Report of the Town Financial Organization Study Committee
to the Budget and Revenue Task Force
Executive Summary
Pursuant to a request made of the Budget and Revenue Task Force by the Board of Selectmen, a Town Financial Organization Study Committee was convened to determine whether it were appropriate for the Town of Arlington to re-structure it's organizational model with regard to departments performing financial functions. Primarily, the Committee was charged with considering whether a model involving an appointed Treasurer~should supplant the current elected-Treasurer model. However, the Committee also considered, among other things, the prudence and viability of creating such positions as Budget Director, Chief Financial Officer, and Town Administrator, along with various permutations of organizational charts.
The Committee created three working groups to study: (1) the current Arlington structure; (2) the rationale behind other municipalities adopting alternative models; and (3) information from 3rd parties (for example, the Mass DOR) with insight into the various models and ramifications of each.
The Committee identified a few areas where efficiencies may be achieved, and also acknowledged that on an operational level, budget presentations should be clarified to reflect better "budget to actual" figures. Specific recommendations for the consideration of the Budget and Revenue Taskforce are included in the full report that follows. However, the Committee concluded that there is no~present need to modify the current financial structure.
With specific regard to the elected versus appointed Treasurer issue, the committee believed~there were competing~ideals between creating a broader (and presumably better-qualified~pool of candidates)* and maintaining an autonomous check and balance. The Committee ultimately determined that these two principles were mutually exclusive. Therefore, given the soundness of the current arrangement~and the extent and quality of citizen involvement, there was no compelling reason to recommend significant changes.
* The committee wishes to note that this is an abstract observation and not a commentary on current or past personnel.
Report of the Town Financial Organization Study Committee
to the Budget and Revenue Task Force
The following report is submitted on behalf of the Town Financial Organization Study Committee pursuant to the request made to the Budget and Revenue Task Force by the Board of Selectmen. It includes: a summary of our scope, plan, and process; a summary of the reports of the various working groups we established; and concludes with recommendations and a statement of our sense of the soundness of Arlington’s current departmental configuration and processes.
I. Scope and Organization of the Committee
Over the course of our first three meetings (after electing a chair, vice chair and secretary and selecting our citizen members) we held extensive discussions about how to approach our task. We made three major decisions concerning scope, committee organization and a work plan. It was determined that our scope would be to review and evaluate four subject areas traditionally considered to be part of financial activities: (i) control and operations ;(ii) budgeting and planning; (iii) auditing; and (iv) financial, debt and risk management. We decide to evaluate these functions across town and school departments as well as related elected and appointed boards and compare Arlington’s practices to other models in other municipalities of the Commonwealth. For purposes of our work, information technology was to be considered part of control and
operations.
II Work Plan
We also decided to adopt the attached work plan. We concluded it would be most effective to form three working groups. The full committee met monthly. Working groups assumed major tasks to be completed between meetings.
The following working groups were assembled:
· Internal Operations - tasked with collecting information about and studying the internal departmental activities of the town. Members: Bob Jefferson; Annie LaCourt; Suzanne Owayda; and John Bilafer.
· External Institutions - tasked with collecting resources and information from institutions and organizations external to the town. Members: JD Chesloff; Joe Tully; and Steve O’Riordan.
· Municipal Experience - tasked with interviewing personnel and officials in cities and towns where relevant financial operating models have been adopted or extensively evaluated. Members: Allen Reedy; Steve DeCourcey; and Charlie Foskett.
See attached work plan with notes.
III The Information Gathering Process
Over the course of the last year each group has done extensive research in its respective area.
The Internal Operations working group collected organizational charts and job descriptions from the offices of the Comptroller, Treasurer, Assessor, Town Manager and the school business office. An extensive discussion was held with former long-serving Arlington Treasurer John Bilafer about who is responsible for the four areas of scope within each town department. The working group also met with the Comptroller, Treasurer, Assessor, Town Manager and school business office staff. At that meeting we requested the various officers to describe their department’s operations, make an assessment of the effectiveness of those operations, and consider what might be the benefits and costs (both literally and figuratively) of a change in organization. These interviews provided the committee with a broad overview of our
current organization.
The External Institutions working group consulted with the Department of Housing and Community Development (DHCD), Department of Revenue (DOR), Massachusetts Government Financial Officers Association (MGFOA) and the Massachusetts Municipal Association (MMA). It asked staff at these institutions for their perspective on the issue of: (i) election vs. appointment for positions such as treasurer and assessor; (ii) current trends; and (iii) what organizational arrangements are common in other communities. In addition, it created potential organization charts depicting alternative structures for departments and/or functions.
The Municipal Experience working group reviewed the financial organization of a variety of local communities. It considered the salient characteristics of Arlington , namely population, demographics, number and type of taxable properties and chose to study three communities in depth. The group specifically sought at least communities that had recently restructured its financial functions. It then interviewed select staff and elected officials. The group questioned the contacts about the effectiveness of their communities’ financial organization. They also inquired as to the reasons for organizational changes and attempted to determine whether the changes had solved problems and/or reduced costs.
The work product of this research has been converted to PDF and posted to the town website. A list of these documents is attached as an addendum.
Summary of the Committee Reports:
Each committee produced one or more reports or sets of notes over the course of the year.
The Internal Operations group did not draw conclusions about the current organization of the town but rather sought to ensure that the whole committee clearly understood the organization. Several things stood out from the information gathering conducted by this group. The first is that the distribution of responsibilities among independent offices - Treasurer, Assessor, Comptroller and Town Manager – provides checks and balances in and of itself. Consequently, one major concern arose that changing the structure (particularly centralizing financial functions in a finance department) may adversely affect that balance. Second, we heard from more than one source that the consolidation of the payroll functions of town and schools had been a great success. Staff seemed proud of this effort and interested in looking at the
potential for similar consolidations in other areas in order to create efficiencies. Third, it was apparent that the staff in the above mentioned positions work well together and have been remarkably stable over time. Finally, it became clear that Arlington has a much stronger finance committee and a more civically engaged populace than many other communities. Therefore, there is inherently stricter financial oversight than in peer communities. These themes, as well as the understanding of the division of responsibilities among the various independent offices and the insight into how information flows among them, guided the deliberations of the committee and were critical to the ultimate recommendations.
The External Institutions working group spoke with staff at DHCD, DOR, MMMA, and MGFOA. It made two interim reports which are attached. Its basic questions to staff or members of these institutions were why communities had sought their help in the past 10 years and what themes or issues in the area of financial (re)organization had emerged. The contacts generally had a similar inclination to recommend that communities professionalize positions such as Treasurer or Assessor by making each appointed positions. The common theme seemed to be the idea that greater competence would be achieved because an appointed position expanded the pool of potential applicants beyond just those with the political ambition or political viability for the position. For the most part those communities that had sought help from these agencies were
having dramatic trouble and in some cases were ordered to make changes to gain control of their situation. Problems ranged from DOR sanctions to distortions in caused by rapid growth. According to the DOR contact, the most popular problem they face is reconciling cash. The primary cause of unreconciled cash is the lack of qualifications of the responsible party. Many of the problem communities were located in the middle or western part of the state and therefore, were smaller than Arlington (in terms of personnel and revenues) and thus had a smaller pool of candidates for office. Often the recommendations for remedying a problem included instituting policies around debt, reserves and capital planning, which Arlington has institutionalized. Our general conclusion is that a financial reorganization is usually the result of a crisis brought on by failure to manage cash or the pressures of growth.
The Municipal Experience working group spoke with the Finance Director or town administrator and elected and appointed officials such as the Moderator, Finance Committee members or Town Meeting members in three communities that had undertaken a financial reorganization. Its full report is attached. The picture that emerged was ambiguous. A few common themes emerged. One was that often a Finance Director or CFO position was created as recognition that someone, such as an assistant town manager, was already performing that role. Another was that there was tension between the advantages of professionalizing positions by making them appointed and the risks of concentrating power by consolidating financial structures. In all of these communities integration of town and school financial management was limited to shared information
systems. There seemed to be a strong feeling that the individual driving the budget process was the Town Manager or Administrator and that the success of that person was closely tied tightly to his/her role in the budget process. Finally, it was clear that creating a finance department did not create efficiencies and reduce staff. In fact there was an argument to be made for quite the opposite.
See attached reports.
Recommendations
Having gathered and considered all of this information, the committee debated what criteria it should use to evaluate the need for change in Arlington. We returned to the work plan and agreed that the originally-conceived criteria were the proper ones:
· Financial and staffing level impacts
· complexity
· loss or gain of critical resources
· impact on bond ratings
· efficiency gains
· impact on checks and balances
With these in mind the committee members proposed a series of recommendations at the October 2006 meeting. The Committee agreed to come to our November meeting prepared to consider, debate, and vote on each. The October minutes were distributed in a timely fashion so that these ideas could be considered. The town counsel was asked for an opinion as to whether there were any legal impediments to the adoption of any of them.
The full set of recommendations and the votes appear in the minutes of the November 2006 meeting which is attached. Those we agreed to forward to the Budget and Revenue Task Force follow below along with notes as necessary
a. Resolved that the human resource functions of the Town and School departments be combined in a single Human Resource Department under the direction of the Town Manager.
b. Resolved that the Accounts Payable functions of the School and Town be combined into single departments.
c. Resolved that the Information Technology department be moved from the Comptroller to be under the direction of the Town Manager.
d. Resolved that the functions of the Information Technology Department be considered as falling into three broad categories: (i) Town and School hardware, networking, telecommunications and software infrastructure support; (ii) Town and School Administrative Applications, Implementation, Training and Support; and (iii) School Academic Applications Implementation, Training and Support. Further resolved that the first two categories be under the direct management of the Town Manager, and that the third category be directly or indirectly under the management of the Superintendent of Schools.
e. Resolved that the Committee should comment in its report that the various independently elected Town Departments (Clerk, Treasurer, Assessors and School) submit to the Town Manager annual budgets on a schedule requested by the Town Manager to permit an efficient and effective budgeting process, and that the Finance Committee be encouraged publicly sanction those departments failing in this regard.
f. Resolved that there be no change in the structure of elected versus appointed positions in the Town of Arlington
g. Resolved that the Committee provide a written summary of its position on the soundness of the current system in Arlington.
h. Resolved that the Treasurer evaluate the advantages and disadvantages of outsourcing the payroll functions and report his conclusions to the Budget and Revenue Task Force within one calendar year.
i. Resolved that the Treasurer evaluate the advantages and disadvantages of tax collections through a “Lock Box” and report his conclusions to the Budget and Revenue Task Force within one calendar year.
j. Resolved that the Town Manager determine how to have the Town standardize its “budget to actual” reporting systems for the Board of Selectmen, the Finance Committee and Town Meeting and report his findings to the Budget and Revenue Task Force within one calendar year.
A common theme emerges from these recommendations. The committee feels very strongly that all efforts to increase the efficiency of operations should be pursued. And thus we are recommending that consolidation of similar functions be reviewed and considered. The success of the consolidation of payroll leads us to believe similar success might be had with accounts payable. Our recommendation to consolidate HR under the Town Manager was based on our understanding that the Schools do not have an HR manager currently. We believe that a reorganization of this area might yield a gain for the schools.
We also believe that moving the Information Technology department to the Town Manager would better reflect the current reality that IT supports functions throughout the town and may also make it possible to achieve better integration between the town and schools. Our second resolution in this area reflects our concern that it be clear that we do not believe that the Town Manager’s jurisdiction should extended into the realm of educational computing.
Two of our recommendations are intended to encourage the new Treasurer to look at the possibility of outsourcing payroll and at using a lock box for cash collections. Both are worth investigating for the possibility that they might yield savings. Outsourcing Payroll would not necessarily mean laying off current staff but could be done as attrition empties the positions that might be reduced.
Several of our recommendations are intended to make the budgeting process more effective. We believe it is important that all offices of the town submit their budgets in a timely fashion in order to make the work of the Finance Committee as productive and timely as possible. We also believe that a greater effort should be made to make the “budget to actual” figures clear and comprehensible despite the end of year encumbrances.
With respect to resolution “g” it is the Committee’s opinion that the present structure contains an important segregation of duties among the individuals charged with the respective fiduciary obligations of the town, which provides inherent checks and balances. Additionally, Arlington possesses a unique dynamic that has endowed the town with a civic conscience to be admired. It has a long tradition of citizen activism that has maintained the town in good stead. The corps of community activists buttresses these checks and balances by assuring that there are ample citizen “watchdogs.” Furthermore, it is the Committee’s opinion that the expertise available within the resident population is such that it is unlikely that town elections for mission-critical positions will not field qualified
candidates.
With respect to the question of changing elected office positions to appointed or instituting a finance department the majority of the committee felt that something important would be lost by making such a change. Committee member J.D. Chesloff made the eloquent remarks noted below, which the Committee unanimously requested be memorialized in its minutes, and be included in its final report. It should be noted that JD is the member who has most recently moved to Arlington and presumably has the least investment in the status quo.
With regard to the resolution to change several elected offices to appointed ones which the committee rejected:
This resolution is one that I, and my subcommittee on external organizations, spent the bulk of our time researching over the past year. From this research, there are some good reasons that emerged to change from elected to appointed positions, such as increased accountability, quality of applicants, or the ability to draw candidates from a larger pool - which I think has the most merit. However, in our contact with external organizations, the main reason cited for supporting an appointed fiscal director as opposed to an elected town treasurer was "everyone else is doing it." And that is not a good enough reason for me.
From what I have learned from all of you during our meetings over the past year, and from my four years living in Arlington, I have found this to be a very unique place to live. People here are very involved with their government and active in their community. There is a very high level of engagement here, of civic engagement, and there is no more important act of civic engagement than voting and participating in elections. Elimination of elected positions discourages that involvement. I would not want to be responsible for taking that away. I therefore move that the Committee not support the resolution.
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