Special to the OBSERVER
CHAUTAUQUA - Unrealistic budgeting is causing the town of Chautauqua fiscal stress, according to the office of the state comptroller.
Fiscal stress is defined by the Office of the New York State Comptroller as "a judgment about the financial condition of an individual entity that must take into consideration the entity's unique circumstances, but generally is a local government or school district's inability to generate sufficient revenues within a fiscal period to meet expenditures."
The Office of the State Comptroller's fiscal stress monitoring system evaluates local government and school districts, based on both financial and environmental indicators, to determine if these entities are in or nearing fiscal stress.
After an examination of the town's financial condition for the period of Jan. 1, 2012, through July 16, 2013, but also extending back to Jan. 1, 2006, the state comptroller's office has acknowledged the town is in fiscal stress.
According to the comptroller's report, the Chautauqua Town Board did not develop reasonable budget estimates for the general townwide fund, and did not properly monitor and control actual activity against those estimates, allowing appropriations to be over-expended. The board aggregately over-estimated revenues for mortgage tax by $154,157 and the rental of real property by $77,580 in the three most recent fiscal years.
Furthermore, Donald Emhardt, town supervisor, included $50,000 in 2012 for the sale of property that was not sold in 2012, the report says. In addition, the board failed to recognize that a debt payment totaling $62,649 was not included in the 2012 budget. The board also reduced the tax levy in 2011 by 5 percent and appropriated $6,495 of nonexistent fund balance in the 2012 budget.
A separate dilemma, which could also be attributed to unrealistic budgeting, is the erroneous anticipation of rental income from a former school building to house municipal offices and rent out office space, according to the report.
In 2005, the town issued bonds totaling $1.7 million to purchase the building, and it was anticipated that rental income would offset the expenses associated with the building. Some of the office space was rented through two 99-year leases, which required large payments totaling approximately $300,000 that were received in 2006 and 2007. These payments had already been spent by the end of the 2009 fiscal year.
As a result, the general townwide fund for Chautauqua absorbed deficit cash positions of approximately $44,000 and annual debt payments of approximately $200,000.
Throughout the audit period, the supervisor provided monthly financial reports to the board that included year-to-date budget-to-actual comparisons, but the board failed to address the over-estimation of revenues and continued to adopt unrealistic budgets, the report says.
The office of the state comptroller discussed the town's financial condition with board members, and although they realized that the general fund's finances were deteriorating, they were unclear on what specifically contributed to the decline. Several board members stated that the building purchase was a critical factor; none, however, mentioned unrealistic budget estimates as a contributing factor, according to the report.
According to the comptroller's office, the cumulative fund balance deficit will need to be addressed either through identifying other sources of revenue, substantially reducing expenditures or significantly increasing real property taxes for the general townwide fund.
A further review by the comptroller's office of the 2013 budget found that the board continued to over-estimate revenues.
The comptroller's office has recommended that the town of Chautauqua take the following steps to overcome its fiscal stress:
Ensure that the annual budget includes all necessary appropriations and that the amounts budgeted are reasonable;
Monitor the actual revenues received against the revenue estimates in the adopted budgets and make amendments, as necessary, to the budget when revenue shortfalls become known;
Implement a plan to eliminate the unrestricted fund balance deficit, and;
Develop a comprehensive, multiyear financial plan to establish long-term objectives for funding long-term needs.
In response to the audit, Emhardt provided the comptroller's office with the following statement:
"The town board has reviewed the draft report. We have no objections to the draft findings and look forward to formulating and submitting a corrective action plan at the appropriate time."
In an conversation with the newspaper, Emhardt called the audit, "a good thing."
"We had a few issues that we were aware of, and they pointed them out, but we also had a few issues that we were not aware of that they pointed out," Emhardt said. "We got some things straightened out in our budget and with general accounting. Basically, we've been running with too small of a tax rate, and we're going to have to bring that up; however, even with that, it will probably still be one of the three lowest (tax rates) in the county. (The audit) was helpful, and it's good to have them come in every once and a while if you have nothing to hide, which we don't. Basically, it just helped us get some things straight."