After a quick vote to send the budget to the Town Meeting – where another vote will be held to send the budget to referendum – the Board of Finance (BOF) heard a report from Marcum Accountants on the FY 2023 Financial Statement Audit. Before we get into that, though, you’ll need a little background first.
According to the state’s Municipal Auditing Act, all municipalities must have all their financial statements audited at least once annually, and for the past couple of years, Stafford has been late getting the audit in. Back in September, Lynn Nenni, then the town’s interim finance director, reported to the BOS that the State of Connecticut Office of Policy and Management (OPM) sent a letter to the Town of Stafford indicating the audit report for Fiscal Year 2022 (FY22) was not submitted by the routine deadline of December 31, 2022. As a result, the OPM requested a written summary explaining why the report was late and the steps being taken to correct the current situation and prevent future delinquencies. (Get more detail here.)
Fast-forward to today, and with the help of new Chief Financial Officer John Lund, the town is getting caught up. Kyle Connors, CPA from Marcum, came to the April 1 BOF meeting to review the town’s 2023 financial statement and single audit results. While the 2023 audit isn’t on time, it will be turned in this month, which is an improvement over the past audit, and Connors is hopeful that the 2024 audit will be on time.
Moving on, Connors drew attention to another chronic problem: an unassigned balance in the general fund that is lower than what is considered healthy. Typically, it’s recommended that the balance should be 8-16% of a town’s overall operating budget. Stafford’s policy says that the balance should be 10-14% of its operating budget. At $3.45 million, Stafford’s current unassigned balance is just 7.5% of its operating budget.
This is what one might consider the “rainy day fund,” ready for emergencies. It also impacts Bond ratings. Stafford has a habit of raiding the fund to shore up the deficit in its utility fund, which pays for the debt associated with the solar and geothermal projects. In 2023, the town transferred $1.2 million to the utility fund to make up for the deficit.
It should be noted that the most recent iteration of the 2024-2025 budget calls for $908,000 to be sent to the utility fund. The goal is to pay down the solar lease faster, decreasing the utility fund deficit and allowing the town to build up the unassigned balance to a healthier level.
But it’s not all bad news, as the town realized $53,000 above what was anticipated, and other revenues were $1,000 more than projected. Fees for zoning, building, and sanitation were “favorable” by $367,000 due to unanticipated development leading to higher permit revenue. Meanwhile, there was $183,000 in interest income above what was budgeted.
Additionally, the town realized about $860,000 in savings or as the accountants put it “under appropriated amounts.” This came from $136,000 in police protection, $337,000 from the general highways budget, and $380,000 in town aid roads. On the flip side, the fire and ambulance service was at a $146,000 deficit and the Board of Education was “unfavorable” by $105,000, though Charmaine Bradshaw-Hill. Director of Finance and Operations, explained this was not about overspending but timing.
Eventually, the report wrapped up with a few recommendations. The town and Board of Education have not historically reconciled their expenditures on a monthly basis, which was part of the reason the audit filings were often late. Connors recommended the town formalize this process, though Lund pointed out he and Bradshaw-Hill now meet monthly to stay on top of this issue.
Other suggestions included creating a better purchase order process to prevent overspending on line items without the knowledge of the Finance Department. Lund said he is currently working on writing and instating this process.
Overall, Connors said, “The process has improved quite a bit.”