North Yarmouth’s Select Board will begin the fiscal year addressing significant financial issues. With an existing backlog of initiatives, progress on any goals outside of keeping the town operationally on track could be secondary for another year.
The election resulted in the unusual turnover of a majority of the Board. Typically seats are elected on a 2-2-1 cycle. The slate of new members joining in July has no select board experience.
During the June 21 meeting, Town Manager Diane Barnes shared a number of issues uncovered by the auditor and new budget concerns.
Since accepting the position of Town Manager earlier this year, Barnes has been working with the auditor to “clean up” financial accounts and records. The Town Manager position had been vacant since 2021 when Rosemary Roy took a leave of absence in April before resigning in July.
In August 2021, the Select Board was alerted to an accounting discrepancy identified in the FY20 audit, related to Wescustogo funds. This prompted a more detailed examination of North Yarmouth’s financial records by the town’s new auditor, RHR Smith & Company. The final ruling was that $147,000 was not missing but part of an accounting error. Subsequently, a more thorough examination of town records was authorized by the Select Board.
Barnes reported at the June 21 Select Board meeting additional financial errors have been found.
A mistake occurred during the FY21 tax commitment. The municipal appropriation from Article 3 occurred, but $380,000 for capital improvement reserves was not captured and therefore, never collected. “We never raised the amount,” but the town spent as if they had, said Barnes. There is still $314,000 in the account, but due to the error, North Yarmouth does not have enough to cover approved projects, like paving.
Barnes is working on a plan to restore the account and minimize the impact on the town. “When I talked to the auditor, their recommendation is not to raise the money in any future commitments but to modify our capital spending plan to accommodate for the shortfall in this fiscal year, which is what we're going to do. And then adjust any capital budgets accordingly to make up the difference.”
Additional issues were discovered in the current fiscal year (FY22) financials. Barnes did not share much detail, but she said revenues were overstated when completing the tax commitment form. “So that's going to leave us with a shortfall.” She said she will not know the exact amount until year-end.
The initial report indicated a $479,000 discrepancy, but Barnes stated the final amount will be less due to favorable revenue sharing totals. To avoid a significant tax increase, the auditor is recommending the town not make up the deficit in the next tax commitment.
These issues are in addition to already identified problems with the town's Undesignated Fund levels. In April, Ron Smith (auditor) cautioned the Select Board about North Yarmouth’s cash flow problems. He recommended the town develop a plan to boost available cash from less than 40 days to 90 days. Returning to a semi-annual tax payment schedule will help, but will not remedy the newly discovered errors.
Barnes will be looking for places in the budget to trim. She plans to meet with department heads to identify expenditures that can be deferred. Finding opportunities in the current budget will be tough. “It's a bare bones budget. So, there isn't, there's not a lot in there,” she reminded the Board.
Budget Committee member Linc Merrill summarized, “what it sounds like, is I'll use these words, we're gonna, we're gonna crush discretionary spending.”
Barnes said the Select Board could take money from other reserve accounts to replenish the capital reserve. Some accounts are in the red, including roadway and contingency. But, “You've got 242 in the heavy equipment, $242,000. So, they could conceivably move some of this money around if they wanted to. But I'm not recommending that.”
The errors were discovered when the commitments did not match town meeting warrants.
Regarding further impact on undesignated fund balance, “I don't know yet. So, if you go with I think it was $1.1 or $1.2 million is what we had for undesignated fund after fiscal year 21. So if you just took, say $500,000 off the top of that, I think that would be your worst case scenario for fund balance until we close out this year, and see where our revenues come in, and what we haven't spent on the operating side.” This would drop North Yarmouth to less than 25 days of operating capital.
Barnes added, “So for this current fiscal year, the warrant article said that we would be raising about $150,000 in overlay. We only raised $57,000.” She is not clear why. Typically, municipalities use this money for abatements. For this year, North Yarmouth’s abatements totaled about $53,000.
Additional complications include Cumberland County will be transitioning from a calendar year to a fiscal year, adding six months ($188,000) to North Yarmouth’s bill for the initial cycle. The county has offered to allow municipalities to spread this cost over 5 years. North Yarmouth will pay $37,006.70 on top of the normal assessment for the next 5 years.
Plus, Casella and Pine Tree Waste's contract quote was 40% above budget. Barnes said North Yarmouth’s current rate is $11,638 per month. “So, I've worked with them, and we've come up with a four-month extension, at $14,601 per month for the next four months.” After which, the multi-year contract rate would increase to $17,000 per month.
The company is phasing out its manual real load equipment to upgrade to an automated side-load collection system. “Which is going to be expensive, we, you know, we gotta gear up for it.”
The contract date shift will align North Yarmouth with other communities and enable us to bid collectively. Negotiations are anticipated to begin in 2026 or 2027. Barnes said there are other details to be resolved. North Yarmouth needs to look at options to purchase the totes. EcoMaine might be able to get the totes cheaper than Casella. Barnes also noted the change signals an end to pay-as-you-throw bags. “We're gonna have to look at that in the next budget and figure out the revenue loss.”