Friday, June 17, 1998

Free cash may be a negative number

by Claudia Miller

A gradual accumulation of funds which are designated for road repairs has left the town in a "precarious free cash position," according to Nancy Pierce, chair of the finance committee. A backlog of road work and associated paperwork for state reimbursement means that the free cash fund may be nearly depleted and the finance committee will have little flexibility in the upcoming budget process.

Over the past several years, Annual Town Meetings have authorized town officials to accept state reimbursements for some of the state-approved roadwork. To qualify for the reimbursements, the town must submit roadwork plans for state approval, complete the project, pay any bills and furnish the state with paid receipts.

As voters have approved taking part in the Chapter 90 reimbursements, funds which are available in free cash have been earmarked for road construction projects until the state reimbursements are awarded, meaning the funds are not available for other uses. According to town accountant Sarah Andreassen, some state auditors have recognized that not all of the earmarked funds will be spent within a fiscal year and that Chapter 90 funds will eventually replenish the town's free cash supply. However, a recent directive is forcing state auditors to take a tougher stand on revenues, said Andreassen.

A backlog of road projects which have not been completed has caused the amount of free cash which is designated for roadwork to creep up. In recent years, the FinCom has recommended funding a portion of the operating budget with funds from free cash. With so much money tied up in road projects, free cash may be certified by the state as a negative number, Andreassen warned. While she said this was no reason for alarm, she added that free cash funds would not likely be available to fund the operating budget.

"This catches us off guard," admitted committee member Alan Deary.

"Free cash is not going to be the tool it was," fellow member Tom Bilotta said earlier as a prelude to the discussion.
Filings just completed

Gary Davis, supervisor of the department of public works, appeared at the November 24 FinCom meeting and admitted that the final filings for state

reimbursement were completed only recently. This came as a surprise to the FinCom, which had been told at previous meetings that the reimbursement filings were completed and the town was waiting for the funds. Davis explained that much of the money was spent in only the last two months.

The town will be submitting roughly $350,000 in bills for payment for a new street sweeper, stone cap seal for various roads and other paving projects, said David DeManche, the newly hired town administrator, who outlined where the town stands in the reimbursement process. He estimated that it would be between six to eight weeks before the town could expect to see state funds.

Pierce noted that any reimbursements the town receives in the coming months would flow into free cash for the next fiscal year and would not be available at the 1998 Annual Town Meeting to fund any budget shortfalls.

"There is essentially no reason to assume we are going to have any free cash," Pierce grimly explained.

Any funds which remain unspent at the end of the fiscal year are deposited into free cash. Every year the free cash balance must be examined by state auditors before the account is certified and the funds are available for use. The free cash account is not a discretionary account under the control of the FinCom as the reserve fund is; a Town Meeting vote is needed before any of the undesignated free cash funds can be spent.

In the future

In an effort to alleviate the difficulties which involve the use of free cash for road work, the last Town Meeting authorized officials to borrow the necessary funds for future road work and then reimbursements will be used to pay off the loans.