Select Board Meeting ~ December 12, 2023

2023-12-12 · Select Board · 1:49:35 · watch on YouTube →

A select board meeting held at the fire station, given over largely to two subjects. Bill Schneider presented the Union Church committee's report, which recommends transferring the church at no cost to the Durham Historical Society along with the roughly $30,000 already set aside for its repair; the board agreed it supports the transfer but tabled the mechanics until the town attorney advises on whether allocated town money can go to a private nonprofit and whether the two questions must go before voters. Marc Roy, the CPA whose firm has taken over the town's accounting, then spent most of the meeting explaining fund balance accounting and why the town's practice of budgeting from the prior year's actual revenues has meant raising more in taxes than it needs. A resident who said she is a CPA challenged the board on what has been done about the audit's findings, which include a material weakness on cash reconciliations and a significant deficiency on segregation of duties. The consent agenda was the only recorded vote.

What was discussed

1. 0:06
   Opening and public comment on the audit

   The chair opened the meeting at the fire station, the board's new venue, and took public comment from the floor rather than at a podium. A resident who identified herself as Jean Sanders (?) said she had found the PowerPoint summary of audit results on the town website, that she has been a CPA for nearly 30 years and had never seen such a bad audit report, and asked what the town has done in the four months since it was issued.

2. 0:06
   Union Church committee report

   Bill Schneider presented the committee's report, which included site visits, outside experts and repair estimates. Its conclusion is that the best course is to transfer the church at no cost to the Durham Historical Society, along with the roughly $30,000 set aside at previous town meetings for its maintenance and repair, so the society can run it as a museum and take on the upkeep the town has not managed. He named the committee members, including Lois Kilby-Chesley, Emily Alexander, Neil Barry and John Talbot.

3. 5:37
   Whether to hand over the money or earmark it

   Josh Klein-Golden said he supports the recommendation but questioned whether it is fiscally appropriate to hand the money to the society rather than earmark it for the repairs and release it against a proposal. Schneider replied that any mechanism which gets the money onto the repairs at about the same time as the transfer would do the job, and suggested prepaying a contractor as one way.

4. 5:37
   Whether the transfer needs a town vote

   The committee's view was that it ought to go to the voters. The town manager explained that the board could dispose of town property on its own tonight if it chose, but cannot transfer roughly $30,000 without town meeting authorisation, so pairing the two would mean holding the building until the April town meeting.

5. 10:42
   The society's acceptance and the money that expires

   The Historical Society has met and voted to accept the building if offered, with a letter to that effect as the last appendix of the report. Of the money involved, about $21,000 sits in a restoration account and $10,000 from last year's budget expires at the end of December and would have to be re-raised at town meeting, giving about $31,000. Repairs in the report are estimated at $56,000, and the society already has a capital request of around $50,000 in for the coming warrant.

6. 16:41
   One warrant question or two

   One member proposed simply putting a warrant article forward to give the building and the money together. Heather Roy asked what happens if voters transfer ownership but not the money, and whether the society would still want the building without the funds for repairs, which argued for making the transfer contingent on the money. Whether both can legally sit in one question was not settled.

7. 16:41
   Grant deadlines argue for transferring sooner

   Josh Klein-Golden asked whether the society would gain by getting the building earlier. Lois Kilby-Chesley (?) said grant money is available before April and that some grants are only open to nonprofits, so the building being owned by one would help an application; some of those grants have rolling deadlines.

8. 22:33
   Legal doubt over transferring town funds

   The chair said he is comfortable that the board has authority to transfer the building, but that transferring allocated town funds to a private entity is gray, and proposed doing due diligence with the town attorney before deciding how to approach it. Schneider offered an alternative: the town keeps the building, spends the allocated money on the more urgent repairs first, and transfers it afterwards, in the way a real estate deal carries a repair contingency.

9. 22:33
   Asking the Historical Society what it wants

   Klein-Golden recommended having someone who speaks for the Historical Society at the December 26 meeting, since nobody present could say whether the society would take the building without a guarantee of the money. Members agreed the sticking points are that clarity and the legal question, and that a formal vote was not needed to establish the board's direction.

10. 28:19
    Direction to the town manager

    Jerry Douglass said he would contact the town attorney about the legality of transferring the building with or without taxpayer money, bring the answer back, and put the item on the next meeting's agenda.

11. 28:19
    Why the accountant was invited

    Douglass explained that the audit report had raised questions from budget committee members about undesignated fund balance, so he brought in Marc Roy to answer them. A budget committee member said the main point was that the term the town has always used, undesignated fund balance, was incorrect, and that Roy had advised both the assigned and unassigned balances should be considered when deciding what to use to reduce the tax levy.

12. 34:03
    Why the town has been over-taxing

    Roy said Durham budgets by taking the prior year's actual revenues and using that figure to work out the tax levy, rather than estimating what it will actually receive in the coming year. Because revenues generally rise, that produces a low estimate and means the town raises more in taxes than it needs, year after year, building an unnecessarily large fund balance. His recommendation for the FY24 budget is to estimate FY24 non-tax revenues, adjusting last year's budget against last year's actuals.

13. 34:03
    Moving restricted and committed money out of the general fund

    Roy said everything had been carried in the general fund, and that it is clearer to report anything restricted or committed to a specific purpose in its own special revenue or capital projects fund. He has moved roughly $900,000 of restricted and committed balances out, leaving the general fund to show only the year's operating activity and making it possible to step from one year's fund balance to the next.

14. 39:54
    What happens if the revenue estimate is too high

    Asked how a shortfall would be covered, Roy said that is what the unassigned fund balance is for: appropriations authorised at town meeting do not change whatever revenues turn out to be, and the difference comes from existing resources. He described stepping through a year: appropriations, estimated non-tax revenues, and the tax levy as the balancing figure, with the option of deliberately budgeting a deficit to draw the balance down.

15. 45:13
    How large a fund balance the town should hold

    Roy gave the rule of thumb that unassigned fund balance should be about two months of expenditures, roughly 16 to 20 percent, which for Durham would be about $1.8 to $2 million against the roughly $3.4 million in the general fund. He said the more reserves a town holds separately, the smaller the general fund balance it needs, and that the excess can either be given back through a budgeted deficit, done gradually rather than in one cut, or committed by the townspeople to a specific purpose.

16. 45:13
    Using the surplus to move to a June fiscal year

    Heather Roy asked whether the excess could bridge a change from a December to a June fiscal year end, which the board has discussed before, particularly for residents on fixed incomes. Marc Roy said an 18-month budget would mean budgeting appropriations and revenues for a year and a half, with the gap funded either from fund balance or by adjusting the tax collection schedule to more than one payment date.

17. 50:34
    The 2021 surplus and how balances were classified

    A member said the roughly $480,000 surplus from 2021 is sitting in the assigned category, which would mean it is not available to move into a capital equipment fund. Roy said the town's classifications are not in line with the GASB definitions as he reads them, that the convention should be everything unassigned unless committed or restricted, with only the budgeted use of fund balance shown as assigned, and that small towns end up relying on their auditor for that call.

18. 56:10
    Fund balance categories explained at the whiteboard

    At the board's request Roy worked through the categories with examples: nonspendable, such as prepaid insurance or bulk fuel inventory; restricted, set aside by an outside source such as local road assistance funds or a donated scholarship; committed, set aside by the highest decision-making authority, which in a town meeting town is the voters; and assigned, which by New England convention is used to show the coming year's budgeted deficit.

19. 1:18:33
    Estimating revenue in practice

    Asked how the estimate is actually made, Roy said there is no formula: take last year's actuals, judge what is reasonable, and note that the state issues its revenue sharing estimate in March, which many towns discount to about 95 percent. Excise tax and state revenue sharing are the two large non-tax revenues, with everything else typically 10 to 15 percent of the total.

20. 1:29:20
    Departmental warrant articles or one budget

    Asked whether to present an overall budget rather than a warrant article per department, Roy said his preference is the transparent version, with a printed booklet breaking each article down to line level, though he acknowledged that can turn a town meeting into an all-day affair as people move to change individual numbers. He described the difference between article wordings that allow only a reduction and open wordings that let any voter move any figure, and said the strongest protection against that is a select board and budget committee that visibly agree.

21. 1:34:32
    Separate funds and separate bank accounts

    Roy said separate funds do not require separate bank accounts, though the town already has six or seven, including ones for the cemetery trust and the park fund. Where money is pooled, interfund accounting records what one fund owes another, and the net effect shows up in the fund balance rather than the cash figure.

22. 1:34:32
    Marc Roy's role, and the audit findings

    Asked who he was, Roy explained that his firm provides outsourced municipal business management (accounts payable, payroll, interim and year-end financial statements) and that they are not the auditors. The audit's findings were described as a material weakness on cash account reconciliations, which apparently had not been done for months, and a significant deficiency on segregation of duties; the suggestion that cash was missing was denied.

23. 1:39:45
    How a resident can get audit questions answered

    The resident said the agenda listed only Marc Roy's name, so she had assumed he prepared the audit, and asked that agendas carry more detail about who is speaking. She was told the meeting with the auditor is on the website and that she should follow up with the town manager. Board members said Jerry Douglass had identified the accounting as a significant issue on arrival and pushed to hire Roy's firm to address it.

24. 1:39:45
    Town manager report

    Douglass said he has been working with the fire chief and the road commissioner on the budget, which is largely wrapped up, and that Jessica is back at work part-time and expected to be out of a wheelchair around the first of January. He said the budget, with a lot of changes in it, is the focus for now.

25. 1:39:45
    Sheriff's department follow-up

    Josh Klein-Golden reported back on the question he raised at the previous meeting: the money the county commissioners allocated is not tied to a particular road but funds a new deputy. He said the sheriff's office does provide speed details if a town asks for them, and members recalled that a proposal along those lines had previously been voted down quickly on the town floor.

26. 1:39:45
    Meeting with RSU 5 on capital plans

    A member reported on a meeting with RSU 5 the previous week, which was mostly about each side flagging upcoming capital projects so the town and the school do not hit taxpayers from both directions at once. The school had no large item in prospect; the town's biggest was the town hall upgrade already under discussion.

27. 1:44:55
    Solid waste committee and the RFP

    The solid waste committee had not reported and no date was given for when it will. A resident had asked about the solid waste contract RFP; the full RFP is not posted, so he would have to request it, and the chair said he would pass on the contact.

28. 1:44:55
    Select board policy redlines

    Members confirmed the discussion of the board's rules and policies will be pushed to January and worked around the budget meetings, most likely as a workshop. Redlines are due to the chair by Christmas break, in Word with track changes, so they can be merged into one document.

29. 1:44:55
    Consent agenda and upcoming meetings

    The consent agenda was moved, seconded and carried. The next select board meeting was set for December 26, expected to be short but with the Union Church added depending on what the attorney says, followed by a meeting on January 9 at the town office. The chair then asked whether an executive session was needed.

What was decided

• 22:33
  On the Union Church, the board reached a consensus that it wants the building transferred to the Durham Historical Society, but held the question of how and when. A member explicitly said a vote was NOT thought necessary at this stage, and the matter was put over to the next meeting pending the town attorney's advice on transferring allocated town money to a private nonprofit and on whether the building and the money can sit in one warrant question.tabled
• 28:19
  The board directed town manager Jerry Douglass to contact the town attorney about the legalities of transferring the church with or without taxpayer money, and to put the item back on the December 26 agenda with that information.passed
• 1:44:55
  The discussion of redlines to the select board's rules and policies was put off to January, to be scheduled around the budget meetings and likely handled as a workshop, with members' redlines due to the chair by Christmas break.tabled
• 1:44:55
  Accept the consent agenda as presented. Moved by Josh Klein-Golden and seconded by Heather Roy; the minutes record it carried 5-0.passed
• 1:44:55
  The chair asked whether an executive session was needed and the town manager said a short one would be appropriate. The recording ends without a motion or a stated result.outcome unclear

An outcome reads "unclear" where the recording does not state it plainly. The recogniser drops short words, and "the motion does not carry" is one missing word from its opposite.

Motions the minutes record

The town's own written account of what was decided, taken from sb_meeting_minutes_12_12_23_0.txt. It owes nothing to the recording or to a model: the clerk typed it, with the vote. Where the summary above claims a decision this list does not carry, the summary is the part to doubt.

• accept the consent agenda as presentedcarried 5-0

  Moved by Josh Klein-Golden, seconded by Heather Roy

Worth knowing

• 10:42
  The Union Church report puts the repairs at about $56,000, against roughly $31,000 available: $21,000 in a restoration account plus $10,000 from last year's budget that expires at the end of December and would have to be raised again at town meeting. The Historical Society has already voted to accept the building if it is offered.
• 34:03
  Marc Roy told the board that budgeting from the prior year's actual revenues rather than estimating the coming year's has meant the town raises more in taxes than it needs every year, and that this is what has built up an unnecessarily large fund balance.
• 45:13
  He put a healthy unassigned general fund balance at roughly two months of expenditures, about $1.8 to $2 million, against the roughly $3.4 million Durham holds. The excess can either be returned by budgeting a deficit or committed by voters to something specific such as roads, buildings or apparatus.
• 1:34:32
  The audit's findings were described as a material weakness on cash account reconciliations, which apparently had not been done for months, and a significant deficiency on segregation of duties. A resident who said she is a CPA of nearly 30 years told the board she had never seen such a bad audit report; the suggestion that cash was missing was denied.

Motion language found in the transcript

Located by pattern matching, with no model involved: "I move that", "I'll second", "all those in favour". This is an independent check on the summary above: 4 passages of motion language, against 5 decisions summarised.

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