(8) Fund and Expenditure Deficits

The capital projects fund currently has an unreserved and undesignated fund deficit of $771,752. A significant portion of this deficit is due to costs associated with water pipe replacements on Shirley and Beechmont Avenue. This deficit will be financed through future bond issues.

Judgements, claims, and emergency treatment of polluted water resulted in expenditures in excess of their budgeted amounts for the year ended June 30, 1996.