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Auditor reports clean FY2025 opinion for Southborough but flags rising OPEB liability
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Summary
Tony Roselli of Roselli Clark and Associates told the Select Board on April 7 that Southborough earned a clean audit opinion for FY2025 and that reserves rose to about 11.7%; he cautioned that OPEB liability and county pension funding present growing long-term risks and recommended follow-up with the county actuary.
Tony Roselli, partner at Roselli Clark and Associates, presented Southboroughs fiscal year 2025 audit to the Select Board on April 7 and said the firm issued a clean opinion for the fifth straight year while flagging long-term obligations the town should monitor.
Roselli said the audit follows the Government Accountability Offices "Yellow Book" standards and focuses on major transactions such as payroll, cash disbursements and receipts. He told the board that the towns GAAP-defined reserve balance increased, producing a reserve ratio of about 11.7% of general fund expenses (the state average is roughly 10% and S&Ps high metric is about 15%). "Southborough got a clean opinion for the fifth straight year," Roselli said.
Roselli attributed the reserve increase to local receipts roughly $2.2 million above forecast and expenses under budget by about $1.8 million, creating a roughly $4 million favorable variance offset by planned use of free cash of about $3.3 million. He advised continuing conservative revenue forecasts, replenishing one-time free-cash uses, and enforcing reserve policies to preserve the towns strong credit standing.
On long-term liabilities, Roselli warned of a notable rise in the towns OPEB (other post-employment benefits) liability. "Your liability went up to 54.4; it increased by 11.4," he said, attributing most of the change to unusually high medical-premium costs, the inclusion of employees missed in the prior census, and retirees living longer. He described those factors as largely outside local control but urged the board to consider whether policy steps are needed.
Board members asked for follow-up information. Brian, the town accountant, said he and the town administrator have coordinated with the county actuary (Linda) and expect a response in about two weeks, with the goal of having answers for the boards next meetings. Roselli recommended asking the actuary about assumptions, the causes of the 2025 increase, and whether a pension or OPEB stabilization fund would make sense.
Roselli also discussed pension funding at the county level, saying Worcester Countys pension system is about 52.7% funded and the state expects it to be fully funded by 2040; he said that path will be difficult without substantial increases in assessments or additional local measures. He recommended towns consider pension stabilization funds as some municipalities have done to smooth assessment impacts.
Finally Roselli urged continued attention to cybersecurity and cash-handling controls after recent municipal incidents and noted that investment income helped the towns revenues (about $600,000 cited). He closed by saying town internal controls are strong overall but that OPEB and pension trends should be addressed in long-term planning.
The board thanked Roselli for the presentation. Town staff and the auditor agreed to seek additional detail from the county actuary and to report back to the board once the actuary responds.
