Latest Annual Audit Continues To

Credit Sound Financial Management

By John Voket

This is the first of a multipart report on Newtown’s 2005 Municipal Audit

It may not hook you like a John LeCarre novel, but if you pay attention to its numeric twists and turns, Newtown’s annual audit can reveal many answers about the methods and reasoning behind local government functions. The Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2005, was recently delivered to the town clerk for public review by Finance Director Ben Spragg.

Information contributing to the latest municipal finance report was compiled over several weeks by a team from Kostin, Ruffkess & Company, LLC, who subsequently crunched tens of thousands of data points reflecting millions of dollars in taxes, investments. and expenditures to come up with the weighty document that comes in just short of 100 pages.

According to Mr Spragg, whose memo serves as a forward section to the data, this independent audit was part of a broader, federally mandated “Single Audit,” which is designed to meet the special needs of federal granting agencies.

“The standards governing Single Audit engagements require the independent auditor to not only report on the fair presentation of financial statements, but also on the audited government’s internal controls and compliance with legal requirements,” Mr Spragg writes. The report specifically hones in on the requirements involving the administration of federal rewards.

Those specific findings are issued in a separate “Single Audit Report,” which The Bee will examine in a subsequent article.

“The larger report is the townwide report, and the smaller report is a specific examination of how we spent grant money and our compliance with those grant guidelines, and is required to be conducted by an outside agency,” Mr Spragg said.

According to Mr Spragg’s introductory comments, the annual audit is prepared in accordance with generally accepted accounting principals (GAAP) and standards outlined by the Government Accounting Standards Board. Those GAAP guidelines require the audit data to be preceded by a narrative introduction, overview and analysis providing a level of information, and style of delivery suitable for the general public.

These introductory remarks are not limited to strict financial reporting or analysis. They provide a brief profile of the town incorporating some demographic and historical context including charter stipulations, the structure of town government, its range of services, and some stipulation related to the town’s budget.

In a section outlining the factors affecting its financial condition, Mr Spragg notes that new housing construction in town remains a strong component of its fiscal well-being.

“In the fiscal year 2005, 141 new housing permits were issued, compared to 140 issued in…2004,” he states. However, Mr Spragg indicates that last year reflected more than a $1.5 million drop in commercial permits, down to $3.235 million from $4.866 million in 2004.

“But there are other related fees related to improvements in private and commercial buildings that actually account for $755,000, a $66,000 increase over 2004,” he said.

The report also details an average eight percent overall unemployment rate among employable residents, the fact that property taxes account for 86 percent of the general fund revenue, and a 98.8 percent tax collection rate.

“The town’s per capita income of $37,786 and median family income of $99,192 are above the state’s high averages, while housing prices are competitive relative to Fairfield County norms,” Mr Spragg writes.

Among its high-value investments and entities, Mr Spragg points to Fairfield Hills as the top item. The report later reflects the purchase of the 185-acre former state hospital and grounds contributed significantly toward the town’s net assets growing by $7.6 million for the 2005 fiscal year.

“This year, we picked up the sewers and the water system at Fairfield Hills as assets, which are $3.1 million of that $7.6 million,” Mr Spragg said. “These are utility assets now owned by the town. These assets will now generate ongoing revenue that will increasingly creating returns to the tax base, especially once improvements and renovations are made to the systems. The users, which are not private home owners, will pay for the improvements, and these utilities were acquired with the idea they will be self-supporting.”

The Sandy Hook Streetscape project and the Newtown Technology Park are also listed as additional primary anticipated appreciating assets. Mr Spragg reports, however, noted information in the cash management area was incorrectly reported at 1.1 percent yield on investments.

“The 1.1 was investment income was governmental revenues, but the actual rates of return were 2.4 percent for the town. A 10.3 percent growth in the pension fund was also misreported in the filed document — the actual number is 7.1 percent.”

In conjunction with its risk management, Mr Spragg outlines the particulars of municipal insurance programs in conjunction with “an aggressive safety plan providing a wide range of training opportunities for employees in promoting safety, managing materials, defensive driving,” which helps “mitigate claim costs and reduce exposure,” to costly insurance payouts.

The finance director said that he expects the information in the town’s annual financial report will again earn the community notice for excellence by the Government Finance Officers’ Association. If a Certificate of Achievement is presented, it will mark the eleventh consecutive year Newtown receives this prestigious recognition.

“I absolutely expect to get it again, Mr Spragg said. “We’ll probably hear from the agency by summertime on the outcome of our application for review.”

The next installment of this series will examine financial highlights, statements and the analyses of governmental activities as presented in the latest municipal audit.