When Charlestown’s external auditors released the financial statements for fiscal year 2021 earlier this month, they revealed an undeniable failure. It was an indictment of our financial management systems and will require additional taxes that will ultimately fall on the backs of the taxpayers of Charlestown.
While the fiscal year 2021 audit was accurate, it showed that our unrestricted fund balance is $3 million lower than the city’s expectations. Why would the city have expected the $3 million to be there if our financial management systems were working properly? How could the Budget Committee have recommended spending $6 million of our surplus over the last 2 city budgets if they didn’t have a solid understanding of how much was actually available to spend? Our external auditor acknowledged in January 2022 that Charlestown’s fiscal year 2020 financial statements were in error, but that they had been unaware of this error in the past year. The budget commission, the treasurer’s office and the city administrator receiving $150,000 in compensation a year who oversees the treasurer’s office have also been in the dark over the past year. You can imagine the apologies made and the pointing fingers. There are a lot of complaints to be made. The Budget Committee declines all responsibility and will not be the subject of an investigation. City staff will investigate themselves as well as the external auditor. Now is the time for the city council to step in and demand an independent investigation.
If it was a small amount, it would have gone unnoticed, but $3 million is not negligible. This will have significant future tax implications for taxpayers, but it is simply called an allocation error.
But this is not a simple allocation error. When your spouse accidentally spends $3 million more than budgeted, it’s not an allocation error. The money was distributed to the vendors, and it must now be recovered in the pockets of the taxpayers. It will cost us!
Where were our professional staff and officials appointed to the Budget Committee whose responsibilities include managing our unrestricted fund balance? It is not enough to blame the auditors, as there are other parties who share this apparent case of negligence.
At the Budget Committee’s last meeting on January 28, Chairman Richard Sartor made the most astonishing rationalization I’ve heard in a long time to justify City Council’s approval of his proposed balance of power policy. funds in February. Sartor claimed that if their proposed new fund balance policy had been passed a year ago, it would have prevented the $3 million debacle from happening, as city staff would have been tasked with identifying the problem and inform the committee. This is just plain nonsense, because under the Charlestown Charter, city staff are already responsible. The budget committee too. Poor internal financial controls are just that, poor internal financial controls.
Charlestown needs to seriously consider another way to budget. We used cash from the unrestricted fund balance to pay for large, long-term capital projects with benefits that span decades. Instead, we should have used that money to pay off our large unfunded debts whose benefits expired years ago. Issuing bonds to pay for our recent major long-term capital projects at historically low interest rates would have been a wise financial decision. This would leave the fund balance unrestricted only for emergency uses.
Wouldn’t that be the advice we would give to our children and grandchildren? Pay for what you consumed before going out and buy a bunch of new stuff.