1. Town of Bridgewater Audit exit conference – Board of Selectmen Roselli, Clark & Associates November 17, 2009

2. 2 Contents n Presenters: – Tony Roselli, Partner – Terenzio Volpicelli, Manager n Introduction n Comparative data to the peer group n Informational items n Findings n Conclusion

3. 3 Introduction - n What is an audit? n Performed in accordance with GAGAS (Yellow Book). n Requires review of internal control over major transactions. n Requires risk assessment and enhanced procedures in identified material areas. n Clean opinion verse qualified opinion. n Prior audits (2003 – 2007) did not have clean opinions. n Caused concern with bond rating agencies. n Current audit cures this concern. n Peer comparisons

4. 4 Peer group comparison n Criteria to be designated as part of the peer group. (1) - Must be a Massachusetts community. - Must have a population between 20,000 and 27,000. (2) - Must have average annual household income between $55K and $75K. (2) n 12 total communities met this criteria. n Total residential tax levy by community was compared. n Average total residential tax levy of the group was compared. n Residential tax per household was compared. n Commercial, industrial and personnel property taxes were deducted for purposes of this analysis. n Expenditures for critical services in total are compared. n Average of expenditures for critical services is compared. n Bond rating is compared. (1) Tax levy data was obtained from the Massachusetts Department of Revenue, Division of Local Services – 2009 At a Glance Reports. (2) Per US Census 2000.

5. 5 Peer comparison – Tax levy

6. 6 Peer comparison – Tax Levy

7. 7 Peer comparison – critical services (2008 expenditures per Massachusetts Department of Revenue Division of Local services web site)

8. 8 Peer comparison – critical services

9. 9 Peer comparison – bond rating (per Massachusetts Department of Revenue Division of Local Services web site) CantonAa2 DanversAa2 WakefieldAa3 DedhamAa3 WalpoleAa3 MansfieldA1 SandwichA1 StonehamA1 EastonA2 SaugusBaa1 BridgewaterBaa2

10. 10 Peer group comparison conclusion n Bridgewater had the lowest total residential tax levy in 2009 for the peer group. n Bridgewater trailed the peer group in this area by 23.9%. n Bridgewater ranked next to last in the peer group when comparing average real estate tax per household. n Bridgewater trailed the average of the peer group on a real estate tax per household basis by 10.9% or approximately $500. n This has resulted in a reduced level of critical services. n This in turn has resulted in the lowest bond rating of the peer group. (Only 1 community in the entire State has a lower bond rating and only 3 others are equal to Bridgewater.) n Moody’s also cited in a recent bond down grade that, lack of financial leadership, reductions in critical services and lack of annual audits has contributed to the reduced bond rating. n The lack of a material commercial and industrial presence is also adversely impacting Bridgewater. n The residential taxpayer is not leveraging this void like other similar communities with a lower commercial and industrial presence like Easton and Stoneham

11. 11 Informational items n GASB 45 - OPEB n SAS #112 – Internal Control n Consideration of fraud and theft

12. 12 Findings n Lack of documented internal control policies (Significant deficiency) - Cash receipt handling and turnover at the department level. - Payroll and benefit policies - Purchasing policies

13. 13 Findings - continued n Overall organizational structure and layout - Eliminate elected Treasurer/Collector and create appointed combined position. - Consider creating a Finance Director position. - Town Manager verse Municipal Administrator. - Physical layout of operations. - Data processing improvements.

14. 14 Findings - continued n Internal audit function. n Annual audits (significant deficiency).

15. 15 Findings - continued n Authorization of payroll warrants. n Payroll processing controls. n Fidelity bonds. n Use of volunteers.

16. 16 Findings - continued n Treasurer/Collector - Automated processing - GASB 31 - Quarterly billing - Lock box - Tailings

17. 17 Findings - continued n Ambulance n Transfer station (Significant deficiency) n Golf course n Foreclosed properties

18. 18 Conclusion – Blue print for improvement n Policies need to be documented. n Enhance revenue through override or other means to close gap between Town and peer group. n Financial infrastructure needs to be improved to make it easier to attract talented individuals who will not resign abruptly. n Appoint consultant. - Handle day to day responsibilities. - Document policies and procedures. - Assist with system conversion. - Assist hiring new financial personnel.