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The Sewer Fund’s Financial Condition Is Improving The sewer fund experienced operating deficits in two of the last five fiscal years and used a portion of its reserves to fund operations. The largest operating deficit, totaling approximately $231,000, occurred in 2016-17 and was caused, in part, by unanticipated equipment repairs totaling $71,000. Figure 3: Sewer Fund – Results of Operations 2014-15 2015-16 2016-17 2017-18 2018-19 Totals Actual Revenues $639,322 $757,930 $698,523 $835,440 $837,222 $3,768,437 Actual Expendituresa $688,989 $751,423 $929,220 $798,764 $744,064 $3,912,460 Operating Surplus/(Deficit) ($49,667) $6,507 ($230,697) $36,676 $93,158 ($144,023) a We increased the 2014-15 expenditures by $13,214 and reduced the 2015-16 expenditures by $11,492 to account for recording errors. We also increased expenditures in 2016-17 by $35,754 as noted previously. A key measure of the Village’s financial condition is its level of fund balance. The sewer fund had a total fund balance of approximately $514,000 as of June 1, 2014, which decreased by $144,000 (28 percent) over a five-year period to approximately $370,000 because of the operating deficits. The majority of total fund balance, more than $230,000 (62 percent), has been restricted in reserves for capital improvements and equipment. Board minutes indicated that the sewer fund’s financial condition has fluctuated. For example, in October 2015, the prior Treasurer indicated that because of DOCCS payments the sewer fund was “healthy” while the October 2016 minutes stated the sewer fund was spending more than it was taking in. In February 2017 a member of the finance committee stated the sewer fund was struggling financially. The Village issued revenue anticipation notes (RAN) in February 2015 ($500,000) and March 2016 ($350,000) to alleviate cash flow issues in the general, water and sewer funds.8 However, the sewer fund still did not have enough operating cash to pay its obligations. As of February 24, 2016, the sewer fund’s operating bank accounts were nearly depleted and cash balances had dwindled to $894. To cover documented outstanding expenditures as of this date, which totaled approximately $16,100, the prior Treasurer transferred $25,000 from the capital reserve account. Capital reserve funds9 are statutorily restricted and typically cannot be used in this manner. We found no indication that the Board approved this transfer and the funds have not been returned to the reserve. In April 2017, the Board approved 8 Proceeds were deposited into a combined operating bank account with $25,000 of RAN proceeds recorded as transferred to the sewer operating account in April 2016. 9 New York State General Municipal Law Sections 6-c and 6-g stipulate how capital reserves can be established, funded and used. Capital reserves are used to finance all or part of the cost of construction, reconstruction, or acquisition of a capital improvement or the acquisition of equipment. 6 Of f ic e of t he New York State Comptroller