After repeatedly raising questions about financial transactions at the meeting of the Newcastle Board of Selectman March 9, Selectman Art Mayers, accused the town of possible illegal actions.
Newcastle town attorney Peter Drum disputed Mayer’s assessment. “In my review of the warrant, nothing is illegal here,” Drum said. “Taking money from the general fund to build Taniscot is no concern. I can’t find anything wrong or illegal here.”
Newcastle town accountant Ron Smith echoed Drum’s sentiment, saying, “I’ve been doing this for 25 years, and that is consistent with what I believe,” he said. “There is nothing here inconsistent with the accepted accounting standards in state of Maine, period.”
The Newcastle Board of Selectman met with Smith March 9, to go over the financial health of the town, the overlooked $147,000 in last year’s budget, and what to do to fix the problem going forward.
The $147,000 oversight was revealed in a conference call between Smith and the board in January. He said Newcastle needs to figure out how to replace the money, because it was double counted as revenue, and not collected through taxation.
Smith explained Newcastle used general fund money, set aside for operating expenses, to complete the Taniscot project instead of borrowing the money requested from voters at last year’s town meeting.
He strongly advised the board to borrow that money before the end of the year to replace what was used to renovate the new town office. Replacing the money taken from the general fund will allow the town to build a larger carryover balance of operating expenses going forward, he said.
Town Administrator Ron Grenier said not borrowing the money in the fall actually saved Newcastle money, because interest rates have fallen since then. The overall savings was somewhere in the neighborhood of $3000, according to Grenier.
In addition to the $198,000 Newcastle voters approved the selectmen to borrow for Taniscot, there was up to $70,000 to fund “unbudgeted major expenses,” available in undesignated capital reserve accounts, Selectman Pat Hudson said.
Total appropriations available to Newcastle to complete the Taniscot project were $268,000. By Dec. 31, 2008, the town had spent $237,000 in revenues to this point with $29,800 carried forward, said Smith.
Mayers took issue with the amount of money available for the project. “We agreed to borrow $198,000,” he said. “Where is the record of amounts for Taniscot?”
Smith laid out the details on the audit paperwork to help Mayers locate the pertinent information.
Smith explained the money was in an MBIA Capital Reserve Account, set aside from operating capital. When the town needs the money they just transfer money from the undesignated capital reserve fund to cover additional expenses, Smith said.
According to Smith, towns can also use these undesignated capital reserve funds to cover unforeseen issues, such as the Patriots’ Day storm on 2007.
Mayers said he knew the money was moved, but hadn’t seen where the account was or when the $70,000 was transferred out of it. He asked Smith to go back and show him exactly where the transfer of cash occurred.
“I have to go look at the MBIA statements,” Smith said. “I don’t think you want to pay me $100 per hour to look it up. Have your administrator look it up.”
Grenier responded that the transfer of money from the capital reserve account happened in September or October. He insisted a motion had been put forth at that time, and every member of the board voted to approve the transfer of money.
Mayers suggested there might be some legal impropriety going on. The meeting broke into complete unrest with everyone talking at once, and some voices raised. Chairman Ellen McFarland hit the gavel on the table several times to return the meeting to order.
Smith audits 120 municipalities, and said Newcastle has about average financial health in comparison to his other clients. Newcastle has a carryover balance of $526,291, which is equal to 30 days of operating expenses, according to Smith.
“The carryover balance can be used for several things,” Smith said. “Combating tough economic times, and fixing revenue problems predicated by government cutbacks. A healthy carryover balance helps stabilize shortfalls.”
Overall the errors in tax collection of $147,000 made the town short that amount. Smith said he dissected the entire budget, and will ensure the proper checks and balances are in place going forward.
“This error caused a hit to the town’s carryover balance of $147,000,” he said. “It took close to 15 days of your carryover balance away.”
