AHOSKIE – Things have been better.
According to the latest audit presented at the recent Town Council meeting, the town’s fund balance decreased due to expenditures outgaining revenues.
Chris Burton of the accounting firm of Carr, Riggs, and Ingram presented the 2015-16 audit report, and while the town is hardly swimming in red ink, Burton delicately informed Council there will have to be some major budget tightening in the future.
“Your fund balance went way down,” Burton began.
The audit report shows the town had revenues of $5,216,398 and a total fund balance of $1,399,740. However, at the end of the last fiscal year, the unassigned fund balance for the General Fund was minus $26,008.
A year ago, Ahoskie’s revenues were at $5,411,121, with a total fund balance of $2,072,280 and the unassigned fund balance for the General Fund was in the black to the tune of $1,008,379.
“You had budgeted revenues of $6,015,000, and you only received $5,200,000, which put you under your budget by $799,000,” Burton said. “Your budgeted expenses were $6.9 million and you spent more than $7 million for a negative of $86,000.
Burton pointed out a capital lease the town had for a street sweeper that put the town’s budget in the red for $205,000.
Town Manager Tony Hammond pointed out the capital lease was budgeted as an annual instead of a lump sum, because that was what the lender wanted.
“For accounting purposes it meets the definition of a capital lease, which means you should have booked the whole thing,” Burton stated.
“Your negative net change in fund balance was a negative $811,000, primarily because the budgeted revenues were not even close,” he continued. “That and you have a lot of debt payments to make. That is why your fund balance went down: you spent what you had budgeted except for the capital lease; but the revenues just weren’t there.”
Burton said as far as revenues in property taxes the town received more than was budgeted, which was fine; sales and occupancy taxes were also fine. However, the unrestricted and restricted intergovernmental funds (telecommunications sales tax, beer and wine tax, solid waste disposal tax, etc.) were in the red by $284,000 and $363,000, respectively. Other over budgeted items included permits and fees and sales and services.
The auditor also presented a five-year analysis of governmental funds.
“Each year your General Fund revenues stay fairly consistent,” he noted. “There was a fairly big jump for 2012-2013, and I think that was when taxes were raised.”
Among proprietary funds, Ahoskie’s water and sewer fund actually rose $344,000, with most of that attached to debt. But in current liabilities, $245,000 shown due to other funds is indicated to show that the General Fund loaned the Water Fund money at the end of the year.
“When you have as much debt as you have in the Water Fund, you need to have net cash provided by operating activities,” he explained. “You have $492,000 and that amount needs to be at least the amount of your debt payment; which is why you’re charging the customers what you are charging them … but your cash flows didn’t come close to covering your debt payment.”
In summary, the expenditures for the town exceeded its liabilities at the end of the fiscal year by $19,660,577. The town’s combined fund balance of $1.8 million decreased over half a million compared to 2015.
There was good news in the town’s total debt has decreased, though the governmental fund debt increased due to finance equipment purchases. Business type fund debt decreased nearly $250,000, due to debt payments, and finally, the town’s legal debt margin fell almost $2.5 million.
“With all these debts I’m looking at, are we going to have the revenue to pay these debts off without getting behind,” asked Councilman Charles Reynolds.
Burton said it’s possible to do so taking into account property tax collection monies and later in the year sales tax revenues and operating revenues from utilities.
“There’s two ways to take care of this,” Burton proposed. “You can raise the revenues, or you can cut expenses.”
Council members pointed to the property tax increase and the rise in water and sewer rates as new revenue streams.
Councilman Justin Freeman asked how revenue projections were so far off.
“I know there are some fluctuating things, but as a municipality I would assume that a majority of our revenues are somewhat forecastable,” Freeman said. “I just wonder how we missed it by almost $800,000. Now that we’re getting quarterly reports that should help us do better with that.”
“We’ve got to get some budget training,” said Councilwoman Linda Blackburn. “We may need a budget workshop before our budget workshop for next year.”
The Council stopped just short of calling for departmental cuts, but did say this would be a topic in upcoming budget workshops.
“We as a Council need to hear what the needs are before we act,” said Councilman Rev. C. David Stackhouse.
“I’ve talked to them (department heads) already,” said Hammond. “I will have another meeting with them and let you all know what the outcome is.”
The Town Manager said he has firm fiscal restraints over his department heads and that any requests over $1,000 must be approved by him. He also promised to report back to Council on his next meeting with the various departments at Council’s February meeting.
“The elephant in the room is that we have made a mistake mathematically over the last three years in revenue projections,” said Councilman Charles Freeman. “How it was made, we’re not certain, but we must correct it. It’s not so much we’re offending because we’re providing for our people, we have over projected and that’s where the bugaboo is.”
Justin Freeman proposed a revised town budget for the five months remaining in this year’s budget.
“In other words, let’s make our expenses match our revenues for the rest of this way, minimum,” Freeman said.
With the discussion concluded, Burton said he was available to assist, if able. The auditor said he would be returning to Ahoskie on a weekly basis.