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Wallkill Valley TimesWalden audit probes shrinking fund balance

Walden audit probes shrinking fund balance

The New York State Comptroller’s Office has some recommendations for how the Village of Walden should handle its finances, according to an audit report the agency released this month. The report advises the village to adopt a fund balance policy and to develop and implement a multi-year comprehensive financial plan.

Covering an audit period of June 2016 to September 2017, the report notes that the village lacks a fund balance policy, adding that Walden’s general fund balance decreased from $859,588 to $379,387 from 2013 to 2017. The audit report states that Walden’s Sewer Fund has not repaid the General Fund $400,000 in interfund transfers from a period between 2014 and 2016. The audit recommends that the village Sewer Fund should repay the General Fund $400,000.

In a letter to the state agency dated Jan. 23, Walden Village Manager John Revella responded that: “The Village of Walden’s Sewer Fund was unable to meet its obligations for the years 2013, 2014 and 2015 and it was necessary for the General Fund to support the Sewer Fund. In 2015, when it was determined the Sewer Fund was unable to support its operations, the sewer rates were increased. As a direct result of the increased rates in 2017, $50,000 of the Sewer Fund has already been paid back to the General Fund as of Dec. 31, 2017, with the anticipation that the remainder will be paid back by the end of this fiscal year (2017-2018).”

Revella’s response letter noted that the village is in the process of formulating a fund balance policy, with an estimated completion date of May 1. The state audit explains that the policy “should establish clear guidelines for fund balance levels, as well as appropriate usage of fund balances. Without reasonable fund balance levels, the Village may not have adequate cash flow to meet Village needs.”

While the state may want towns and village to build up their fund balances, that goal might not always be realistic.

“We do what we think is prudent for our taxpayers,” Walden Mayor Susan Rumbold said. “Myself and Mr. Revella have the same feeling, we don’t want to raise taxes simply to create a large slush fund. We do what we can do to keep our budgets as tight as we possibly can.”

The audit concludes that the village should craft a multi-year fiscal plan that “could outline financing methods, such as accumulating funds in a reserve, to perform updates mandated by Department of Environmental Conservation to the sewer infrastructure. Developing a financial plan would be a useful tool for officials to help ensure that recurring revenue sources are sufficient to finance operations and help prevent the over-reliance on debt to fund operations. A multi-year financial plan could also help to rebuild fund balance.” The village is planning on enacting a comprehensive financial plan by the end of May. “That’s an ongoing project, but the difficulty is you have to look at what the state requires and what they’re looking for,” Rumbold explained. “They want us to not increase taxes. They have a tax cap in place. They also want us to improve our infrastructure and to build fund balance. Those three things, plus you have to look at all of the unfunded mandates that the state hands down on municipalities, so in my view, and I’ve said this many times before, they’re creating a perfect storm. They want smaller municipalities to consolidate with larger municipalities, and I think at the end of the day they’re making it more and more difficult for smaller municipalities to survive under that scenario.”

The state report points out that short-term debt in the village remained steady at approximately $2.5 million annually from 2014 to 2017, a figure that was approximately 32 percent of the total budget. In the fiscal year 2017, total short-term debt increased to nearly $3.4 million, while total debt increased to more than $5.2 million. The Comptroller’s Office recommends that the village should “analyze borrowing to ensure debt levels are reasonable and budget for expected repairs instead of relying on debt financing, when possible.”

The standard the state sets can sometime come in conflict with the fiscal realities on the ground for local municipalities.

“For people to think that once we formulate a budget that’s it, we’re done planning financially is totally untrue,” Rumbold said. “If you look at the audit, we underspent our budget last year, which we usually do. You have unforeseen issues. This winter for instance, the number of water main breaks we’ve had, it does put stress on your budget. But we’re also constantly improving our infrastructure. The state penalizes you for that. They want you to do it, but the way you figure out your fiscal stress, they do not use the same formula for the state budget as they force municipalities to do. So we’re really penalized by doing one of the things they want us to do by improving infrastructure. So it’s a Catch-22.

If you don’t improve your infrastructure, that’s not good. But if you do improve it you’re penalized at the same time.” Even if the report was critical of Walden’s finances, Rumbold said the village was happy to participate in the state process. “I don’t know if it’s unfair, but not every municipality participates in it, so I don’t know if it’s a fair characterization of what exactly goes on throughout the state,” the mayor said of the audit. “But we’re willing to fill it out and it is what it is. We have no complaints about the financial situation in the village.”

By Ted Remsnyder

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