That is the assessment of Laura Landers, certified public accountant with Freed Maxick, who conducted an audit of the city’s basic financial statements for the year ending March 31, 2020 along with a management report for the same time period.

On Monday night, Landers gave her final audit report to City Council at the governing body’s Conference Meeting at the City Centre Council Board Room. She will be retiring at the end of this year, with auditing of the city’s finances being turned over to Kathryn Barrett, a CPA in Freed Maxick’s governmental practice unit.

The 2019-20 audit, dated Sept. 16, came on the heels of Landers’ meeting with the City’s Audit Advisory Committee and Interim City Manager Rachael Tabelski in August.

Landers reported revenues of $16,747,439 and expenditures of $17,528,340 for fiscal year 2019-20, leaving a deficit of revenues over expenditures of $780,901. This deficit decreased fund balances in the general fund to a total of $7,893,502.

The city ended the 2019-20 year with an unassigned fund balance of $1,863,699, exclusive of restrictions and assignments, Landers said.

Cash on Hand for Unexpected Expenses

“So, that’s the amount that Council can utilize for whatever purposes they choose to utilize it for (such as utilizing) it to appropriate in next year’s budget process or for any particular unanticipated expenditures that might arise,” she advised, adding that the city’s actual revenues were slightly under budget and expenditures came in under budget by about $1.4 million.

This bodes well for the city, she said, as “management continues to monitor expenditures in particularly this year as the city moves forward through the current environment and is doing analysis regarding cash flows, routinely, to make sure there is sufficient cash for operations for the city to move through this pandemic.”

Landers also provided charts showing revenues and expenditures from 2011-2020 – data that revealed that income exceeded spending in all of those years except 2015, 2017 and 2020.

“During the current year, the city utilized reserves to fund equipment purchases, sidewalk improvements, health care claims and information technology improvements in the amount of approximately $1 million, and funded reserves in the amount of about $114,000,” she said. “The city has continued to fund reserves in an effort to stabilize tax rates, provide for replacement of equipment and infrastructure, thereby reducing reliance on issuing debt and provide for payment of future liabilities.”

She reported that Tabelski did not assign any money to fund reserves from the fund balance for the 2019-20 fiscal year, reasoning that management and the Audit Advisory Committee “thought that it was prudent, given the uncertainty … to just keep that unassigned fund balance there in case the City Council needs to utilize it for whatever purpose,” such as unanticipated expenditures.

Breaking Down the Fund Balances

Landers broke down the city’s fund balances at the end of the fiscal year. The total general fund balance of $7,893,502 showed assigned and unassigned funds in the amount of $2,315,855 and restricted, non-spendable and committed funds in the amount of $5,777,647.

She said restricted funds included $777,000 for insurance, $3.6 million for capital projects, $273,000 for employee benefits and accrued liability, $332,000 for retirement benefits, $36,000 for Dwyer Stadium and $303,000 for third-party restrictions on money that has come into the city.

“There’s a little over $1,000 that is restricted for debt service – money left over from bond proceeds that wasn’t spent for projects that needs to be utilized to pay down the debt service,” she noted.

The committed fund balance at year’s end had $214,000, which are monies committed to the city’s master plan, Habitat for Humanity architect plans, Ellicott Trail, Creek Park and (the discontinued) Vibrant Batavia.

Landers said no money has been assigned to reserves, but $259,000 has been set aside to help balance the 2020-21 budget. She mentioned that the fund balance of $1,863,999 does comply with the city’s internal fund balance policy in place as of March 31, 2020.

'Strong Cash & Cash Equivalents'

As far as the deficit is concerned, Landers said it was a result of the city “recognizing the City Centre as an asset of the city, a disability retirement settlement and several high-value health insurance claims, which increased the amount that is transferred from the general fund to the self-insurance fund of the city.”

“Overall though, the balance sheet in the city represents strong cash and cash equivalents and also strong fund balances, especially in the restricted areas and the unassigned areas,” she reported.

The audit also reviewed the city’s water and sewer funds, which received high marks for “good cash balances and strong net positions in both the restricted and unrestricted net positions,” Landers said.

Her report revealed a $1.3 million operating surplus of the water fund – before subtracting $516,000 in operating and nonoperating revenues and expenses, and the operating subsidy to the general fund. Landers said this indicates that current rates continue at sufficient levels to support operations.

She said the net cash position of the water fund increased by a little over $1 million.

“Part of that increase relates to the bond anticipation note that was issued in the current year, but this resulted in cash at the end of the year a little over $3.8 million, which does not include the cash that’s restricted for capital projects,” she said. “The $3.8 million is unrestricted cash in the water fund at the end of the year.”

Landers said the sewer fund showed an operating surplus of about $74,000 before operating revenue and expenses and an operating subsidy to the general fund which totaled around $141,000.

“The net cash position of the sewer fund decreased about $319,000, however the cash balance at the end of the year – cash restricted for capital projects -- was a little over $5 million," she indicated. “Still, healthy cash position and healthy net position in the sewer fund, and the sewer fund restricted of about $3.9 million and unrestricted of about $6.7 million.”

No 'Falloff' in Water, Sewer Activity

Landers said the city hasn’t seen a falloff in operating revenues for sewer or water or late payments, concerns that Tabelski had in light of COVID-19.

“Rachael said that they haven’t seen any of that so I would expect that the position – the cash position, net position of the water and sewer funds will continue to be strong going into 2021,” she said.

On the city management report, Landers said that no significant deficiencies or material weaknesses were found.

Summarizing, Landers said the city’s major funds “are still in a good position” and credited management for monitoring cash flows, controlling expenditures and utilizing reserves.

She also advised City Council to capitalize on low interest rates being extended by financial institutions.

“If there is something that you could issue debt for, that just gives you another tool in your toolbox as the Council to go to as far as a funding source,” she said.