Lansford borough needs to keep a hawk eye on its money, and take a close look at its past to map out its fiscal future, an auditor told council's Administrative Committee on Tuesday.
"Many boroughs and townships across the state are facing dilemmas with decreasing resources and rising expenses. So they need to look at a better and more timely budgeting process and monitoring process to deal with these potential challenges," said auditor Gregory J. Shank of Maillie, Falconiero & Co., LLC.
The good news is that while the borough is in a financial hole, it's not as deep as officials initially thought.
"Overall, the borough has challenges ahead of it. The key is to identify where they are at now, and then look at the projected deficits so that they will have that information in front of them as they address their 2012 budget," he said.
"This analysis needs to be done (as soon as possible)," Shank said.
While the draft audit is not yet ready to be released, Shank walked committee members through it. He explained the borough's annual financial report is "cash-based" rather than "accrual-based." The difference is that an accrual-based report is more comprehensive, including appraisals of assets such as buildings and debt load.
Committee member Mary Kruczek said she'd like to see the borough adopt an accrual-based system because it would give officials a clearer picture of the borough's financial status at any given time, and would also help with planning and when Lansford applies for grants.
Shank gave each committee member a list of concerns, including some bills due in 2010 that were not paid until 2011. They include the police pension fund. Because that was paid late, the borough racked up interest payments, he said.
Shank also cited cash flow deficiencies, money left in accounts that could have been used to pay other bills, a need for internal controls of the borough's pool operations, and basing the 2011 budget on expectations of collecting 100 percent of taxes. In reality, the collection rate is substantially lower.
That was a big mistake, because it assumed much more money would be available than actually is. There's not much council can do at this point to correct that; it can only try to cut expenses for the rest of the year.
"You're going to have an extremely challenging 2012 budget," Shank warned. "The challenges are great. It's going to take cooperation and teamwork" to move through them.
He advised the committee to analyze where the borough stands financially right now, and then to project its expenses for the rest of the year so officials can see what condition the borough will be in as they begin to craft next year's budget.
Council also needs to implement an "enhanced budgetary monitoring process," Shank said.
That means council needs more detailed information flowing in on a regular basis so it has a clear picture of borough finances at any given time. Council needs detailed budget reports, not just summaries.
The borough has been in a financial dither for some time. Recently, the Lansford-Coaldale Joint Water Authority sent a notice concerning unpaid bills, and some vendors have cut the borough off for the same reason.
The situation was such that on Dec.30, Councilman Tommy Vadyak asked council to consider filing for bankruptcy. After some discussion, however, council decided the borough's financial condition wasn't bad enough to warrant that action.