I was interested to read in todays Boston Globe that Merrill Lynch has agreed to repay the City of Springfield for nearly $14 million in investment losses, as well as the City’s legal fees. The losses were reportedly related to “collateralized debt obligations,” which are securities linked to bonds and loans, including subprime mortgages, according to the Globe.

Interestingly, these reports are coming on the heals of several recent investment related reports and advisories that TLB has been monitoring on behalf of its clients. As well as downgrades from rating agencies on some government investment pools.

November 30, 2007, Standard & Poor’s issued a report entitled “S&P Rated Local Government Investment Pools Weathering Storm.”

On December 5, 2007, the Boston Globe ran an article with the headline “Volatile holdings part of state fund - SIV’s add risk as communities seek to increase income,” referring to the MMDT cash portfolio.

This was followed by a frequently asked questions report by S&P on December 10, 2007, related to local government investment pools and a separate question and answer piece issued by Fidelity on the MMDT cash portfolio and its perspectives on Structured Investment Vehicles. S&P also issued a separate report entitled “U.S. State and Local Government Investments and Recent Market Disruption,” on December 10, 2007.

Just recently, I received the 2007/2008 investment circular from the MMDT on the cash portfolio and the MMDT short-term bond fund.

TLB has been adding additional procedures to its municipal audits to ensure our clients are meeting the disclosure requirements of GASB 40, have an investment policy, are following and monitoring adherence to the investment policy and that city and town treasurers understand to what extent municipal investments may be at risk.

TLB will be adding future posts on a treasurers responsibility for deposits and investments under Massachusetts General Laws, and otherwise. But, in the meantime, there is no time like the present to review where your community stands. If you have any questions regarding the recent reports, on investment policies or municipal investments in general please contact Rich Bienvenue at (508) 255-2240 or via e-mail rich@tlbcpa.net

Posted by Rich Bienvenue

With municipalities receiving significant Medicare Part D reimbursements in fiscal year 2007 and 2008, and with the tax rate setting season upon Massachusetts municipalities, TLB has been fielding several questions regarding the proper accounting treatment of these reimbursements. The Government Accounting Standards Board (GASB) has issued a Technical Bulletin concerning these reimbursements, effective for financial statements issued after June 30, 2006. (more…)

Massachusetts cities and town who choose to provide employee health insurance through a self-insured arrangement should be aware of the financial accounting and reporting requirements of doing so.  TLB has long recommended to cities and towns that self-insurance programs be accounted for in an internal service fund.  (more…)