CHATHAM – A $103,771 overdraft for police and fire overtime in fiscal 2016 caught the attention of the state department of revenue, which told the town in no uncertain terms that this sort of deficit spending isn't allowed.
“I expect that this will not become an annual event,” Marie Jane Handy, director of accounts at the DOR, wrote in a bolded paragraph in a Sept. 22 letter to Town Manager Jill Goldsmith. “I suggest that town officials review more closely the adequacy of account balances near fiscal year's end.”
Only certain municipal accounts, like snow and ice removal, can be overdrawn. All other spending requires either town meeting or finance committee approval, Handy wrote.
DOR's bureau of accounts will reduce the town's free cash certification by the amount of the overdraft, according to the letter.
The proper way to handle such an overdraft, according to the letter, is to place the deficit on the following fiscal year's tax rate recap form.
When last year's books were closed out, the unanticipated overtime amount was actually $154,722. Surplus funds of $20,307 in the police expense budget and $30,368 in the animal control budget (due to the hiring of a new animal control officer at a lower salary) were applied to the deficit to bring it down to $103,771.
Finance Director Alix Heilala said she regularly tracks payrolls, but the last payroll of the year is split between fiscal years. While the finance committee can provide a reserve fund transfer, or town meeting can appropriate funds to cover a deficit, with the payroll coming so close to the end of the fiscal year there is “very little wiggle room,” she said.
Limited amounts can be transferred from other departments to cover deficits. Heilala said there was money left over from the department of public works budget, but that went toward last year's snow and ice removal deficit of $74,301.
Selectman Seth Taylor noted most of that came from an assistant DPW director position that has been budgeted for five years at $55,000 annually but not filled. That concerned him; budgets should honestly inform residents where money is being spent, “and not create little pockets of money in anticipation of needing to jigger it around at the end of the year,” he said.
As he did last year, Taylor called for a reserve or revolving fund for ambulance receipts which could be used to cover overtime costs. He said it wasn't fair to try to anticipate overtime, given the emergency nature of the department's service, and also not fair to have money budgeted for one expenditure and have it “presto-chango being repurposed and rebudgeted.” He asked Heilala to investigate establishing such a fund.
“We cannot be the only town that has this problem,” he said.
Heilala said there is no mechanism in state law to allow that, but she agreed to research the matter further. It could require special legislation.
This year's total unanticipated fire department overtime was about $200,000, above the contractually required $343,000, which accounts for education, vacations and anticipated staff shortages, Heilala said. The unanticipated overtime is due to storms and other emergency operations when the department must call in staff. Last year's amount was much lower than the previous year's $600,000, she added.
This year the town added another firefighter, which should reduce overtime, she said.
“It should go down,” agreed Chairman of Selectmen Jeffrey Dykens.
The overtime amounts represent “an enormous amount of money,” Taylor said, and continuing to budget for that provides a “very juicy piece of fruit to nibble.” He's concerned that won't provide any incentive to management to curtail overtime, and the result will be “outrageous overtime growth being pushed and pushed and pushed. Because if it's built in, it's going to be consumed.”
For many years how to control fire department overtime has been “the elephant in the room,” said Goldsmith. Enough data exists to make her comfortable that adding another firefighter will alleviate the overtime issue.
She said she's assured the DOR that the overdraft was an anomaly, and that closer tracking of monthly finance reports will help officials stay on top of the situation.
“This isn't anything people are proud of,” she said of the overtime issue. “We really want to contain it.”