Finance Committee - 4/17/2019 Page 2
That’s a real quick summary of the Governance Letter. It is a little bit more in detail; it tells you about some key
estimates that are incorporated into your financial statements. But in essence, auditing standards require us to
tell you if we found any significant audit entries that needed to be posted; if there were any disagreements in
how to apply accounting principles into your financial statements; and if there were any key estimates in there.
And the first two, again, just to summarize, we did not need to propose any significant audit entries; there were
no disagreements in how to apply Generally Accepted Accounting Principles. There are a few estimates in
there; most of your estimates though are actuarially determined so there is a standards and science behind the
consultants that you employed to help you estimate two account balances. It will talk very briefly about, in your
CAFR, which is your net pension liability and your net OPEB liability.
With that said, if | could turn your attention into the Comprehensive Annual Financial Report, when | mentioned
it just a moment ago, our auditors’ opinion, if you have the document, is starts on Page 15 and it goes 15
through 17. Everything else in this document belongs to the City of Nashua and again just to summarize our
opinion, your financial statements are totally in accordance with Generally Accepted Accounting Principles.
Following that is your management’s discussion and analysis. It is a great resource to go back to at a later
point in time to understand why key account balances may have changed. If you have the document or if you
choose to at least make a note, the one thing in MBNA that | would want to point out is on Page 26 in the
middle part of Page 26, it is headed up as the General Fund. I’m not going to read about, you might want to
reference that, because when we get to your General Fund Balance Sheet, many of the things that I’ll talk
about on that General Fund Balance Sheet are summarized very nicely here on Page 26, that middle
paragraph on Page 26.
With that being said, if | could turn your attention over to Page 31, just a couple minutes of discussion on Page
31. This is what we would refer to as your Long-Term Perspective Balance Sheet. In just a moment we will
turn a few pages and look at your General Fund Balance Sheet which is really where most readers will turn to
look at fund balance on the different components of fund balance. But many years ago, the Accounting
Standards put into play a duel perspective financial model here and so you have both your General Fund Basis
and you have Page 31 which is a more of a long-term basis balance sheet. Very quickly, the key numbers on
this page in that first column of numbers, about 2/3 of the way down the page, you have your net pension
liability and your net OPEB liability. First on the net pension liability there are two components of it, you are a
participant in the New Hampshire Retirement System and you also have locally the Board of Public Works
System.
With respect to your proportional share of the New Hampshire Retirement System Liability, you see that
number about $244,000,000.00 million dollars and that’s measured as of June 30, 2017. That’s actually down
from the year before by about $25,000,000.00 million dollars mostly due to improve investment results through
the point and time of June 30, 2017. The other liability that | mentioned is just above that number, it is called
your Net & Total OPEB Liability and that has an account balance of about $67,000,000.00 million dollars.
There is something new in that number this year; a year ago that number was $27,000,000.00 million dollars
but the accounting standards changed. |’ll certainly try to answer any questions that the Committee may have
on the changes, but it is not as if the liability from one year jumped from $27,000,000.00 million to
$67,000,000.00 million. That major jump | think | recall speaking about it with you a year ago, was because a
new accounting standard was put into play for Fiscal Year 18. And maybe just quickly to summarize, that
OPEB or OPEB it is an acronym for Other Post-Employment Benefits and the “other’ means benefits other
than pension and by and large what that means is the retiree health care benefit that retirees have earned.
That’s a real quick summary of those two long-term liabilities. Just to put them in perspective, they certainly
are large and significant. Rating agencies know about them; the accounting standard changes that have been
put into play over the last couple of years have in essence taken them from being — my words — buried on
Page 150 where not that many readers would get to Page 150; the accounting standards changed to put them
on the face of this balance sheet. But financial institutions and rating agencies have always known that for
Nashua and other communities in the State and throughout the Country that those liabilities have existed.
Also, with respect to the Pension Liabilities, they are on a funding schedule; | think it goes out about 18 years
and that liability is scheduled actuarially to be fully funded over that timeframe. So hopefully that provides just
