Saturday, September 18, 2010

Pay for Performance?

Paying for performance is a perfectly acceptable practice.  For example, some folks will go through great lengths to put their children through private school even if it strains their finances.  Why?  Because they feel it is worth it.

According to the borough audit summary for 2008 (completed in July 2009), the outside auditor issued nine "recommendations" relating to borough financial operations.

Fair enough.

One would think that the borough audit summary for 2009 (completed in August 2010) the same auditor would have either fewer "recommendations" or at least have different ones, right?

Here are auditor identified financial deficiencies from 2008 that carried over to 2009:
  • Internal controls regarding the preparation of the Borough’s general ledger be reviewed to ensure that the general ledgers for all Funds are complete and reconciled with the subsidiary ledgers and records on a monthly basis;
  • The encumbrance system be enhanced to ensure that materials be ordered only after a purchase order has been executed;
  • Internal controls of the Recreation Commission financial activities be reviewed and enhanced;
  • The General Capital grant receivable balances be reviewed and action taken to collect or clear of record.
  • The Borough review its procedures relating to developers escrow and ensure that procedures comply with New Jersey Statutes.
I am no expert; however, these recommendations suggest a history of poor record keeping.  While in and of itself poor record keeping is not considered wrongdoing; however, it does open the door to future trouble, possibly exposing the borough to financial risk.  Did this deserve a 3.5% raise?  But hey, I am just a "misinformed" dopey resident.  What do I know?

Full audit report is here.

The 2009 Audit Corrective Action Plan is here.  As taxpayers, how do we know that the actions will prevent identical "recommendations" by the auditor next year?  Is this the performance we are rewarding?

It appears the auditor agrees that several deficiencies have not been corrected from 2008:

2009 Dumont Auditor's Report (Full)

Again, there is a lot here.  I thank the SEC for the disclosure.

Saturday, September 4, 2010

Dumont's "Very Good" Financial Condition?

As you may be aware, it has been difficult for an average citizen to obtain borough financial information, even via OPRA.  This is because the borough is only required to publish current and previous year data.  This has made longer duration analysis challenging as many different documents must be stitched together in order to determine whether the many declarations from various elected and appointed officials whether the borough's financial condition has vastly improved can be confirmed.

Until now.

Because of the borough's seemingly insatiable appetite for debt in the past five years, they have been seeking short term financing.  Short term financing, those of duration of about a year or so, are not subject to financial disclosure requirements.  With regards to long term financing, loans obtained from other agencies such as the Bergen County Improvement Authority (BCIA) are also not subject to financial disclosure.  This year; however, the borough instead sought long term financing independently in the municipal bond market.


Going it alone has exposed an opportunity to the public:  While the mere declaration that borough finances are improved from the mayor or finance committee members would probably satisfy most residents, federal regulators require a far more comprehensive disclosure to potential investors.

The entire document is here.  Some observations:

On page 31, the municipal tax rate increased 25.3% over the period, yet on we see that total debt grew 25.4%.  Even with interest rates being nearly zero, having debt grow faster than revenue is unsustainable.  With a steadily decreasing population and increased foreclosures, remaining taxpayers will be squeezed even harder for tax revenues.  With all the noise about runaway education expenses earlier this year, school tax rate from 2005 to 2009 increased 20.4%.  How ironic:  Taxpayers can vote the school budget up or down, yet it is the municipal tax rate that has been running away.

Bond Prospectus

This is a big document, so feel free to look through it and see what else you might find.