External auditor: Brookfield’s books ‘fairly stated’ for fund statements but government-wide records show gap on capital assets

An external auditor told the Brookfield Select Board that the town’s general fund, trust funds and conservation accounts are “fairly stated” but the government-wide financial statements have an adverse opinion because capital assets have not been recorded.

The auditor, identified in the meeting only as Cheryl, said “an audit is, a process that is required by the state,” and explained that towns of Brookfield’s size must receive a full annual financial audit rather than the smaller MS-60 spot check. She described the adverse opinion as limited to the government-wide statements and said it does not bar the town from borrowing.

Why it matters: government-wide statements combine all funds on a single balance sheet and income statement. Missing capital asset records — buildings, land or equipment — can make those consolidated statements materially incomplete, which leads auditors to issue an adverse opinion.

Cheryl told the board the town began the year with $850,041 in unassigned fund balance, used about $325,000 during the year and finished with an overall budget surplus of $216,456. She said revenue exceeded budget by $68,004.61 and appropriations were underspent by $147,995; those results produced an unassigned fund balance of $741,497 as of 12/31/24 that will be used in setting the 2025 tax rate.

The auditor recommended the board consider adopting a written capital-asset policy before attempting to record assets on the books. She described a practical rollout — “take it in baby steps” — starting with land and buildings, establishing capitalization thresholds, useful lives and depreciation methods, and documenting historical cost (for example, by using insurance replacement values and the Consumer Price Index to derive a historical cost estimate).

The auditor also raised several governance recommendations in a separate letter that are not treated as material weaknesses: two IT/cybersecurity comments stressing disaster recovery, off-site backups and employee training; clearer purchasing and fraud‑response policies; and better file documentation when related‑party vendors provide services. On related‑party transactions she said auditors tested invoices and found some instances where supporting invoices were missing and recommended maintaining full supporting documentation.

On cash and investments the auditor reported Brookfield’s cash was fully insured and/or collateralized at year-end. She noted the town held $1,038,873 in the New Hampshire Public Deposit Investment Pool (PDPIP) at year‑end and explained PDPIP balances are not FDIC-insured but are covered by Securities Investor Protection Corporation (SIPC) mechanisms through the custodian bank; she recommended staff confirm collateral arrangements with the PDPIP administrator and noted the pool is subject to state statute oversight.

Select Board members and staff asked procedural questions about bank‑statement review and sign‑off. The auditor recommended an independent reviewer, such as a deputy treasurer or board member, verify bank reconciliations monthly to show board oversight. The auditor also said the adverse opinion currently “does not prevent the town from borrowing any debt, or any loans from the banks,” but cautioned that some lenders or the bond bank could require full government-wide reporting in certain borrowing situations.

The board thanked the auditor for the report and for offering to share sample policies with the town. The discussion produced no formal board action; the presentation concluded with the auditor’s offer to assist if the town chooses to start capital‑asset recording.

Ending: The board moved on to other agenda items after asking follow‑up questions about implementation steps and timing.