from Division of Local Services - who can be contacted for questions.
REVENUE AND APPROPRIATION DEFICITS
March 2017
Field visits with municipal finance officials have revealed certain misconceptions about what
constitutes a “budget deficit.” The term is often used when projected revenues are lower than
anticipated expenditures at the start of the budget process. However, because municipal budgets
must be in balance, policymakers must close this gap before the start of the fiscal year. After the tax
rate is set, appropriation and revenue deficits can arise during the course of the fiscal year and must
be addressed before the following year’s tax rate can be approved.
An appropriation deficit is an excess of expenditures at any point in a fiscal year
over the legally authorized amount approved by the local appropriating authority for
the same period.
With four spending exceptions (court judgments, snow and ice costs, overlay, and emergencies
threatening public health or safety), a city or town department may not overexpend its
appropriation under M.G.L. c. 44, §31. Unless corrected prior to year-end through transfer or
appropriation of unexpended reserves, all appropriation deficits must be raised on the tax rate
recapitulation sheet (tax recap) for the ensuing fiscal year. Illegal appropriation deficits also
negatively hit free cash, which creates a double penalty.
A revenue deficit is the amount by which actual revenues at year-end fall short of
projected revenues and are thereby insufficient to cover actual expenditures (not
including appropriation deficits).
A revenue deficit must also be raised on the tax recap for the following year, but unlike an
appropriation deficit, it does not affect a community’s free cash calculation.
It is useful to remember that in determining revenue deficits, municipalities are allowed to regard
the current year’s net real and personal property taxes as 100 percent collectible. This effectively
narrows the source of a revenue deficit to state aid or local receipt categories.
With either deficit type, town accountants and city auditors should monitor expenditure and
revenue trends during the fiscal year to identify potential problems. Appropriation deficits can
often be corrected through transfer or appropriation. An identified revenue deficit usually requires
a corresponding midyear spending reduction. However, it is not possible to fully quantify a revenue
deficit until after the fiscal year closes and a balance sheet is prepared.
In addition to monitoring revenues and expenditures throughout the year, these are other methods
to avoid or remedy deficits:
Under M.G.L. c. 41, §56, the accountant or auditor should disallow any departmental
payment request when the appropriation balance in the line item to be charged is
insufficient to cover the invoice amount. The timely exercise of this authority when
processing warrants will prevent appropriation deficits.
A town meeting or city council may approve midyear line-item transfers or appropriate from
reserve balances. In either case, the executive branch must originate the request.
Under M.G.L. c. 44, §33B, a board of selectmen (with the finance committee’s agreement)
or a city council may approve the transfer of appropriations between line items during the
last two months of the fiscal year or the first 15 days of the ensuing fiscal year, provided
that the appropriations are not taken from the school department or municipal light plant.
Under M.G.L. c. 40, §5A and M.G.L. c. 40, §6, a city council or town finance committee may
vote to transfer from the reserve fund an amount to fund extraordinary or unforeseen
expenses.
posted by Jeff Bennett
So here we have in black and white ! The law says, not Jeff Bennett, Will Spring or Bev. Bartolomeo ! M.G.L.c.41,56 says the Accountant should watch for potential problems, and disallow any department payment request when there is not enough money in the account. That is all we have to understand. We cannot spend money we do not have ! Surprise, surprise !!
ReplyDeleteSo it looks like the town spent over $500,000 on audits for what?
ReplyDeleteThe Advisory Committee did its job by notifying the "executive branch" i.e.; the selectmen and accountant of the shortfall in dispatcher wages.
It appears the proper way to handle this glaring deficit would be to:
" A town meeting or city council may approve midyear line-item transfers or appropriate from reserve balances. In either case, the executive branch must originate the request."
The selectmen could have called for a transfer of funds from other accounts to cover the deficit in Dispatcher Wages. The Advisory Committee could have met to discuss the transfer to cover the shortfall in this account. Then that vote would cover the deficit until the end of the fiscal year .
End of story.
But no, The accountant http://templetonwatch.blogspot.com/2017/05/a-response.html>responds that
"May 17, 2017
The Response:
It is being paid out of the 911 Grant as budgeted for this year.
Kelli Pontbriand
Accountant
Town of Templeton
978-894-2765 "
So what's the big deal?
Above it states:
" Unless corrected prior to year-end through transfer or appropriation of unexpended reserves, all appropriation deficits must be raised on the tax rate recapitulation sheet (tax recap) for the ensuing fiscal year. Illegal appropriation deficits also negatively hit free cash, which creates a double penalty."
Double penalty sounds good, right?
Enjoy your day!
Hey, I'm a little slow, but anyone know why we dont have the Town Administrator position advertised on the town website, MMA.org, etc? Where are we looking, under bushes, behind buildings for a TA? This seems to say we are not even looking..............
ReplyDeleteA search committee has met already. Two candidates have been presented to the Selectmen for consideration as well as one candidate from the last search committee. The Selectmen will be meeting soon to interview the candidates for the Town Administrator position.
DeleteAnon,
ReplyDeleteOh, Thats another one of those "anonymous" committees that is not listed on the website or its members listed, ahhhhh.
http://websites.networksolutions.com/share/scrapbook/69/690852/Templeton_T.A._Profile.pdf
I am just waiting for our Administrative Assistant to be put up for this position ! Does the job description say anything about being trustworthy?
DeleteI wonder how many women are on the search committee?
DeleteCam
ReplyDeletethe accountant should not approve it if is going to be a deficit. she can see what the account has and if it can be covered.