WELLFLEET — Auditors have discovered “several major deficiencies in the town’s financial and accounting activities which will require immediate mitigation measures to correct,” Town Administrator Maria Broadbent reported to the select board last week.
The issues brought to light include “improper encumbrance documentation, tracking and reconciliation, deficiencies surrounding payments made without a purchase order in place or executed contracts violating Town Policy, inappropriate vendor maintenance leading to the Town being deficient on issuing 1099s, paying employees outside of union contract rates, and inaccurate benefit day tracking impacting the Town’s financial liability statements,” Broadbent wrote in her report to the board.
The audit is nearly complete, Broadbent said, and a financial management report is still to come. “We anticipate there’s going to be a lot of details in there of changes that we need to make,” she told the select board. She recommended that administration and board members review the report in a late afternoon session. “Maybe we don’t do it starting at seven o’clock at night,” she said.
After the report is reviewed, the town administration and select board will hold a public meeting to go over the findings.
Broadbent started work as Wellfleet’s administrator in August 2020, and one of her first decisions was to dismiss the town accountant, Gene Ferrari Jr., on the final day of his contract, Sept. 22. She said this week that she did not “fire” Ferrari — she chose not to renew his contract. His successor, Heather Michaud, began work for the town on Dec. 14, 2020.
Broadbent would not provide details of the auditors’ findings, but she told the Independent that the discrepancies occurred during the transition from one accounting software system to another.
“Accountants are record keepers,” she said. During the transition from the old software, Business Management Systems, to the new, Vadar, generally understood accounting practices were not followed, said Broadbent. But, she emphasized, “There were never any signs of anyone doing things intentionally wrong.”
Finance committee chair Fred Magee wrote in an email to the Independent, “I’m not in a position to discuss that at this time. The finance committee has not yet fully reviewed the audit.”
AAA Bond Rating
In spite of the town’s accounting problems, it has secured a triple-A bond rating this spring, resulting in a very low interest rate for its municipal bonds, which could mean a lower tax rate next year.
The select board on March 9 unanimously approved the sale of bonds for capital projects such as the dredging of Wellfleet Harbor and the purchase of major highway and fire equipment.
Securing a top rating requires a lot of behind the scenes work by the finance team, financial adviser Lynne Welsh told the select board. The bond rating agency Standard & Poor’s reconfirmed the Town’s AAA rating on Feb. 22. The triple-A rating is the strongest investment grade a municipal bond can receive.
“Receiving a AAA bond rating is great news,” Broadbent wrote in an email. A low interest rate, she said, “means your cost of debt stays lower, so naturally that has a positive impact on the tax rate.”
At the select board meeting, Broadbent noted that environmental issues ranked high among the factors considered by the rating agency. “I find that kind of refreshing,” she said. The rating agency was intrigued by the harbor dredging project, said Welsh, and it was a “big part of this issuance.”
Welsh thanked Miriam Spencer, the town treasurer, for being a “total rock with all the transition in town on various levels.” She also lauded the new town accountant, Michaud, and town administrator for their work on the bond rating.
The capital projects covered by the current $9.2 million bond sale include Lieutenant Island Road repairs, the purchase of fire and rescue equipment, engineering of the elementary school fire suppression system, water system upgrades, and the harbor dredging.
The town went to market to offer the $9.2 million in bonds on March 1 and received seven bids from syndicate firms, said Welsh. Piper Sandler won the bid with a 1.53-percent true interest cost to the town. These are 20-year bonds, said Welsh, “so, I think that’s quite impressive and really shows how low the interest rate market is.”
Piper Sandler offered $882,000 plus premium in cash to the town, said Welsh. With that, they were able to resize the bond from $9.2 million to $8.5 million. “What that means to taxpayers is, as opposed to paying debt service on $9.2 million, you’re now paying debt service on $8.5 million,” said Welsh. “That’s basically $720,000 we were able to reduce because of that premium.”