted from the fact that the same people in the department are responsible for both issuing bills and collecting on them. The auditors recommended that the money be collected by Town Hall to create a check and balance in that process.
Sheehan said that there is current no plan to address this issue.
“The water commissioners have talked about separating duties within the department. That helps but doesn’t address the material weakness. They don’t seem anxious to move water collections over here, so who knows what will come of that,” Sheehan said.
To answer concerns about the risk assessment policy, selectmen voted 2-0 on Feb. 11 to adopt a fraud policy, which attempts to protect the town from attempts to defraud taxpayers by employees, contractors, venders, agents or members of the public.
The fraud policy will be included in the town’s personnel manual.
Sheehan said that Stacy was also working to prioritize maintaining the tax title accounts.
“She’ll be working on that over the next few months to try to make sure that everything is where it needs to be in the tax title process and try to collect on those delinquent accounts,” he said.
Sheehan cautioned that the weaknesses may show up again on the audit from fiscal year 2013, which will be completed in March.
“Many of these items, because they were not addressed prior to FY13, will appear again. What we’re trying to do is to get things cleared up so a year from now, or less than a year from now, when we have an FY14 audit, we have a clean management letter,” Sheehan said.
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