Bolivar’s leaders may have felt like they were experiencing deja vu in a recent meeting as the city again earned praise in response to its annual independent audit.
Rebecca Frederich, a certified public accountant with KPM CPAs and Advisors, said the city received an “unmodified or clean opinion, which is the best opinion you can receive” for 2018 during the Tuesday, June 18, board of aldermen meeting.
She said the top rating means the city’s financial statements are presented fairly and in accordance with generally accepted accounting principles.
Frederich said the city’s general fund did see a decrease during 2018.
“However, when we look at that ending balance and we refer to the expenditures the city had during the year, the general fund still has decent reserves,” she said. “They’re right at 25%.”
Last year, Frederich reported the 2017 reserve at 33%, as previously reported in the BH-FP.
However, even with the decrease, she said the city’s 25% directly hits the targeted three-month reserve auditors want to see in a city’s general fund.
“That means if you spent the same amount out (in 2019) that you spent in 2018, then you could go three months and not have any revenues and you’d still be able to pay the city’s expenses,” Frederich said.
Decreased spending helped the city maintain its target reserve, Frederich said.
While the general fund’s cash balance decreased by around $200,000 — from $542,000 in 2017 to $345,000 in 2018 — “the reserves still stayed about the same because expenses were lower this last year.”
Frederich said auditors found improvement in the city’s internal controls over financial reporting in 2018.
In her report last year, Frederich said the city needed to examine segregation of duties, particularly in the municipal court where one person had access to both physical assets and accounting records, as previously reported in the BH-FP.
This year, Frederich said that issue had been corrected.
“We believe the city has put controls in place to mitigate that risk in the court,” she said.
Frederich had a pair of recommendations for the city, one of which the city has addressed in 2019.
As last year’s audit expressed, Frederich said the city needs to reevaluate its water and sewer rates to make sure that the water and sewer fund can be self-sustaining.
In her report last year, Frederich said water and sewer funds “should bring in enough revenue to cover the expenses of repairs and maintenance and the debt service.”
In 2016, the water and sewer fund cash balances sat at $271,000. They decreased to $96,000 in 2017, and fell another $3,000 to $93,000 in 2018, Frederich said.
“It’s one of those things, the city needs to determine what kind of funds it wants to have in the water and sewer fund and increase those balances,” she said. “Those are kind of low for the activity that’s happening.”
However, Frederich acknowledged the 2018 audit doesn’t reflect the impact of increased water and sewer rates the city implemented Jan. 1, 2019.
“So I think that will probably be significantly different for 2019, but we just wanted to point that out for ‘18,” she said. “But, we did note that you raised the rates.”
Also, she said the city needs to prepare for a new accounting standard that will go into effect in December 2020.
Under the pronouncement, equipment leases that last over a year will need to appear as an asset and liability on financial statements in the future.
“Currently, you just show the cost of the rent payment,” she said.
She said many cities have copier leases, for example.
“It could be equipment, or even if you lease a building from somebody and just pay rent, for the term of that, you have to show the liability on your financial statements,” Frederich added. “It won’t impact you for a little while, but we wanted you to be aware of it.”
For more information from the June 18 meeting, find the approved minutes online at BolivarMoNews.com.