Town's finances in good standing, audit finds

The town is on solid financial footing, according to auditors and actuaries who presented a breakdown of Johnston’s finances to the Town Council on Monday following an audit of financial statements for the fiscal year ending June 30, 2018.

“I would suggest to you, and probably following suit with what the mayor suggested, that relative to the revenue side it would be indicative to me – and I think to most readers of the financial documents – that there is a solid budgetary process going on here that is conservative in nature,” Ronald Nossek, a certified public accountant who specializes in audits of government entities and works for the firm Blum Shapiro, told the council. “I would certainly applaud you for that.”

Nossek provided a summary of his firm’s reporting results and the town’s financial highlights, along with recommendations that were deemed required communications to those charged with governance in town.

He said that the statements provided to his firm embody the assertions that the administration has conveyed relative to its financial statement, and that he was hired to provide an opinion on those assertions of the financial statements.

“I think we can say that this was a great audit for the town … it shows that not only are we transparent, but we’re right on there with our numbers,” Mayor Joseph Polisena said. “I’m very proud of the audit. The numbers are there, and it goes to show you the diligence that this administration did and the council did.”

Blum Shapiro performed the audit under a set of standards, including generally accepted auditing standards, generally excepted governmental auditing standards, and standards applicable to financial audits issued by the comptroller general of the United States.

“In our opinion, we believe the financial statements fairly represent the financial position and the results of operations for the town for the fiscal year ending June 30, 2018,” Nossek said. “Under the compliance component of governmental auditing standards, we did not come across any non-compliance matters that we would be required to report to you.”

According to the audit, the town’s general fund balance increased by $4,743,374 for the fiscal year, with the total fund balance as of June 30, 2018, being $29,484,908. The school’s unrestricted fund balance decreased by $515,197 due to operating costs, and totaled $4,141,884. The town’s non-major funds balance increased by $5,329,229 during the fiscal year to $9,603,009, due primarily to bond proceeds recognized in capital project funds.

Nossek said the increase in the general fund balance was primarily due to revenue collection and excessive plan budgetary revenues in all revenue functions, lead by tax revenues, intergovernmental revenues and departmental revenues. Property tax collections for the year totaled $71,985,309, which amounted to a 96 percent collection rate.

In terms of long-term debt, that decreased by $2,923,331 and is attributed to scheduled debt retirements and a reduction in net capital other post-employment benefit, or OPEB, liabilities. Total governmental long-term liabilities currently equal $409,886,373, with $5,153,084 due within one year.

Randy Gomez and Brian Nichols of Nyhart, a consulting, actuarial and administration services company, provided a high level overview for the council the town’s OPEB plans.

As far as changes in premiums were concerned, Nyhart expected a 9 percent increase in premiums for retirees over the age of 65, and was on target with that number. For retirees under the age of 65, there was a decrease in premiums, which contributed to a decrease in the liabilities for the town’s OPEB liability.

“We know health care costs will go up, and anytime we get a flat or a decrease it’s a wonderful thing,” Gomez told the council. “Sometimes you guys make those things happen by making deliberate design changes by changing vendors, sometimes it’s because the risk pool that your in had a good year. You get good brownie points for that.”

The actuaries stated that there were no substantial changes to the demographics of the town’s retirees, and that there were no substantive plan provision changes other than removing a $350 premium paid by school retirees which was no longer in effect.

Gomez said key assumptions that design and drive the town’s costs related to OPEB liabilities are health care trends, employer costs for coverage, interest earnings and eligibility requirements of retirees. The town’s total OPEB liabilities for fiscal year 2018 were approximately $203.5 million, down from $215.4 million from the previous fiscal year.

The town’s OPEB trust saw a roughly $800,000 increase, from $2.4 million to $3.2 million, which was mainly due to a contribution to the trust by the town.

“That’s roughly $800,000 worth of brownie points. You found the money, whether from savings in other places or a dedicated OPEB decision to make, but keep doing that,” Gomez said.

“Other cities and towns put $50,000 in, or put $100,000 in and they think they hit the lottery. We’re putting hundreds of thousands in, so I think we’re doing pretty damn good,” Polisena said.

Gomez recommended that the town manage risks such as annual premium rate increases by picking up best practices from other communities; pay attention to health care trends, shifting costs to retirees in the future; and avoid surprises through advanced planning.

Polisena said when he took office, there was a $9 million deficit. In 2010, there were cuts from the state that equated to approximately $5 million in lost revenue per year, and the town’s schools were at risk of losing accreditation.

Since that time, he said, the town has done “remarkably well.”

“We’re working really hard to ensure that we’re bringing our costs down. Is it going to take a while? Absolutely. But I’m very confident in the OPEB and what we’re doing,” the mayor said. “I’m very, very proud of, obviously, the council members and the town’s administration that have worked so hard, and also the School Committee.”