Loss of investment income at Library due to Republican Incompetence

 REPUBLICAN-AMERICAN  

   SOUTHBURY — The Southbury Public Library's $2 million gift fund has generated about $25,000 in income since a portion of it was invested in securities beginning in May.

Fiduciary Investment Advisers, the Windsor-based firm that manages the town's employee pension plan, invested $800,000 in May and another $600,000 in July in securities. Another $400,000 remains liquid, and the remaining $200,000 is in CDs that mature Dec. 2.

The gift fund had been managed for decades by the library's board of directors, which deposited the money in low-interest CDs.

Questions about its management surfaced last year when town officials learned a state law requires all gifts of money to a library to be received, held and managed by the town treasurer, not a library board.

The library board's treasurer was overseeing the fund from his house even though audit reports in 2003, 2004, 2005 and 2006 recommended the money be put in the town's general ledger.

Oversight of the money was transferred last year to the town treasurer, but it was not invested in securities right away because the banks that held the CDs would have penalized the town for early withdrawals.

"We have professional people investing the money now," said William G. Sarosky, the town's treasurer. "They are the same people who are investing our pension."

The delay in investing the money cost the library considerable income.

The portfolio where the fund is now invested is up close to 8 percent since last summer, meaning the return could have been approximately $160,000, not $25,000.

Returns go up and down with the stock market, but officials say they are more concerned that the fund now has proper oversight.

"I know (the town's auditors) are happy that everything is now in the same set of books instead of having a separate set of books that was manually done," Sarosky said.

The library board retains exclusive right to decide how money from the gift fund is spent. This fiscal year, the board anticipated using $400,000 from the fund, and Sarosky said $40,000 has been spent so far.

The balance of the money remains in a liquid savings account and can be accessed when the library board needs the money, he said.

"There's proper financial oversight, proper accounting oversight and donor intent is being honored by doing it this way," First Selectman Ed Edelson said.

Sarosky said library staff members have adjusted to the new purchase order system.

They have also learned how to enter requests for money in the town's accounting system, called MUNIS.

Even though the auditors' recommendations from a decade ago were not followed, the town in recent years tried to keep better track of the money by requiring the library board to submit monthly account reports to Sarosky.

Still, some procedures violated standard accounting principles.

For example, the library board's treasurer, when directed by the board to make a payment for something, would cut a check and then reconcile the books when checks were returned by the bank at the end of the statement period.

Accountants say one person should cut the check, and another person should reconcile the account.

The library board is proposing changes to the charter that would eliminate one hurdle that could potentially limit its access to the gift fund.

The town has a requirement that transfers of $20,000 or more between accounts be approved at a town meeting.

The proposed charter change would eliminate that requirement for the library since the money is for the building's exclusive use.

"I'm hoping this will be agreeable to everybody because I think it makes sense," said Sharon Elias, a library board member. "This way it's more clear in the charter. It just alleviates problems in the future."

The proposal has not yet been presented to the Charter Revision Commission, which is holding monthly meetings to review proposed charter changes.

A vote on any proposed changes will be held in November 2014