Presentation says FY25 audit has no completion date, both treasurer posts are vacant, and overhead charges to water, sewer, and trash funds appear to have been inflated

By John Barrella

MIDDLEBOROUGH — Middleborough’s finances are in deeper disarray than previously disclosed, with the town facing more than $1 million in budget adjustments, an overdue audit with no completion date, and apparent problems in the way it has charged its water, wastewater, and sanitation funds for overhead, according to Interim Town Manager Robert G. Nunes.

Nunes is recommending that the town delay its Special Town Meeting until Nov. 9, giving officials additional time to close the budget gap, complete the fiscal 2025 audit, and review the town’s finances before asking voters to act.

At a meeting Monday night, Nunes said he intends to produce a balanced fiscal 2027 budget “without using budget gimmicks” and warned that the town needs to correct its underlying financial picture before moving forward.

“The town must get this right,” Nunes said.

The financial problems he outlined include a $1.15 million shortfall created by the town’s assessment from Bristol-Plymouth Regional Technical School, six-figure deficits in the water and sanitation enterprise funds, uncertainty over free cash and new growth, and a fiscal 2025 audit that remains unfinished more than a year after the fiscal year ended.

Nunes also said the town’s indirect costs — charges from the general fund to its enterprise accounts for employee benefits, administrative services, operating costs, and debt — “appear” to have been inflated, raising questions about how the costs have been allocated among the town’s funds.

The audit delay has already affected the town’s relationship with its bond-rating agency. Nunes said Monday that Standard & Poor’s “did not want to hold its standard bond rating call due to the FY25 audit being incomplete.” The town’s last S&P rating was AA with a stable outlook.

The Nov. 9 date gives the town several additional weeks to work through the financial issues Nunes outlined Monday. His presentation did not include a final fiscal 2027 budget, instead laying out a series of issues officials say must be resolved before Town Meeting.

A seven-figure hole

The largest immediate problem is the town’s assessment from Bristol-Plymouth Regional Technical School.

The bill totals $3,401,055, including a $1,109,497 debt payment for the district’s new high school. Middleborough budgeted $2.25 million for the assessment, leaving a $1,151,055 shortfall.

The town has $1,057,112 in its debt stabilization fund. Voters at the June 1 Annual Town Meeting approved putting $800,000 into that fund under Article 6 for the new school’s debt. Moving the money out, however, requires another Town Meeting vote.

Nunes wrote that transferring the $800,000 to the general fund to cover the payment “will trigger a structural deficit for FY28.” He said the issue would be addressed in the final supplemental budget.

“Budget adjustments in excess of $1,000,000 will be needed to balance the budget in FY27,” Nunes said Monday.

The problem is complicated by the circumstances under which the current budget was prepared.

“Perkins delivered a balanced budget based on the data that was presented to him,” Nunes said, referring to Joseph Perkins, the former interim town manager who served before Nunes returned to the position.

Other factors are also putting pressure on the budget.

The town’s final Cherry Sheet showed a net reduction of $154,386 in state aid after Governor Maura Healey signed the state budget July 9.

The overlay account, which pays for property tax abatements and exemptions for eligible residents, including veterans and seniors, was budgeted at $300,000. Nunes’s presentation says that amount will increase, citing a range of $300,000 to $400,000.

The town had projected $1.1 million in new growth revenue, but the actual figure remains under review by the state Bureau of Local Assessment.

There is some favorable news on local receipts. Fiscal 2026 receipts came in at $12,097,769, about $598,000 above the town’s $11.5 million projection, according to unaudited figures in Nunes’s presentation.

But Nunes said the town should not expect a large free-cash certification to solve the problem.

“I’m not expecting a lot of free cash since most of it was used at Spring Town Meeting,” he said.

Enterprise funds show deficits

The town’s enterprise accounts are also under scrutiny.

The water enterprise fund closed fiscal 2026 with an unaudited deficit of $576,041. The sanitation fund had an unaudited deficit of $105,906.

Nunes wrote that those deficits must be covered either through transfers from retained earnings or by raising them on the recap sheet, the state form used to set the tax rate.

The town’s general stabilization fund has $6,866,630. Depending on the state’s certification of free cash, the presentation says, the fund may have to be used for supplemental appropriations.

The town’s Other Post-Employment Benefits trust fund holds $5,454,881. Its annual $200,000 appropriation will require an article on the Special Town Meeting warrant.

Nunes said the fiscal 2026 balance sheet will be submitted to the state Bureau of Accounts in early October. Tax bills are scheduled to be mailed at the end of December.

The water deficit drew particular attention Monday.

“Water rates were increased several years ago and I’m not sure how a deficit happened,” Nunes said.

The presentation estimates that the water department faces an additional $110 million in enterprise debt over the next five to 10 years, not including trucks, tank work, or construction of a new tank.

Nunes said the water rate increase that took effect Jan. 1, 2024, will be reviewed and that water rates and other charges must ultimately cover the department’s expenditures, including debt.

Audit remains unfinished

The town’s fiscal 2025 audit is another major obstacle.

The audit, covering July 1, 2024, through June 30, 2025, is being performed by CBIZ. According to Nunes’s presentation, “a good amount of audit work still needs to be done,” and the auditors have not established a completion date.

CBIZ will bill the town an additional $45,000 because of the increased scope and time required to complete the work.

Nunes said Monday that Standard & Poor’s had been unwilling to conduct its normal bond-rating call because the audit remains unfinished.

The audit is expected to identify internal-control weaknesses, material weaknesses, significant issues, and findings involving financial reporting, journal entries, debt, and enterprise-account reporting.

Nunes identified the town’s conversion to the MUNIS financial software system in the middle of the fiscal year as one of the challenges facing the auditors.

“New issues continue to come forward,” he wrote.

The delay could have consequences beyond the current audit. The presentation says ratings agencies will require the fiscal 2025 audit for the town’s next ratings call and warns that a late FY25 audit will also delay the fiscal 2026 audit.

Standard & Poor’s rated Middleborough AA with a stable outlook in September 2024. Nunes’s presentation lists a potential downgrade and higher borrowing costs among the possible effects of the audit delay.

He recommended that the town hire an outside consultant to address the audit findings.

The Goat News reported in August that CBIZ auditors Zach Nowlan and Scott McIntyre called town officials Aug. 17 to report that the audit would not be completed before the bond-rating call.

The information came from a memo Perkins sent to the Select Board and Finance Committee. According to the memo, the auditors described the engagement as “significantly challenging.”

They cited the March 2025 software change, revenue that a former town employee had reported to the finance office in incorrect amounts, the manual reconciliation of those errors, and limited staffing at both the town and CBIZ.

The town is rolling over its short-term bond anticipation notes rather than converting them to long-term debt, following a recommendation from Hilltop Securities.

Questions about indirect charges

Nunes also raised questions about how the town has allocated indirect costs to its enterprise funds.

Those charges are amounts assessed by the general fund to the water, wastewater, and sanitation funds for employee benefits, operating costs, administrative services, and debt.

The methodology and percentage calculations for the charges, including enterprise debt, “were changed over the last several years,” Nunes wrote.

“It appears that indirect costs were inflated,” he wrote. “This will impact both the General Fund and Enterprise Accounts.”

Nunes reiterated that concern Monday.

The presentation does not identify when the methodology changed or who authorized the changes. Nunes recommended hiring an outside consultant to review the long-term indirect charges to the enterprise accounts.

The review could have implications for both sides of the town’s financial ledger.

If the general fund has been charging the enterprise funds too much, the enterprise accounts could have been carrying expenses that should have been borne elsewhere. At the same time, reducing those charges could affect the general fund’s finances.

Nunes said the issue needs to be examined as part of the broader effort to establish an accurate financial picture.

Other financial issues

Nunes’s presentation also identified several other areas requiring review.

PFAS settlement: The town has $1,350,455 in a receipts-reserved special revenue fund. Spending the money on PFAS-related work requires approval through a Town Meeting article.

Sanitation: The town plans to analyze the costs and implications of municipal versus private trash and recycling collection.

Wastewater: Upgrades at the wastewater treatment plant are continuing.

MCCAM: The budget for Middleborough Community Cable Access Media is held in a special revenue fund and will also be reviewed.

A widening financial scrutiny

The presentation comes months after Perkins told the Select Board in March that the town faced a potential $3.3 million shortfall.

Since then, the Finance Committee has voted to ask the Select Board to pursue a forensic audit of the town’s finances. The measure passed over the objections of some members.

The committee has also sought read-only access to the town’s MUNIS financial system.

In August, Kenneth M. Woodland, chief of the Municipal Finance Law Bureau at the state Division of Local Services, wrote that he was not aware of any municipal finance law that directly addresses local officials’ read-only access to MUNIS.

Woodland referred related public-records questions to the secretary of the commonwealth’s Public Records Division.

The financial questions come as the town is also operating with vacancies in both the treasurer/collector and assistant treasurer/collector positions.

Interviews for the positions are ongoing, according to Nunes’s presentation. The town also has pending filings with the state Department of Revenue.

Nunes said those staffing issues, along with the audit, enterprise funds, revenues, department budgets, and warrant articles, all need to be reviewed before the town can responsibly present a final fiscal 2027 budget.

Nunes returns to a familiar town

Nunes is no stranger to Middleborough or to municipal finance.

A former longtime mayor of Taunton, he was named in 2007 to lead the state Department of Revenue’s Division of Local Services. Middleborough selectmen chose him as town manager in late 2014.

He retired in 2022, when James McGrail succeeded him. McGrail’s last day as town manager was March 4, 2026.

Nunes has now returned on an interim basis to a town facing a set of financial problems that he says cannot be solved simply by closing the immediate budget gap.

In his recommendation to postpone Town Meeting, Nunes wrote that he, the Finance Committee, and the Select Board “must produce a realistic balanced budget that addresses our current priorities while avoiding the creation of massive structural deficit in FY28 and beyond.”

On Monday, he returned to the same theme.

The town, he said, needs to correct its financial picture before moving forward.

“The town must get this right.”

Disclosure: John Barrella is an elected member of the Middleborough Finance Committee and a member of the town manager search committee. He publishes The Goat News. The GOAT podcast is recorded at MCCAM’s studios.