NORTH ADAMS -- City officials were urged to increase reserve funds and strengthen internal controls in order to bolster the city's financial future during Thursday night's Finance Committee meeting.
Additional improvements suggested in a recently released audit by Scanlon and Associates include moving away from the past practice of utilizing end-of-the-year transfers to offset account overruns, centralizing the management of airport improvement grants, applying for grant reimbursements in a more timely fashion and establishing a policy to handle delinquent school lunch accounts.
While city officials have already taken corrective action on many items suggested by the report, Tom Scanlon, managing partner of Scanlon and Associates, stressed the importance of maintaining healthy reserve and free cash accounts at Thursday's meeting.
The city should have 3 to 5 percent of its annual budget, or about $1 million, on hand in reserve or free cash accounts, he said.
"We all understand that the economy is hurting, but in the future, bonding companies will not look kindly on [the city] spending to the brink," he said. "It's important to understand that some bond-rating companies are now looking [for municipalities] to have 10 percent in reserves."
When asked about the financial health of the city over the last three years, Scanlon said that he thought 2012 showed less fiscal improvement than 2011 and the overall tone was "going down." However, it was noted that reserve accounts were higher in 2011 than in 2012 because the city paid out $680,000 from those accounts as part of a medical insurance trust fund settlement with its employee unions.
"There were several grants that were problematic, which helped result in the negative free cash result this year," Scanlon said. "We've worked with the city to rectify those issues and to bring the airport's grants [directly] under the administration to control the reporting and submission of reimbursement charges."
In other business, Mayor Richard J. Alcombright reported that current fiscal spending is about $360,000 over the fiscal 2013 budget.
"We're about $130,000 over in the police salaries line item, with the majority of overages coming in the form of overtime," he said. "We're also $130,000 over in insurance premiums and $75,000 over in the snow and ice removal account."
Although the city is down about $240,000 in local receipts, Alcombright said his finance team is confident the revenues will be in place by the close of the budget.
"We're already 3.4 percent above where we were last year," he said.
The mayor also noted that numerous steps are being taken to keep the budget's annual growth under 2 1/2 percent, including the development of a five-year capital management plan, consolidation of the building and health departments into a centralized inspections services department and creating a formula to better project salary needs for the Public Safety Department.
"We're really looking at all our infrastructure and equipment needs," City Administrator Michael Canales said. "We're looking at replacing the vehicles in our fleet on a cyclical basis and best maintenance practices."
Canales and City Auditor David Fierro have also created a formula -- based on past absences, injuries, training days coupled with better utilization of reserve officers -- to better anticipate the projected salaries for the fire and police departments.
"We need to stop the bleeding we experience every year," Alcombright said. "What's interesting is that Dave's projections, based on the formula, are quite close to what we've budgeted for salaries and the overages we are experiencing."
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