Audit Committee Chairman: New Canaan Should Review Bonding Practices

New Canaan’s bonded debt is the highest among all neighboring towns, the chairman of the Audit Committee said Wednesday night.

What the town has bonded and plans to fund through bonding—typically large capital projects and equipment—would come, together, to nearly 100 percent of its revenues, Bill Parrett told members of the Town Council during their regular meeting.

“It was a surprise to me,” Parrett said at the meeting, held in Town Hall.

The question of just what New Canaan funds through bonding is “a significant issue,” according to Parrett, because though the IRS has rules and regulations around the practice, “that should not govern what we do as a town, as to what we in fact bond or don’t bond.
“And when you bond something, as you all know, that is borrowing money±—sort of like a home equity loan, you have to pay it back … and we bonded quite a bit over last couple of years. In the last year or two, there are plenty of items that have been bonded, small items that were not bonded in prior years. And we are working through that. There are really two issues here. One of them is an accounting issue around what should be bonded and what shouldn’t be bonded, and the other is really a taxing issue around the mill rate.”

The comments came during an update for the legislative body, which also has final approval of the municipal budget. Parrett said that the town’s annual audit is now underway and a report should be issued in about one month. Though no “material weaknesses” are expected, he said, two “significant deficiencies” have been: One around closing entries and the other around access controls to the town’s MUNIS system.

In addition, “the auditors have identified an issue [for] which we do not seem to have a policy that is documented anywhere, or that we can find anywhere: What items are bonded each year.”

Councilman Cristina A. Ross asked who the Audit Committee thinks should decide what items should be bonded. Parrett answered, “certainly not the Audit Committee” though perhaps the first selectman, Board of Selectmen or finance officials.

Councilman Steve Karl asked whether Parrett could come back in the future with examples of what the committee feels the town has bonded that perhaps should not have been. He agreed to do so, and suggested that the task may properly fall to the Board of Finance.

Pressed by some councilmen who supplied some of the reasons why seemingly smaller items were funded through bonding—for example, fire hoses are bonded because they were awkward operating budget items and have a life of more than five years—Parrett said that his point is that “it’s the number of items and the transparency around that, and the impact on the mill rate.”