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

Why is a post about a Templeton Town accountant possibly applying for a part time accounting position in another municipality being talked about or brought up?

Since there is a thing here in Massachusetts called the Uniform Massachusetts Accounting System


Chapter 1 - Introduction

Scope and Purpose:
 This Manual comprises the Uniform Massachusetts Accounting System (UMAS). The scope of the Manual is the operation of an accounting system for a local governmental entity in Massachusetts. Its purpose is to provide a reference for the City Auditor, Town Accountant or official with similar responsibilities in accounting for financial transactions and reporting results of municipal financial operations. The Manual is based on Generally Accepted Accounting Principles (GAAP), but is written to meet the particular needs of Massachusetts local accounting officials.

Massachusetts General Laws (G.L.) c. 44, § 38 requires the Director of Accounts in the Department of Revenue to prescribe uniform accounting systems for local governmental entities. Accounting for municipally owned electric light plants is prescribed in G.L. c. 164 and is regulated by the Department of Public Utilities; accounting for retirement systems is prescribed in G.L. c. 32 and is regulated by the Public Employment Retirement Administration Commission. This Manual deals solely with accounting policies. Municipal financial issues such as budgeting or audit procurement are not included. Other publications of the Division of Local Services (DLS) address such subjects.

So it seems like if the Templeton Town Accountant takes a part time position in another community (and that is fine as long as Templeton does not take a back seat), it does not appear that the accountant would pick up any pointers or other things because the LAW cited above states there is one standard for ALL cities and towns.

Now, perhaps not known to some current selectmen and others, once upon a time there was a full time Health agent working in Templeton with a very generous compensation package who also worked part time for a few other communities. One of those communities was the Town of New Salem. On the New Salem town web site was a section involving that town's health agent and on that page, the health agent listed "my office number is 978-939 etc., which happened to be the telephone number for the Templeton Board of Health. It seemed to me the Templeton health agent could be conducting other town's business on Templeton dime. I found that website along with other communities where that individual was listed as part time health agent and there did not seem to be enough hours in the week to do all the work the individual was doing while also spending 40 hurs per week in Templeton. Somewhere I have a print out of the New Salem website. There was also a building inspector doing essentially the same thing. potted in another town during hours he was supposed to be in Templeton. That is why, in my opinion, the Templeton Town accountant possible part time position was worth a mention. Also of note, not to long ago at a selectmen meeting, there was mention of Phillipston was looking for a Town accountant and it could be possible for the two towns to share an accountant. A few weeks later, it was stated at another selectmen meeting that Phillipston was not interested. So, just in case any residents happen to see or hear of the Templeton accountant working for Phillipston, we try to avoid any assumption that "hey, I guess the two towns are sharing a town accountant and maybe we are saving some money." .


posted by Jeff Bennett