Audit: West Haven fund balance decreased by $1.4 million, leaving $2 million deficit despite deficit bonding

Auditor Joseph Centofanti of PKF O’Connor Davies discusses West Haven’s 2016-17 audit with the City Council at City Hall.

Auditor Joseph Centofanti of PKF O’Connor Davies discusses West Haven’s 2016-17 audit with the City Council at City Hall.

The city’s fund balance decreased by $1.4 million — to an $18.14 million deficit — during the fiscal year that ended June 30, 2017, leaving a carry-over deficit of $2 million even after the city sold $16.14 million in deficit funding bonds, an audit shows.

That was the grim-but-expected news Monday night, July 23, when auditor Joseph Centofanti of PKF O’Connor Davies’ Wethersfield office presented the long-delayed audit for the 2016-17 fiscal year to the City Council.

Credit rating agencies generally expect municipalities to maintain fund balances of 10 percent to 15 percent of their total operating budget, Centofanti told the council. The city sold the deficit funding bonds in November 2017.

According to Centofanti, summarizing the audit, the net decrease in the fund balance was the result of lower-than-expected intergovernmental revenue, which fell $2.71 million short of the budgeted amount; lower-than-expected charges for services, which fell $807,071 short, with those overages partially offset by an expenditure budget underspent by $1.11 million.

A number of other accounts were underspent — including general government that spent $748,868 less than budgeted, public safety that spent $824,174 less than budgeted and education, which spent $807,071 less than budgeted.

But they were offset by benefits and insurance overages that totaled $1.56 million, the audit found.

The lower intergovernmental revenue figure largely was the result of the city budgeting the school system’s special education grant as revenue, which later was credited directly to the Board of Education.

The police and City of West Haven Fire Department - Allingtown pension funds were funded at 84.13 percent and 22.27 percent, respectively, the audit found — something the state Municipal Accountability Review Board already discussed at its recent meeting.

While the pension funds remaining underfunded, their net position increased by a total of $7.57 million: $6.8 million for the police pension fund and $763,081 for the Allingtown fund, Centofanti said.

The police pension funding percentage increased from 79.28 percent to 84.13 percent during the 2016-17 fiscal year while the Allingtown fund saw its funding percentage rise from 20.28 percent to 22.27 percent.

Council members offered only a peppering of questions on Centofanti’s presentation, with several asking whether the auditor, which prepared the audit in the first year of a three-year contract, could present next year’s audit report on time.

If not filing for an extension, audits generally are supposed to be completed by Dec. 31 following the close of a fiscal year.

“It’s shocking to see these numbers now,” said Councilman Aaron Charney, D-3. “I would love to see those numbers as we were working on the budget.”

Council Chairman Ron Quagliani said at the end of the special meeting at which the audit was discussed that nothing happened at once and “we’ve been in deficit year after year after year” over the past 35 years, with the exception of the few years when the state was running city finances under a previous state review board.

“We really need to be able to work together to get that under control as a community,” Quagliani said.

But he said it’s important “that we continue to make the decisions for this community, and not have the state make the decisions for us.”

Mayor Nancy Rossi, who took office in December, asked questions to confirm that the deficit bonding didn’t fully cover last year’s deficit, and remarked, “I would have thought that would save bonds for the deficit ... but obviously not.”