What's New
Auditor
Urges Fiscal Upgrades in Springfield
The Republican
By, Peter Goonan - July 9, 2008
SPRINGFIELD
- The state auditor is recommending further improvements in the city's
cash management procedures in the aftermath of a failed investment of
municipal funds with Merrill Lynch last year that lost millions of dollars
before being reimbursed.
State
Auditor A. Joseph DeNucci, in a 13-page audit report, said the city has
made progress in its investment procedures, but still can do better in
areas such as monitoring those investments, reporting and documentation,
and in delegating responsibility.
DeNucci
said a top priority in investing city funds, under state law and the
city's own policies, is keeping the investments safe.
The
investment of $13.9 million with Merrill Lynch lost nearly all its value
in a span of several months last year, but was reimbursed by the firm on
Feb. 1, under pressure from the city and state agencies including the
attorney general's office, who said the investments were in unsafe funds,
contrary to state law.
In
a key audit finding, DeNucci said that City Treasurer Salvatore R.
Calvanese followed policy when he discovered the failing investment with
Merrill Lynch and notified his supervisor, the chief financial officer,
Mary T. Tzambazakis. Springfield Finance Control Board officials were
alerted, but the problem was not relayed to then-Mayor Charles V. Ryan and
the city solicitor until months later, DeNucci said.
Mayor
Domenic J. Sarno, who requested DeNucci's audit days after taking office
in January, said yesterday the city will review the audit recommendations
and continue to strive to improve its cash management policies and
procedures.
"I
don't want this ever to occur again," Sarno said. "I want to
take corrective measures to make sure it never occurs again."
Calvanese
has been on medical leave since March 10 for undisclosed reasons.
Tzambazakis has taken a job in the private sector.
Glenn
A. Briere, a spokesman for DeNucci, said the auditor's findings on Merrill
Lynch are limited because it remains under investigation by other state
agencies. Instead, the auditor focused on cash management procedures and
policies.
"The
auditor hopes the recommendations offer the city a potential framework for
strengthening policies and procedures for investments long after the
control board is gone," Briere said.
The
recommendations include: clearly defining and outlining the roles and
responsibilities of employees who handle cash and investments;
implementing proper oversight mechanisms; establishing ethics and conflict
of interest policies; creating a job description for the city treasurer
that does not currently exist; and considering the use of an investment
adviser.
Prior
to the control board being established in 2004, "the city had
inadequate, fragmented, piecemeal written procedures or informal policies
and procedures in place for its overall cash management and investment
functions," DeNucci said.
The
control board's fiscal policies in February 2006 called on city funds to
be invested in a "prudent and diligent manner with an emphasis on
safety of principal, liquidity and financial return on principal." In
subsequent revisions, it calls for the emphasis to be "first on
safety and principal."
The
control board in January voted to shift all funds held by investment firms
to the Massachusetts Municipal Depository Trust, an investment pool under
the control of the state treasurer.