Study finds Parks and Recreation programs in deficit most months

A review of the town’s recreational programs conducted by the town’s auditor this summer has concluded that the income collected by the Parks and Recreation Commission each year has failed to cover the commission’s monthly program costs for all but two of the past 24 months. It’s only at fiscal year end that the commission’s revolving fund turns positive, the report found, as beach revenues surge, leaving the account with a small surplus as the new year begins.

Outgoing Finance Director David Nalchajian says the monthly deficits violate state law, but they were exacerbated two years ago when the town transferred nearly $22,000 from the commission’s revolving account to free cash at the close of 2016. That year had ended with nearly $32,000 in the account, but state law allows only $10,000 to be carried from one year to the next. Although preliminary estimates for fiscal 2018, which ended June 30, showed a year-end balance of $4,876, by Oct. 3 that surplus had disappeared and the fund had accumulated a deficit of $21,000, Nalchajian said last week. Without a cash infusion from the town, he says, the monthly deficits will continue.

The Parks and Rec commissioners have refused to sign the auditor’s report. They say that they agree with the report’s recommendations, but are disappointed it did not answer the questions they asked. They say they will accept the report, but with reservations that they will spell out in a separate memo. They have asked newly-elected chair Doug Thornton to draft that document for review and approval by the group. As of Tuesday this week, that action was still pending, but in an email, Thornton said he would have a response ready for the commissioners to approve at their next meeting on Oct. 15.

The five-member Parks and Recreation Commission is charged with overseeing the town’s summer and winter recreational programs, managing the beach staff and facilities, and maintaining the playing fields and Common, including the parcel between the General Store and the Congregational Church.

The commission has two principal sources of revenue: (1) money appropriated by Town Meeting each fiscal year to pay for a waterfront safety director, field maintenance, and other expenses; and (2) money it collects from the sale of beach parking stickers, swim and boat lessons, and fees paid by participants in the winter ski program. User fees are deposited to the commission’s revolving fund and should cover the cost of the commission’s programs, which are expected to break even. The wages of seasonal beach staff and the cost of their training and certification are the commission’s largest expense, totalling nearly $55,000 last fiscal year. Busing ski club participants to Mt. Wachusett is the second largest annual expense, which totalled $11,000 in the same period.

A graph of Parks and Rec revolving fund balances (see below) confirms that while the fund has ended each year in the black, it consistently runs a deficit in each of the remaining 10 to 11 months. The cause is a disconnect between when user fees are collected and when they are spent. The deficit diminishes, for example, during May and June as residents register for swim and boating classes, buy parking stickers, and pay for other types of beach access and services. But with the beginning of the new fiscal year July 1, the cost of paying beach staff quickly outpaces revenue collection, and the deficit deepens. Although the revolving fund may balance at year end, what matters, says Nalchajian, is that for most months the fund is overspent and the town must cover the difference with money in its general fund. For those 11 months, the town is in violation of the state law governing such accounts. And, by covering the deficit with the general fund, the town is using taxpayer dollars for expenses that Annual Town Meeting never authorized.

Nalchajian said he alerted Parks and Rec to the problem when he arrived in Harvard 22 months ago, in December 2016. He said he asked the commissioners to come up with a solution that could be presented to the Select Board and voted on at Town Meeting, but the commission never took action, he told the Press. Two fiscal years later, the problem remains. In their report, the auditors suggest two remedies. First, they say that the rates the commission charges for its classes are well below those charged by other towns. The commission should consider raising fees, the auditors wrote. Second, most towns pay for beach safety personnel with a line item in the annual budget. Arguably, having trained and certified lifeguards at the beach is a matter of public safety that benefits the entire town and should be paid for with taxpayer dollars, not user fees. Moving seasonal beach staff wages into the annual budget would remove more than $51,000 from revolving fund expenses in July and August, when the deficit hits its maximum.

Those two actions would in time reduce or perhaps eliminate the monthly deficits, said Nalchajian, but the current deficit needs to be eliminated now. And there is only one remedy for that, he said: a cash injection from the town. That step would require a warrant article and a vote by Town Meeting. An injection of $25,000, in conjunction with the other recommended changes, would probably be sufficient, he told the Press. The money, said Nalchajian, could be appropriated with a transfer this spring from fiscal 2018 free cash to the Parks and Rec revolving fund.

Not what we asked for

The report was commissioned last spring when Nalchajian threatened in an email to then-chair Wyona Lynch-McWhite that he was prepared to close the beach program unless the commissioners found a way to eliminate its monthly deficits. As reported in an earlier issue of the Press, the commissioners suspected that some portion of the money they collected had not been properly credited to Parks and Rec accounts. They were also alarmed by allegations that hundreds of beach parking stickers had been sold but not paid for. Lynch-McWhite asked for an audit to put those concerns to rest, and the town hired Roselli, Clark & Associates, the town’s auditor, to look into the matter. The work was commissioned July 16 and completed three days later on a budget of $3,500.

But the report did not delve into either of the commission’s requests. “I don’t find any part of the report to be inaccurate factually, but it doesn’t cover what I asked for,” said Lynch-McWhite at the commission’s Sept. 17 meeting. The reason, according to commission member Bob O’Shea, who contributed to the review, is that the auditor had convinced Nalchajian that reconciling the three databases used to collect Parks and Rec revenue was going to take a long time to complete and wasn’t worth the effort, which could cost as much as five times the amount budgeted for the project. Besides, there were no signs of fraud or “hanky-panky,” said O’Shea, who further asserted that a recent change to the way Parks and Rec collects fees and reports them to the town has eliminated the problem.

As for the allegations that beach stickers had gone missing, Nalchajian told the Press last week that he and another member of the Finance Department had done their own reconciliation of tickets and receipts and had determined that only seven 2018 stickers had not been paid for.

At a meeting of the Finance Committee last week, some members were also critical of the report. Charles Oliver said he had thought the major reason for the investigation was the “opacity of the fee collection and the inability to determine whether parking stickers in particular were being paid for.” While the report makes observations, it doesn’t reach any conclusions, he said. There’s no “This is what we found.”

In fact the auditors took pains to explain in their report that their work was not an audit. “This business operations review is not an audit,” they wrote. And their cover letter included the following caveat: “We do not express an opinion or conclusion ... Had we performed additional procedures, other matters may have come to our attention that would have been reported to you.”

“Because they didn’t do what we asked, we never will know, ever, if any of the funds deposited in the accounting process were improperly credited to other town accounts,” Lynch-McWhite said at last week’s commission meeting. She acknowledged that a new registration system ensures those questions won’t arise in the future. “But I was hoping the [fiscal 2018] issue would be resolved and exonerate ... this group.”

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