Auditor gives Fryeburg good news

By Lisa Williams Ackley
Staff Writer

FRYEBURG — The auditor for the Town of Fryeburg rates this municipality’s financial position a “B or B-plus.”

“I think you’re a healthy town,” said Ron Smith, CPA and principal of RHR Smith & Company, who has been performing the town’s audit for five years now.

“Your excise tax collections were good,” Smith told Selectmen Rick Eastman, Tom Klinepeter and Ed Wilkey and Town Manager Sharon Jackson Jan. 27.

According to Smith, Fryeburg’s General Fund shows that at the end of Fiscal Year 2010 (June 30, 2010) the town had assets of $3.3 million and liabilities of $2.175 million with a Fund Balance of $1.2 million, of which $1.135 million was Undesignated funds and $65,000 was Designated funds.

“Your Surplus is down about $400,000, over last year,” said Smith, explaining the reason for that.

“In 2010, the town used a little over $300,000” to reduce the property tax impact and also moved $100,000 from the General Fund to the Cemeteries Account “due to a spiritual debate,” Smith said.

The town is allowed by law to use the interest from the Cemeteries Account for perpetual care of town-owned cemeteries, according to Smith.

“In the past, the town would never budget for perpetual care out of the Cemeteries Account, they used the General Fund,” said Smith. Referring to an instance last year where a resident questioned why $105,000 was in the General Fund account rather than in the Cemeteries Account, Auditor Smith said, “We weren’t looking to raid the Cemeteries Fund. I’ve been the auditor for five years, and the town never transferred any interest out of the Cemeteries Fund. The town took the most conservative approach.”

“So, that’s the big reason your Fund Balance went down — the $100,000 transferred to the Cemeteries Fund and the $300,000 was used for tax relief and a couple of other projects,” Smith stated. He went on to explain that the town did not spend the $100,000 in the Cemeteries Fund, rather those monies were just transferred from the General Fund to that account.

Twice a year tax collection helps

Selectman Eastman asked Smith, “Are we in a better place, for collecting taxes twice a year?”

“You were operating on last year’s money and with (the ongoing) Haleytown Road project — the moral of that story is you were using a boatload of money,” stated Smith.

“We borrowed on a Tax Anticipation Note (TAN), too,” said Selectman Wilkey.

“There’s no TAN anymore, your cash flow is good and the twice a year (tax billing) is good,” said Smith. “I’m comfortable you can look in your taxpayers’ faces and say, ‘We’ve been frugal.’”

Explaining the difference between the town now billing property taxes twice per year instead of once per year, as in previous years, Smith said further, “In the past, the town had a low Fund balance and cash flow was poor. Tax collection was down over 2009 — and you’re the sixth or seventh town I’ve told this to — the economy has taken no prisoners. Liens are up, collections are down. People are trying to save their homes and don’t always pay their taxes on time.”

“Your property tax collections were down,” noted Smith, “and that’s an effect of the economy, I’m convinced. Your state revenue sharing was down by $35,000, but you made up for $31,000 of it through excise tax collections.”

“You’re a healthy town”

“As for the town’s financial position, I think you’re a healthy town,” Smith said. “I’d probably rate your position a B to a B-plus.”

“Your excise tax collections were good,” said Smith.

The auditor pointed out that “the State’s got financial problems and towns are beginning to see that.”

“There was an eight to 10% decline in revenue projections for some municipalities…but you braced for impact. You put yourselves in a good financial place,” Smith said.

“Just consider yourselves fortunate you backed off the pencil on revenue expectations,” said Smith. “I think you will have to do that again, this year.”

Smith also suggested the town look at putting a policy in place regarding custodial credit risk, saying, “There are two types of credit risk — market risk and custodial risk.”

“Market risk you have no control over, while custodial risk is totally, totally in your control,” said Smith. “Two years ago, you did have an investment fund that fluctuated badly, and it has been transferred, and you recovered nicely. Clearly, you lost some market value — about $10,000 in a trust. Now, it’s back in a fund, and the town stopped the bleeding. It’s nice to look your constituents in the face and say, ‘We’re frugal with our money.’ It’s also nice to be able to say to them, ‘Your money’s safe.’ Your money is safe. But, you need to put something (in a policy) that is more to Fryeburg’s needs.”

“After spending $6.5 million, you were within $6,000 of what you expected to spend,” Smith announced. “That’s pretty tight — pretty frugal.”

As for the Haleytown Road reconstruction project, Smith advised the selectmen and town manager, “There is almost $600,000 left, to finish that project. That was a big project for the town. It is time to bring some closure to that — it’s been three years.”

“The state’s been holding us up — the DEP (Department of Environmental Protection) and the Corps (Army Corps of Engineers),” stated Selectman Wilkey regarding the status of the Haleytown Road project.

“Boston has the Big Dig, we have Haleytown Road,” said Chairman Klinepeter.

The town’s projection for its Surplus couldn’t have been better, the auditor said.

“You were spot on,” said Smith. “I’m here to deliver that message. It’s good news. It’s good fortune. You were spot on.”

As for recommendations made by Smith for improvements the town could make, Selectman Eastman stated, “I thought it was a good presentation, and I know full well that Sharon’s already working on some of your recommendations.”

“You’re doing well,” said Smith.

“Well, that’s a pretty good report card,” said Eastman.

“That is pretty good, considering the hits we took from the State,” Wilkey said.

Bad news

“We are looking to lose State Revenue Sharing more than we lost already, for this budget year,” Town Manager Jackson said. “Now, there will be a $50,000 deduction from the current budget here. So, we won’t get in the revenue we’re projecting from State Revenue Sharing, and goodness knows what we’ll get next year.”

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