Selectmen adopt revised fund-balance policy after extended discussion on enterprise funds, DRA guidance

The Wolfeboro Board of Selectmen voted Feb. 5 to adopt the revised fund-balance policy (FIN-007, revised 00) as recommended by Finance Director Sam Kelly after an extended discussion that ranged from the policy’s 8% unrestricted fund-balance target to questions about enterprise fund accounting and DRA guidance.

Sam Kelly presented the policy and told the board the document is unchanged from the prior draft and that staff are waiting for a response from the New Hampshire Department of Revenue Administration (DRA) on a related question. “Good evening. Sam Kelly, finance director. I’m here to have you review the fund balance policy, FIN-007,” Kelly said on the record.

Board members pressed for clarity about several topics. One selectman noted the policy’s stated 8% target for unrestricted fund balance and asked that the town better explain government fund-accounting terminology to the public so residents understand the difference between retained earnings and a cash checkbook. Several board members discussed a prior letter to the DRA that said the town would “strive to use any unassigned fund balance for the purpose of setting the annual tax rate rather than for warrant-article projects,” and asked that results of any DRA opinion be appended to the policy or attached to meeting minutes.

Members also raised repeated concerns about enterprise funds, specifically sewer and water, that have run deficits or required general-fund support. A board member asked for the votes that authorized enterprise funds to run year-end deficits that are later covered by the general fund, and asked staff to request a formal DRA opinion on whether the town’s practice aligns with DRA guidance. Sam Kelly confirmed staff would follow up with the DRA and that auditors had said there is no automatic requirement for the general fund to cover enterprise fund deficits, though voters can approve transfers.

After discussion the board moved to adopt the revised FIN-007 policy. The motion passed with four votes in favor and one abstention; the member who abstained said the abstention would be lifted once a specific DRA memorandum (referenced in the discussion) was included in the meeting minutes.

The board directed staff to send the DRA inquiries already in process, to include the referenced DRA memorandum in the board packet and minutes when available, and to return with any formal DRA advice and the auditor’s findings for further consideration. The vote places the revised policy into effect pending those follow-up actions and documentation.