Is Portsmouth in good financial standing? What an audit found.

PORTSMOUTH – Mary Sahady, principal of the accounting firm contracted to perform the town’s annually required audit delivered not only an unmodified “clean” opinion of the town’s financial statements for Fiscal 2022, but also went out of her way to praise Town Administrator Richard Rainer and Finance Director Ryan Fitzpatrick for their diligence and transparency in compiling the requisite materials.

State laws require all general-purpose local governments to publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of certified public accountants licensed to practice in the state of Rhode Island. It is not unusual for municipalities to request a one-month extension from the state to complete the task.

Sahady congratulated the town and its employees for receiving a certificate of achievement for excellence in financial reporting last year and noted Portsmouth’s financial statements contain more information than many neighboring municipalities. She acknowledged “some lag” between the departure of the town’s previous finance director and the hiring of Fitzpatrick – which caused Portsmouth to ask the state for a one-month extension to complete the audit – but said the staffing challenges did not require any findings with regard to the town’s internal financial controls and praised Fitzpatrick for working so hard to get the audit materials in before the extension deadline.

Key numbers from Portsmouth’s 2022 financial statements

• Liabilities of Portsmouth’s governmental activities exceeded assets for the fiscal year ending June 30, 2022 by almost $50 million. However, this is an improvement over 2021: the town’s total “net position” increased by $6,876,818 in 2022 due mainly to an increase in state aid.

• The General Fund is the chief operation fund of the town. Portsmouth has an unassigned general fund balance of over $9.2 million, which is equal to about 14% of the town budget. Sahady said most towns target a fund balance of at least 10% of budget, so Portsmouth is doing well. Town Councilman Keith Hamilton stated he would like to see the fund balance raised to 16% and maintained at that level.

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• Portsmouth has a closed benefit plan which provides pensions to former town employees. The plan’s funded ratio was 55.1% as of June 30, 2022, down from 65.9% on June 30, 2021.

• The school department has a fund balance of $1.4 million, which is a $110,000 increase from last year. Department policy dictates 1.5% of its appropriation be put into reserve every year, with any excess over that going into a separate capital reserve fund. The department cannot legally return any surplus back to the town after it has been disbursed.

How Portsmouth’s municipal budget process works

Portsmouth uses a “zero-based budgeting” system and all town departments are required to submit requests for appropriation to the town administrator each year. The School Committee submits the proposed school budget.

The town administrator uses these requests as the starting point for developing the proposed annual budget, then submits it to the Town Council by April 2 of each year. Rainer has publicly stated he will deliver this year’s proposed budget by March 31.

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The Town Council holds several work sessions to discuss and revise, then adopts a preliminary budget no later than 30 days after the submission of the town administrator’s proposed budget. In June, the council adopts the final town budget by ordinance.

The appropriated budget is prepared by fund, major program function (e.g., public safety) and department (e.g., police). Department heads may make a transfer of appropriation within a department. Transfer of a major program function may be made by the town administrator, provided that proper notification is given to the Town Council.

An overview of Portsmouth’s local economy

As of Dec. 31, 2021, there were 605 businesses in Portsmouth. The tax-assessed value of these businesses was just over $61,535,000.

One hundred twenty six companies have leased equipment in Portsmouth, with tax-assessed values at over $7,735,000 and utility property and equipment with a tax-assessed value of nearly $96,350,000.

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Portsmouth has a Town Farm program designed to help conserve and preserve farmland, and 99 parcels received farm credits in FY 22.

The town’s largest employer is the Integrated Defense Systems division of Raytheon Company, which specializes among other things in ground-based and sea-based radars for air and missile defense, Navy radar and sonar, and torpedo and naval mine countermeasures.

This article originally appeared on Newport Daily News: Portsmouth annual audit finds town in good financial standing