Northampton — Employees of the Hampshire Council of Governments were granted bonuses in June, despite a critical audit of fiscal 2016 that questioned the organization’s long-term viability.
The audit, which covers the period between July 2015 to June 2016, raised a red flag about HCG’s fiscal health, with auditors saying they have “substantial doubt” about the organization’s future.
HCG’s leaders, however, said Wednesday that the bonuses for the 14 employees are well-deserved because they have expanded the council’s programs and offerings. Each full-time employee received between $1,500 and $2,000, with part-timers receiving less than $1,500.
“I think it was important to recognize the good work that staff had done,” HCG’s Executive Director Todd Ford said.
The fiscal 2016 audit conducted by Greenfield accounting firm Melanson Heath shows that HCG’s electricity department ran a $702,559 surplus. This money helped offset a $612,821 deficit in the general fund, resulting in a $89,738 operational surplus, Ford said.
Melanson Heath said HCG ran a $224,420 deficit that year, in a large part due to the $314,158 deficit in a separate, nonmajor governmental fund.
When asked why this deficit was separated from the general and electricity funds, Ford said that the fund, which pays for renovations to the old Northampton courthouse restoration, the Tobacco Free Community Partnership, and the Retired and Senior Volunteer Program, is entirely funded by outside grants. As such, Ford said that monies from it are not used by the general fund or the HCG’s electricity business, and both of those concerns do not contribute to the nonmajor governmental fund.
He said that the deficit occurred in fiscal 2016 because grant funds received in fiscal 2015 were spent in fiscal 2016. He also said that the fund was a money-in money-out affair.
“It’s always balanced over time,” said Ford, who said that Melanson Heath expressed no concerns about the nonmajor government fund’s long-term fiscal viability.
The audit did express concern with the long-term financial viability of HCG as a whole.
“… the council has sustained losses in the current and previous years that have raised substantial doubt about its ability to continue as a going concern,” reads a passage of the audit.
The audit also includes a statement from the council that it will continue to use its electricity business to make up for its general fund deficit.
“The council anticipates continuing to utilize surplus generated from electricity fund operations to subsidize the annual shortfall in the general fund,” the statement reads.
The bonuses did not apply to Ford, who received a $15,000 bonus as part of his contract renewal this year, and the council’s two commission sales people.
Of the bonuses handed out, three were for $1,500, four were for $2,000, six were for less than $1,500 because the employees were part time, and one was for less than $2,000 because of an employee’s start date.
In addition to the bonuses, staff received a 2.5 percent cost of living increase for fiscal 2016.
Spokeswoman Catherine Welker said that the bonuses were given to recognize the staff for their work.
“The work that we’re doing at HCG is sustainable long term … because of the hard work that staff put into these projects,” she said.
Ford said that because the HCG does not have the ability to tax to fund itself, it has to raise revenue through the creation of programs that are competitive in the private marketplace, and he credited the staff with successfully accomplishing this.
The HCG serves 15 different member communities in Hampshire County, which the organization has traditionally served through bulk purchasing. HCG’s electricity business dates to 2003.
Currently the HCG sells net-metering credits from solar panels and anaerobic digesters and is looking to enter into wind energy. HCG also manages about $3.6 million in solar renewable energy credits for private individuals and other organizations.
Asked about tying the fortunes of HCG to a business as volatile as electricity, Ford said that HCG was looking to diversify income streams, provide more net-metering options and expand the offerings of the purchasing co-op.
According to the unaudited numbers released by HCG for fiscal 2017, which ended on June 30 of this year, the combined revenue streams of the electricity and general funds made for an excess of $374,891.
These numbers continued to show growth in HCG’s electricity business, with an excess of $923,220 reported. However, it also continues to show HCG running a deficit in its general fund, with the fund running $548,329 in the red.
The nonmajor governmental fund finished in the black according to these numbers, at $47,142.
This story has been updated.