WINTHROP — A recent audit of the town’s finances provided good and bad signals to local officials as they try to set the town on a healthy fiscal path, following the discovery in late 2016 of a large revenue shortfall.

The audit reinforced the precarious position of the town’s finances, highlighting that a $1.6 million deficit remained in the town’s operating costs at the end of last fiscal year, among other ominous indicators.

But according to Bruce Nadeau, an audit manager at the accounting firm RHR Smith & Company, the latest figures also showed that spending cuts by the Winthrop School Department and other measures have prevented the damage from being worse. He projected the town could recover from the shortfall in about three years, assuming there are no unexpected challenges.

“Considering the hand that you were dealt, it’s not bad,” Nadeau said during a recent presentation to the Town Council. “I think the hemorrhaging is stopping, and I think you’re moving in the right direction, because again, it wasn’t until the fall of last (fiscal) year that we learned we had some significant problems that we have to address.”

The large deficit was caused by a mistake in 2015, when a $700,000 revenue item in the school budget was accidentally counted twice, creating a situation in which the town didn’t raise enough money to cover its costs.

But the problem wasn’t noticed until more than a year later, when the shortfall had doubled — and town and school officials started to disagree about which side was responsible for it.

As both sides begin preparing next year’s budgets, members of the Town Council and School Board will meet at 6:30 p.m. on Monday to discuss their spending goals.

In the middle of February, councilors met to hear a presentation from Nadeau about the audited figures for the fiscal year that started in July 2016 and ended last June. Later, the figures were finalized and posted on the town website.

Particularly jarring to some officials was that the that balance of the town’s general fund fell by almost $375,000 in the last fiscal year, ending at negative $642,449.

“I’m probably misinterpreting it, and I certainly hope that I am,” Councilor Rita Moran said during the presentation. “But it looks like on (July 1, 2016) we were $267,541 dollars in the hole, and on (June 30, 2017), we were $642,449 in the hole?”

“Correct,” Nadeau said. He explained that “unbalanced budgeting” had caused the town’s expenses to be greater than its revenue last year, but also that the shortfall “could have been closer to a million dollars.”

“OK, I was hoping I was wrong, but that’s pretty toxic. Thank you,” responded Moran, who was elected to the council last year.

Sarah Fuller, chairwoman of the Town Council, said that officials have been making spending and taxation decisions with the goal of recovering from the shortfall for about three years.

While the shortfall is located in the school side of the budget, she said, the council will also probably have to increase municipal spending — and property taxes — to reduce the deficits and make priority investments. One cost that probably can’t be delayed another year is the replacement of trailers at the transfer station, she said.

“Its a balancing act,” Fuller said last week. “The news is not good yet, but the news is not disastrous.”

Councilors and members of the School Board have sharply disagreed over numerous things in the last year, including which officials should have caught the mistake that led to the town’s shortfall. Town officials say the School Department should have noticed the costly error, as it originated in the school budget. But the School Board and Superintendent Gary Rosenthal have said the town’s tracking of revenue made it responsible for the mistake.

Nevertheless, the Town Council and School Board will be having a joint meeting on Monday night to discuss their spending priorities, Fuller said.

Another financial figure that raised a red flag during the mid-February audit presentation was the amount of fees received by the Winthrop Ambulance Service, which is partly funded by Winthrop and other towns that use the service.

Last year, the service received $755,593 in ambulance fees. That number was down $150,227 — almost 20 percent — from the projected revenue of $905,820.

“We’re going to have to look at that, because that’s a lot of money,” said Linda Caprara, vice-chairwoman of the Town Council. “We’ve got to look at this right away. It can’t wait until June.”

But Town Manager Ryan Frost told Caprara that he and town’s finance director have been looking closely at the town’s revenues since starting his job last year, including the ambulance service’s. According to Frost, the service has stopped staffing a third ambulance at certain times to help save money.

“It’s a very complicated system,” Frost said of emergency medical transportation.

In an interview after the meeting, John Dovinsky, director of the Winthrop Ambulance Service, said that there have been two developments that have, together, caused it to lose at least 200 dependable, Medicare-funded calls a year.

The service used to shuttle residents of a local nursing home, Winthrop Manor Long Term Care and Rehab Center, to and from MaineGeneral Medical Center in Augusta, but that nursing home closed in 2016. Also, Dovinsky said, the ambulance service has stopped receiving calls to transport non-emergency patients away from MaineGeneral to facilities in Winthrop, because of a change in the hospital’s operations.

“We were hugely impacted by the loss of non-emergency transport revenue,” Dovinsky said.

Charles Eichacker — 621-5642

ceichacker@centralmaine.com

Twitter: @ceichacker