Friday, April 23, 2004
FinCom looks at management of town funds
At the April 4 meeting of the Carlisle Finance Committee, member Bret Bero presented an analysis of fund balances in various accounts controlled by the town. The fund accounts reviewed included not only "typical" accounts, like free cash and the stabilization fund, but also other less well-known accounts like the special purpose trust funds and "off balance sheet" investment accounts. The analysis covered the period from 1998 through 2003, and sought to understand the totality of the assets/resources actually available to the town.
Based upon the analysis, the report concluded that greater visibility and understanding of all these funds would be desirable to allow better financial management and budgeting decisions to be made by the FinCom. Based on this analysis, a set of recommendations was discussed by the FinCom:
1. Carlisle can use free cash and the stabilization fund to backup the town operating budget.
2. As a policy, the town should seek to establish a reserve level (combined free cash, stabilization fund, and reserve fund) equal to 5% of its operating budget.
3. As a policy, the town should set its reserve fund equal to 1% of the operating budget.
4. The town should only continue the CPA surtax as long as the state matches the collections.
5. The town should strive for greater transparency in fund reporting.
It was noted that the budgeting process deals with item #1, and the Benfield Parcel A purchase and the related debt obligation are driving #4.
With regard to item #2, FinCom members agreed that the main objective is an improved bond rating (and lower interest costs) for the Town if total reserve levels were at 5%. Here, Bero agreed to draft a policy for review by the FinCom, which would then be sent to the Selectmen.
On the 1% reserve fund recommendation (#3), committee members thought that a hard policy guideline was not required. The current reserve fund is one half of 1%. "Creative workarounds in response to budget overruns happen when there is no money," said Wilkes. In other words, whatever is in the reserve fund will likely be spent. To maintain discipline, it was better to keep the reserve levels low.
In terms of recommendation #5, greater visibility of all funds, the FinCom was in strong agreement. This, members felt, was a logical extension of trying to assess all resources available to departments when setting operating budget levels. While acknowledging that many of these special purpose funds (e.g., the $182,000 Melone Library fund) had limitations on use, it was important that accountability, transparency, and intended use of these funds become part of the annual budget review process. Toward making this happen, Jenson-Fellows agreed to work with Barton to develop the needed reporting and review processes.
© 2004 The