Submitted by: Scott Miller, CPA, Principal
Cities and towns across the state will soon gear up to prepare budgets. It appears that local finances are going to be tight once again and property tax disbursements may be delayed. In light of this situation, it is even more important for your community to make certain that budgeted expenses are properly allocated between the general fund and your community's utilities.
Many communities allocate certain expenses such as salaries and wages, employee benefits, rent, insurance, utilities and vehicle expenses among the general fund and the water and sewer utilities. These expenses are allocated to the different funds because employees perform functions for both the civil city or town and the utilities. Often these expenses are split evenly among the three entities. But is an even split fair and accurate?
While a one-third split is easy to calculate and track for bookkeeping purposes, it may not accurately reflect the actual time spent on the job. A little investigation may, for example, reveal that a town's maintenance employee spends 80% of his time working on utility issues and only 20% on street issues. In this situation, a larger share of the salaries, wages and benefits should be allocated to the utilities to properly reflect cost. Likewise, an analysis of the use of the town hall may reveal that most of the space is used for utility billing and other purposes while only a small portion is truly used for town functions. In this case, rent and/or utility expenses should be allocated to properly reflect use of the facility.
Accurately allocating shared and common expenses is probably not going to create a windfall for the general fund. But in today's environment, every little bit helps. If you have questions or would like assistance in analyzing your expenses, please contact us at footnotes@umbaugh.com.
Full Newsletter 
Accurately Allocating Shared Expenses