Following a contentious budget year where the Legislative Council voted to keep library funding flat rather than recommending a requested increase, the Board of Finance is now mulling a set of guidelines for reviewing fund balances of non-government or so-called “outside agencies” that receive budget subsidies from the town.

At a July 28 finance board meeting, First Selectman Dan Rosenthal suggested it might be “helpful to set some kind of policy or guidelines” on how to deal with groups carrying large fund balances.

In the current budget, the town made nominal contributions to seven outside agencies that serve the community. In addition, the Lake Lillinonah and Lake Zoar Authorities and the Edmond Town Hall Board of Managers received budget allocations.

Three other quasi-governmental agencies also received funds: $303,000 to Newtown Youth & Family Services; $143,000 to the Children’s Adventure Center; and $1,408,000 to the C.H. Booth Library. And another $1,132,000 was distributed to the town’s five fire companies; $270,000 to Newtown Ambulance; and approximately $10,000 to Newtown Underwater Search and Rescue.

A document put together by Finance Director Robert Tait for the BOF to review highlighted some things the town may want to consider, including a total itemized 2024 budget, including revenue estimates; a current year budget with estimated actuals; a prior year budget; the latest audited financials; and a statement on the fund balance.

Rosenthal cautioned against a “hard and fast rule,” such as cutting town allocations if an agency is holding a fund balance over a certain percentage. He felt that any rule like that would be arbitrary.

Guidelines, however, would allow the town to decide what to do on a case by case basis.

“We could put some verbiage around, ‘if a group carries a fund balance over 10% of their total budget, they should be prepared to show with their budget submission how they will use the cash they already have on hand,’” said Rosenthal. “That should be something they tell us. They should show us a document regarding their fund balance.”

Rosenthal said if a group shows uses for the fund balance that the town doesn’t agree with, the Legislative Council could alter their budget allocation.

Rosenthal said if fund balances were less than 10% of an agency’s total budget, officials would not need to scrutinize it.

“If they have a fund balance of 3%, we don’t need them to write a ten page essay on how they plan to use it,” said Rosenthal.

Rosenthal said another thing that should be considered is year-to-year growth of a fund balance. If an agency asks for a larger town allocation one year, and its fund balance is significantly higher the next, officials should look into it further.

“We don’t want the taxpayers to be giving money that just ends up in an account,” said Rosenthal.

The first selectman said a set of guidelines was important to avoid the town being “accused of picking on one group while another group has a similar financial position and we say nothing.”

He said the library was in a unique position as the only agency that gets a substantial municipal budget allocation, so it was not surprising the Legislative Council applied extra scrutiny when they learned of its substantial fund balance of $800,000 earlier this year.

With the library, he said, the town would like to know how the fund balance is going to be used.

“They have the autonomy to deploy it as they choose, but if they deploy it on something that could cause an additional budget cost in future years, it should probably be discussed before it’s done, and not after,” said Rosenthal.

“With some larger items, we may say it’s not a good idea,” he added. “They can still do it — we can’t say they can’t — but if they ask for a large funding increase we may not support that.”

BOF Chairman Jeff Madzula suggested that Tait do some research into the matter, particularly around what percentage should trigger increased scrutiny of a fund balance.

Associate Editor Jim Taylor can be reached at jim@thebee.com.