2008 Annual Financial Report Says It All

Paul Hongo is the former deputy director of town affairs for the Town of East Haven.

This formal memo was sent to the following Town Officials on May 30, 2009.  The original is on file at .

To:       The Honorable Town Council

            The Honorable Board of Finance

            The Honorable Board of Education

Cc:       April Capone Almon, Mayor

            Ralph Mauro, Assistant Deputy Director of Town Affairs

            Patricia Cofrancesco, Town Attorney

            Anthony Serio, Jr., Superintendent

            Pattie Lewis, Finance Manager

From:   Paul J. Hongo, Jr., Deputy Director of Town Affairs

Date:    May 30, 2009

RE: June 30, 2008 Annual Financial Report

The purpose of this memo is to simply separate fact from fiction.

It troubles me to hear people speak foolishly about the financial state of the Town; and I believe as East Haven officials we have a responsibility to make certain the residents of our community are provided truthful and accurate information.

To that end, I believe the following common-sense facts need to be communicated when engaging in conversation or answering questions about the June 30, 2008 Annual Financial Report:

1) It’s mathematically impossible to “overspend” and still have $956,798 leftover on the expenditure side of the balance sheet.

2)In other words, if the Administration did “overspend”, the final dollar amount on the expenditure side of the balance sheet would have been greater; instead it is less:

                        Amount budgeted to spend - $78,932,970

                        Actual money spent - $77,976,172

3) And lastly, it’s impossible to spend the absurd amount of money some people are claiming the Administration spent.  Why?  Because if it had, there’d be a record of it.  Remember, this is Public Sector.  You would have had to gone before the Board of Finance and Town Council to secure their authorization/approval; and, it would be clearly documented in the minutes of their meetings, and on file in the Town Clerk’s Office.

I believe it’s pretty evident the Administration did not “overspend”, and page 19 of the June 30, 2008 Annual Financial Report clearly illustrates this fact.

The reasons for the depletion of the Fund Balance rest squarely on the revenue side of the balance sheet – every revenue line item on page 19 of the June 30, 2008 Annual Financial Report clearly illustrates a loss.  For a more descriptive breakdown, turn to page 43 where you will see the following:

1) A loss of $1,022,917 in Real Estate Tax Revenue – even though the Tax Collector collected nearly ninety-eight percent (98%) of the Town’s outstanding Real Estate Taxes.  So how did the Town come up $1 million dollars short?  The former Director of Finance budgeted for a collection rate of more than ninety-nine percent (99%) – completely unrealistic.

2) A loss of $751,527 in a non-existent Casino Assistance Grant – the Connecticut Conference of Municipalities (CCM) notified the Town in April and June of 2007 that it wasn’t going to receive these funds – no action was taken by the Town.

3) A combined loss of $714,437 in State Aid School Construction ($252,346) and Education Block Grant ($462,091) – the Connecticut Conference of Municipalities (CCM) notified the Town in April and June of 2007 that it wasn’t going to receive these funds – no action was taken by the Town.

That’s $2,488,881 in revenue that existed on paper only.  Combine this with all the other revenue shortfalls, and the $600,000 that was appropriated from the Fund Balance to balance the 2007-2008 Annual Budget and you have a grand revenue shortfall of $4,144,168 – gee look at that, just slightly more than what the Town had in its Fund Balance on June 30, 2007 ($4,091,026)

Conclusion – These are the facts, the indisputable facts as supported and backed up by the June 30, 2008 Annual Financial Report; and as such, I am completely confident you will be able to help others separate fact from fiction when engaging in conversation or answering questions from your constituents, particularly when they are inquiring about what happened to the Fund Balance.

In closing, please do not hesitate to call me if you have any questions or concerns regarding this matter.

Thank you.

(Editor's note: The 2008 annual town audit and financial report have been added to this blog post by East Haven Patch.)