Winchendon Mass. – On the road to recovery : A Study in Municipal Mismanagement and what NOT to do!

Winch

winchendon DOR Review

Based on our observations, the former town manager had little involvement with the budget once adopted by town meeting.

That quote is from the Town of Winchendon Financial Management Review July 2015 by Mass Dept. of Revenue , Division of Local Services.

The Town of Winchendon is an interesting case study of Municipal Fiscal mismanagement and shows what happens when you have multiple turnovers in key positions or people in positions they should not be in. It reminds me of what happened here in Lowell when the city was also self insured but not putting enough funds toward health care and using reserves to balance an unbalanced budget.

The Town is now poised to be on the road to recovery with an expert interim Manager.

The Town and it’s current interim Manager, Board of Selectman and other Fiscal stakeholders met with the State Dept. of Revenue in early August to review this report which shows what has happened, why it happened and the State Dept of Revenue made recommendations so it would NOT again happen.

The report doesn’t even mention that there is a group of people in the town who after the former Board of Selectman extended the then Manager’s contract, led a charge to have him removed, resulting in the town using $300,000 in reserves to pay him to leave.

The Dept. of Revenue acknowledges the town is on the right track now with the interim Manager in place but warn that attempts by townspeople to water down the powers of a Manager could jeopardize that and result in a control board.

If you are interested in municipal government, it is an interesting study in mismanagement. Below are some of the “Highlights” from the State report which can be found on line at the states website. (or pdf attached)

The Review by the State really calls out the former Manager and Town Accountant:

Many of these management letter findings became more severe due to a lack of budget monitoring by the former town manager and irregular communication between the prior town accountant and department heads. Based on our observations, the former town manager had little involvement with the budget once adopted by town meeting.

He did not have access to the town’s financial management software application and he seems to have delegated the review of monthly revenue and expenditures to the town accountant.

The former town accountant also neglected to distribute spending reports to departments or more widely to the board of selectmen or finance committee. Instead, any spending adjustments appear to have been handled informally between herself and individual departments and generally not until year-end when she had to close the books. This practice, which likely grew out of town’s bottom-line approach to budgeting, coupled with a lack of regular reconciliations, made it almost impossible to comprehend the town’s financial position throughout the year or to hold departments accountable for their spending

Turnover contributes to the problem:

Further amplifying these existing problems, Winchendon experienced a tremendous amount of turnover in its other finance-related offices. Besides the town accountant, these positions included the assistant town accountant, treasurer/collector, assistant treasurer/collector, and chief assessor.

To fill these positions, the longtime assistant treasurer/collector was promoted to the treasurer/collector’s position in early 2012 and a new assistant treasurer/collector was quickly hired. However, she left within a year which forced the town to start yet another new search. In the assessor’s place, the town elected to privatize the operation when it contracted with an outside firm, Regional Resource Group, Inc., to provide in-house staff and to serve as the appointed board of assessors.

By mid-December 2014, this confluence of issues culminated in substantial operating deficits and other financial management concerns that prompted the town to seek approval and receive a series of local aid advances, along with special legislation to borrow funds necessary to close the deficits.

Winchedon trouble’s result in State stepping in:

To date, Winchendon has borrowed nearly $3m to cover prior year deficits (see Appendix, Table III.FY2014 Deficits Raised) and received over $8.3m in local aid advances on top of internal borrowing of over $1.5m from its stabilization fund for cash flow purposes.

By our estimation, the town will also end FY2015 with a cumulative operating deficit nearing $600k due largely to remaining health insurance claims. Based on a preliminary review, the town’s FY2016 budget is also structurally imbalanced. Lastly, local officials expressed serious concerns regarding their cash position at the start of the fiscal year due to significant cash outlays resulting from pension assessment, debt,payroll and other obligations due early in the fiscal year.

State has High Praise for Lynch Appointment!

To its credit, the board of selectmen responded by hiring a veteran municipal manager to serve as interim town manager. A highly respected individual, he brings a wealth of knowledge and experience as the former city manager for Lowell where he turned around an $8m deficit,developed sizable reserves, and increased the bond rating.

Town officials indicate that he will work part-time over the next three to six months and will be joined by an equally qualified finance consultant with deep experience using the town’s Munis financial software application. Together, we hope that this team will be a force for change which will build on more recent improvements including implementing a new purchase order system, issuing monthly year-to-date budget reports,and changing the manner in which town meeting adopts the budget so departments can be held accountable for their individual appropriations.

State warns those who seek to undermine Manager!

The new interim town manager’s ability to successfully steer Winchendon in the right direction will require buy-in from the board of selectmen, finance committee, and department heads alike.

Without their support, the town’s outlook remains uncertain.We also hope that any positive momentum is not undermined by a recent movement to strip the town manager’s position of needed authority to implement change.

As explained at the May meeting, DLS will continue to monitor local activities closely and take whatever action is necessary,up to and including a possible control board, if steps to resolve Winchendon’s longstanding financial management shortcomings are delayed or otherwise left unresolved.

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