The city is still catching up on the auditing process for its finances, thanks to the pandemic, but the latest results still show Chelsea to be in solid financial shape.
Representatives from the independent auditing firm of Rosselli and Clark Associates appeared before the City Council’s finance subcommittee on Wednesday, March 16 to discuss the Fiscal Year 2020 audit and financial report.
City auditor Edward Dunn noted that the city is currently in the tail end of FY22, and that the audit is from FY 20. Tony Rosselli of Roselli and Clark said that because of information that has been delayed at the state level, many audits have been delayed, but that he expected the audits for Chelsea to get back on schedule fairly quickly.
Rosselli said there are many positive economic indicators for the city in the FY20 audit, including over $40 million in reserve funds and a high bond rating. Rosselli also discussed what an independent audit is, and what it can accomplish.
“The first thing the public is thinking when you are doing an audit is that you are going to look at everything and you are going to look at everything and you are going to find everything, that if someone took something for $5, we’re going to know where it is,” said Rosselli. “That’s not really what an audit is. An audit is more of a process put out … by the Government Accounting Office in Washington.”
During the process, the auditors may identify if there is anything unusual which could point to a misappropriation, but Rosselli said the auditors don’t go into the process with the express purpose of finding misappropriations.
“This audit is really intended to go out to all of your bond holders,” he said. In addition, copies also go out to the federal government to make sure the city is in compliance with federal grants and to the division of local affairs at the state level.
Rosselli said the audit showed a clean opinion, showing no major qualifications or areas of concern.
The economic trends for FY20 showed about $43 million of reserve funds in the city coffers.
“The reserve funds peaked back in 2017 at about $45 million, and it looks like it is making its way back there, which is a great place to be for the city,” said Rosselli.
The amount of money in reserve compared to the city’s expenses was at 27 percent, which is almost three times the state average. Rosselli said that number puts Chelsea in a good position for its bond rating.
In addition, for the year audited, the city’s expenses were $5.5 million under budget, and its revenues exceeded expectations by $6.2 million, creating a surplus of $11.7 million.
“Your bond rating is a double A, which is a very good investment grade and one step below the triple A,” said Rosselli, allowing the city to get good interest rates when it bonds for capital projects.
The only thing keeping the city from the highest bond rating is its demographics, especially compared to wealthier communities such as Newton and Wellesley.
The audit also showed the city is in good shape funding its pension liability, which was 76.5 percent funded in the FY20 audit, compared to the state average of 65 percent.
The audit did show that there are almost 100 smaller accounts in the city which have not been used for at least a year or two that should be closed out. The total amount in those accounts is about $600,000. City Manager Thomas Ambrosino said the auditor’s office is in the process of going through those accounts so that the money can be earmarked for current programs or projects in the city