MEXICO – Officials aren’t sure just how much the town is in debt.

“We’re waiting for the final audit to see where we stand,” said David Errington, assistant to the town manager.

Town officials declined to provide a copy of the partial preliminary audit until the town lawyer is consulted.

The most recent estimate showed a debt of around $300,000. Of this, $197,000 is owed to the town’s various reserve accounts.

The problem in spending arose from an unexpected $50,000 expense to buy a new boiler for the recreation center, $28,000 in police department overtime costs, and the rest can be attributed to deficits in the recreation and Wellness center accounts, according to officials.

The deficit was also caused by lower than expected revenues, including a court decision that eliminated about $114,000 in property taxes from MeadWestvaco. The paper company owns a fly-ash dump in Mexico and had recently installed a substantial amount of pollution prevention equipment which led to a reduction in its property tax.

The town also has no surplus or carryover. Towns are expected to have between 5 percent and 15 percent of their budgets set aside in surplus, said Michael Starn, spokesman for the Maine Municipal Association.

Starn would not say that using reserve funds was legal or illegal without approval granted by residents at a town meeting. Instead, he said as a high-tax town, Mexico may be trying to operate on a very narrow financial margin.

“They just need to figure out where they are and if they went beyond the directives of town meeting, then get the necessary authority,” he said, adding that town officials need legal and financial guidance for corrective action.

He said the use of reserve funds sometimes happens.

“It’s not common, but it does happen. They need to get straightened out,” Starn said.

Keel Hood, the town’s auditor, couldn’t say when the final audit will be ready for selectmen. He said he is changing over the town’s books to guidelines under the Government Accounting Standards Board, which is a new method for the town.

He declined comment on any aspect of the town’s preliminary audit.

Errington said reserve accounts have been used for cash flow since before 1996. Whether action had been taken at a town meeting in the early 1990s that authorized such a use is in question. He said the town’s lawyer is looking into it.

“We’re trying to figure out what the deficit will be prior to the end of the fiscal year,” he said.

The town’s fiscal year ends on June 30.