Town Administrator Tim Bragan presented a memo to the Finance Committee at its Oct. 20 meeting, citing a free cash certification from the Massachusetts Department of Revenue of $1,005,556. (Free cash is funds that are unrestricted and available for appropriation once certified by the state, and occurs when a community’s actual revenues exceed its budgeted revenues and/or when actual expenditures are less than budgeted expenditures.)
In his memo, Bragan stated that this amount of free cash is “quite large and extraordinary for Harvard,” usually coming in at around $100,000 to $300,000. He pointed out the need to “understand how and where this amount came from.” Bragan’s initial analysis is that the unpredicted leftover cash derives from “one-time nonrecurring sources or events,” but adds that all town accounts need to be looked at closely.
Ordinarily, certified free cash becomes an item to be dealt with at the next town meeting after it is certified. Historically, unless there are unusual mid-year needs that were not anticipated when budgets were voted, free cash is transferred to the Stabilization Fund. For example, a few years ago when union contracts were settled unusually late, and certified free cash was more than $500,000, free cash was appropriated at a September town meeting to fund the contracts, rather than requiring an override.
Last May, Annual Town Meeting voted to direct future town meetings to transfer certified free cash to a newly created Capital Stabilization and Investment Fund to fund the Capital Plan, unless critical, extenuating circumstances (such as cuts in state funding) warrant use of the funds for current operations, or the funds are needed to maintain the General Stabilization Fund above 5 percent of the preceding year’s Omnibus Budget, a generally accepted target for maintaining the town’s good credit rating.
On the revenue side, according to Bragan’s memo, there was a total of $381,114 more than what was estimated. Eight of 13 lines came in higher; five were lower. $205,000 of the surplus came from FEMA/MEMA (Federal and Massachusetts Emergency Management Funds), received in fiscal 2010 as reimbursement for expenses incurred during and after the December 2008 ice storm. Bragan also identified as nonrecurring income: penalties and interest on taxes ($81,138), licenses and permits ($21,218), trash disposal charges ($28,590), fines and forfeitures ($21,218), and other smaller items. Although possibly recurring, Bragan explained the penalties and interest coming from the treasurer’s going after unpaid taxes in the fall of 2009, something that can only be collected once. He also cited the large Ayer Road development and the two church projects as contributing to nonrecurring excesses in licenses and permits. He explained the trash disposal charges as being caused by transfer station fees that should have been paid in June not being paid until July.
On the expenditure side, there were 12 accounts Bragan’s memo cited as accounting for $511,132, including Reserve Fund ($157,179), Benefits ($147,727), and Public Buildings ($47,101). The memo explained all of the underspent line items, and identified five accounts that “need to be looked at further to determine the level of funds which may or may not be recurring including Benefits, Public Buildings, Transfer Station, Library, and Recurring Capital.”
In an interview with the Press, Bragan said that a “very small portion [of the free cash] is recurring; everybody [all town departments] is going through their numbers right now and all of these numbers will be reviewed by the Finance Committee.”
Bragan said he was most concerned about “the numbers where we came in high or low, for example, investment income deposited into accounts and earning interest … We estimated $46,000 and only received $37,000. We need to determine if there is any way to boost that number.” He said that he hoped that by the Nov. 17 “all-boards” meeting, the town would have some indication of the state’s level of local aid contribution for fiscal 2012. He said, “By Nov. 17, I’m hoping all the town’s boards and committees have done their due diligence,” and the Finance Committee will be working with realistic numbers.
Bragan’s memo to the Finance Committee concluded, “While I agree with the dismay, I also see this as proof that some of the things we have done over the past two years are paying off and that we are now better able to face future financial difficulties.” He went on, “We need to understand what has caused this to happen and not let the anomalies dictate an imprudent reaction.”
