(11/10) Town auditors cautioned the Town on its practice of loaning money from the Town’s General fund to cover shortfalls in the Town’s Water fund based on findings disclosed in the Town’s 2022-2023 financial audit.
While there is nothing illegal or unethical about the practice, historically the Water system has been run as a business and held to those accounting expectations. This includes the expectation that all expenses incurred in the running of the Water system should be covered by user fees, e.g., quarterly resident water and sewer bills.
Some local municipalities have taken this guidance literally, down to the point where the cost of paper, envelopes and stamps used for quarterly billing are kept separate from general town correspondence costs, or time spent by town office staff in answering a call related to a water issue is charged to the Water fund, as opposed to the General fund, which is supposed to cover the general cost of running the town.
Following the latter practice has resulted in the bankrupting of the Water fund in some towns, most notably Emmitsburg, which recently enacted a 350% water rate increase to balance its books.
How Woodsboro splits its costs between running the water and sewer systems and the general town affairs is consistent with many other towns of its size, said the auditor, and that if it works for the town, it works for them.
Woodsboro only charges the cost of physically running the water and sewer systems, such as electricity, chemicals, plant materials, replacement parts, and the salaries of the town plant staff members to the Water fund. All other incidental charges, such as phones service, gas for vehicles &c are charged to the Town’s General fund.
However, over the past 20 plus years, the Town has actually moved money from its General fund to cover shortfalls in the Water fund, the auditor said, resulting in the General fund showing a ‘loan’ of $433,000 on its books to the Water fund, and the Water fund showing a ‘liability’ for repayment of that loan on its books.
"Again, you’ve done nothing wrong," the auditor said, "but you may want to consider how long you want to carry forward that loan, or for that matter, if you want to forgive the loan outright." Forgiving the loan would only be a paper work issue and would not actually result in the town physically transferring money. "It’s equivalent to taking money out of one of your pant’s pockets and putting it into another," said one Commissioner.
Burgess Barnes said he thought it was a good idea to forgive the loan to clear up the books, which in the long run will allow the town to get a better handle on what it truly costs the town to run its water systems.
"Trust me," Barnes said, "I’m not advocating a rate increase, but we just need to know where we are with regards to costs so we can budget more effectively going forward."
The Auditor closed out her briefing telling the Council that she was quite impressed with how the Town staff maintained the Town’s books. "The quality of the day-to-day bookkeeping made my job easy," she said.
Overall the town’s General Fund balance increased $363,600 to $2,023,732. If the Town forgives the ‘loan" to the Water & Sewer Fund, the balance will drop to $1,602,733.
The principle sources of revenue into this fund included: state and local grants ($290,677), property taxes ($168,888), and state income taxes ($373,467). Principle expenses were: staff salaries and town office expenses ($236,365), trash collection ($71,326), and street and park maintenance ($231,176).
Water and sewer service plant expenses exceeded payments from customers by $259,097. This deficit was covered this year by a $508,000 American Rescue Plan (ARAP) grant. However, there will be no ARAP grants next year so the town will need to figure out how to address the anticipated shortfall.
The principle costs in operating the water and sewer service plant include: electricity ($107,741), repairs ($69,236), sludge disposal ($54,941) , and supplies and chemicals ($51,645). The Water & Sewer Fund balance stood at $1,655,061, however, if the Town forgave the ‘loan’ to it from the General Fund, the balance will increase to $2,023,372.
Read other news articles on Woodsboro
