HARPSWELL

An audit report for the town of Harpswell was presented at the Board of Selectmen meeting on Thursday night. Greg Chabot and Ronald Smith from RHR Smith and Company, a public accounting group in Buxton, addressed the town’s financial statements for the 2014 year.

Chabot had good news for the board members regarding Harpswell’s report.

“Our job is to issue an opinion on those financial statements, and that opinion was a clean opinion — and that’s the kind of opinion that you want,” Chabot said. “It means that there were no departures from generally accepted accounting principles.”

In addition to providing an opinion on Harpswell’s financial statements due to the audit, Chabot said that they are required by audit standards to review internal controls and to report anything that rose to the level of what was termed as a “significant deficiency” or “material weakness.”

“I’m happy to report that there were no such deficiencies or internal controls that would be required to be reported to you,” Chabot said.

Chairman Richard Daniel clarified to the board that there will still be “small suggestions along the way” throughout the course of the year, but there was nothing that was immediately concerning, which Chabot confirmed.

Chabot also discussed Harpswell’s unassigned fund balance and its fund policy, which calls for 25 percent of prior expenditures, excluding capital items.

At the end of 2014, Harpswell’s unassigned fund balance was $3,393,000, which was about $300,000 over the policy goal. Chabot said this was consistent with the policy and an appropriate use of fund balance.

“Each year you budget, you effectively use your fund balance by using it, and in compliance with your fund balance policy, to smooth the tax rates so you don’t have large changes in the tax rates,” he said.

However, Smith, the founder and principal of RHR Smith and Company, advised the board to reassess their fund policy, especially with the town’s concern with SAD 75’s proposed school budget, which increases 10 percent this year.

“It’s a good policy, but there’s some rigidness to it, and not a lot of flexibility,” he said.

According to Smith, a fund balance policy is normally used for tax stabilization, but he said it could also be used for other things in Harpswell, such as education relief and public works.

“Revisit your fund balance policy. The times have changed around you, and maybe make that a little bit more flexible,” he said.

Changes to this policy were addressed by the board with the amendment to article 79 of the town warrant for the annual town meeting.

The amendment involved increasing the proposed $306,000 of the unassigned fund balance to $506,000 in order to reduce the town’s tax commitment, due to the pending school budget.

“If we stay with those numbers and use the $306,000 for fund balance, the tax rate could increase to 7.23 percent,” said town administrator Kristi Eiane. “If we are open to allowing more fund balance to be used, and not to exceed those amounts in $506,000, it would help offset the increase in the school budget, with the tax rate increasing at 5.41 percent.”

The 5.41 percent would be closer to last year’s numbers, as opposed to the 7.23 percent, according to Marguerite Kelly, the town treasurer.

“The 306 is using up all excess of unassigned fund balance according to the policy. It is every dollar that is in excess of 25 percent of last year’s expenditures,” she said. “Going to 506 would mean making an exception to the policy, but if you have the flexibility to go to 506, you have the time to wait to see whether the school number actually comes down. And then you would then have the flexibility to choose a number up to $506,000.”

Instead of making an exception to the fund balance policy for just this year, Kelly also advised the board to reconsider the 25 percent expenditure and reassess the policy for the future.

The motion to raise the fund balance figure to $506,000 was moved and approved by the board.

After the approval, Selectman Elinor Multer predicted that there would be some pressure at the town meeting regarding the school budget.

“I don’t think we’ll be alone in rejecting the level of increase,” Multer said. “I would think there’s a fair chance that the budget will be reduced somewhat — I think the odds are not bad.”

Kelly noted that because Harpswell is a calendar year town, even if the increase in the school budget rose to 10 percent, it would be only bea5percentincreaseforthis year, though she said that the proposed budget is “still driving a tax rate increase.”

dkim@timesrecord.com

Amendment alteration

CHANGES TO THE fund balance policy were addressed by the Board of Selectmen with the amendment to article 79 of the town warrant for the annual town meeting.

THE AMENDMENT involved increasing the proposed $306,000 of the unassigned fund balance to $506,000 in order to reduce the town’s tax commitment, due to the pending school budget.