The Board of Finance picked up its ongoing discussion about a policy on funding for outside agencies that have a fund balance during its December 12 meeting, discussing both framework as well as misconceptions about what finance officials are doing.

Earlier in the meeting, Library Board member Betsy Litt spoke concerning the policy, stating concern that fund balances being limited to ten percent of its total budget “would not be enough” for the library.

“If there is some emergency with the library building, which is town-owned, like with the HVAC — before we can get the project pushed through, we’ll need a lot more than ten percent of our budget,” she said.

BOF members, as well as First Selectman Dan Rosenthal, then explained the policy was not about creating a cap for the fund balance total, but rather a threshold for when a fund balance would need scrutiny from town boards such as the BOF and Legislative Council during respective budget reviews. The balance can be over ten percent, they explained, but once over that amount the boards will want information on why the balance is so high and how the balance will be used.

Rosenthal said the policy would give outside agencies a “heads-up” when they do budgets.

“They need to be mindful we need transparency on what they have in the bank,” Rosenthal said, adding if an agency fund balance was less than ten percent of its total budget, officials would not be inclined to scrutinize it.

“If they have a fund balance of three percent, we don’t need them to write a ten-page essay on how they plan to use it,” said Rosenthal.

Applicable For All

BOF Vice-Chairman Chandravir Ahuja said that the issue started last year with the library’s fund balance, when Councilman Ryan Knapp moved to cut an increase from the library’s proposed budget, keeping it at its 2021-22 level.

“We need to discuss what our policy should be so we are not picking on a single agency,” said Ahuja. “The framework should be applicable for one and all, not an ad hoc look at the fund balance if they are asking for more money.”

For example, Ahuja said if the town sees it is giving an outside agency $10,000 per year, and each year its fund balance grows by $10,000, the town needs “to ask why we’re putting money in their savings account.” He also noted that if the town disagrees with the reason why money is being saved in a fund balance, it needs to be discussed.

“Say, if they were looking to buy an airplane,” joked Rosenthal.

Finance Director Robert Tait presented a draft policy to serve as a framework for discussion.

The policy reads: “Any outside agency requesting public funds to partially fund their operations will need to submit a report describing their mission and outlining how they benefit Newtown residents in the most recent fiscal year completed.

“The outside agency will be required to submit their two most recent financial statements and their current working budget compared to the two prior year budgets.

“Any outside agency with an undesignated fund balance of over ten percent of total budget will have to submit a report outlining planned expenditures of excess undesignated fund balance (amount over ten percent). Planned expenditures can be over a period of time (capital planning). An undesignated fund balance under $50,000 need not report,” the draft policy continued.

“The Finance Director shall inform, in the October time period before the budget process starts, outside agencies that plan to request a contribution in the next budget process submit a request with the required information: A mission statement; a description of services which includes services that benefit Newtown residents (providing specific data); the most recent two completed financial statements; a budget comparison report comparing current budget to prior two years; a statement of planned use of excess undesignated fund balance; excess undesignated fund balance is the amount over ten percent of total budget (this requirement is not necessary if undesignated fund balance is under $50,000).

“This documentation will be included in the Town budget process as additional information for the budget reviewers to make decisions or to make additional inquiries.”

Budget Assessment Framework

Ahuja noted that with the Legislative Council considering restoring a $11,157 cut it made to the lake authorities in the 2022-23 budget, it shows there is “a larger issue at hand.”

“It may be helpful to have a framework on how to assess budget requests,” said Ahuja. “We need to be thinking in a broader sense.”

Some discussion centered on a possible questionnaire to be sent to outside agencies concerning their budgets. Ahuja wanted to keep the questionnaire focused because he did not want to sort through hundreds of pages — just five or so to help him understand what is going on in each budget.

In the current budget, the town made nominal contributions to seven outside agencies that serve the community. In addition, the Lake Lillinonah and Lake Zoar Authorities and the Edmond Town Hall Board of Managers received budget allocations.

Three other quasi-governmental agencies also received funds: $303,000 to Newtown Youth & Family Services; $143,000 to the Children’s Adventure Center; and $1,408,000 to the C.H. Booth Library. And another $1,132,000 was distributed to the town’s five fire companies; $270,000 to Newtown Ambulance; and approximately $10,000 to Newtown Underwater Search and Rescue.

The BOF will review the proposed policy as well as questions for a possible questionnaire, and is expected to discuss further at a future meeting.

Associate Editor Jim Taylor can be reached at jim@thebee.com.