Auditors report clean opinion for Southborough; warn on pensions and federal-grant uncertainty

Tony Roselli, managing partner of Roselli Clark & Associates, told the Town of Southborough Select Board on April 29 that his firm issued a clean audit opinion for the fiscal year ended June 30, 2024.

The audit “is a snapshot of June 30 of ’24,” Roselli said, and he emphasized that auditors follow generally accepted government auditing standards (the “yellow book”). He said the town received a clean opinion and that the finance team’s work made the audit straightforward: “Happy to report we didn't have any of that in Southborough. We've never had any of that.”

The audit showed Southborough’s reserve balances have generally risen since 2017, Roselli said, from roughly $3.5 million to about $6.5 million in reserves. He explained how S&P and other credit analysts calculate a “reserve” figure—by combining stabilization funds, undesignated general-fund balance (close to free cash) and assigned fund balance for encumbrances—and noted that Southborough falls in S&P’s tier 2 reserve bracket (about 8–15% of expenditures) with a “AA/AAA” profile supported by other strong metrics.

Roselli described the town’s long-term obligations, including general obligation bonds, compensated absences, net pension liability and other postemployment benefits (OPEB). He summarized the OPEB actuarial findings: the town’s OPEB liability using the latest actuarial numbers stood near $38.7 million, down about $3.7 million from the prior year because of favorable investment returns and a higher discount rate (6.48% versus 5.6%). He said the OPEB trust earned strong investment returns, noting the most recent year’s results and earlier multi‑year performance.

On pensions, Roselli said Worcester County’s pension funding ratio has lagged peers and that Worcester’s funded ratio was around 50.4% on the valuation cited in the audit. He and Select Board members discussed the county’s statutory schedule to reach full funding in the early 2040s and options communities have for addressing the assessment, including making additional contributions or considering pension obligation bonds when market conditions make those attractive.

Roselli also warned of federal grant uncertainty. He said municipalities should “keep an eye on” federal grants because federal policy and staffing changes can delay or change grant programs. The audit team conducted a federal single‑audit this year because the town met the federal threshold for expenditures.

Board members thanked the auditors and the finance team for the clean opinion. Select Board members and staff asked questions about how reserves are defined, the components of long‑term liabilities, and the town’s ability to withstand market or policy shocks.

The audit presentation was informational; Roselli offered to review the draft debt policy and S&P methodology with staff before the town finalizes decisions tied to upcoming borrowing.