Cuts have allowed City to maintain strong fund balance

Audit ‘not what you are seeing in a majority of municipalities’

by BETH ALTENA

Peter Haefner of Verdeveld Haefner, LLC, the accounting and consulting firm that provides the City of Rockford with its annual audit, reports to city officials and Rockford City Council on Monday, Nov. 14. He said the strength of the City’s financial report is positive news.

The results of the audit for the City of Rockford’s year-end finances as of June 30, 2011 were reported at the Rockford City Council meeting on Monday, Nov. 14. According to Peter Haefner, who presented the report, the results are “not what you are seeing in a majority of municipalities.” Haefner, of Vredeveld Haefner, LLC, had good news regarding the City’s financial condition.

“You have been able to cut a lot of costs to maintain a strong fund balance. That’s positive,” Haefner stated.

According to the audit, financial highlights of the City of Rockford’s year ending in June 2011 included seven items of significance: purchase of a $160,000 plow truck; upgrading of financial software to BSA.Net version; purchase of two new 4×4 pickup trucks and plows; the lease of three new public safety vehicles, upgrading of radio capabilities and replacement of bulletproof vests for the police department; the receipt of a grant to replace an aging emergency warning siren; receiving a grant to complete the Rogue River Nature Trail in the 2011-12 budget year; and the upgrade of lighting fixtures throughout all municipal buildings with a Consumers Energy grant program.

The financial statement regarding City finances is divided into three components: a government-wide statement, fund financial statements, and notes on financial statements. Government-wide statements, according to the audit, are designed to “provide a broad overview of the City’s finances. Comparing a City’s assets and liabilities and the changes between the two serve as a useful indicator of the financial position of the City is improving or deteriorating.” In the case of Rockford, assets for the year exceeded liabilities by $15,326,439 at the close of the most recent fiscal year.

Verdeveld Haefner’s audit showed an increase in the assets of both the governmental and business-type activities of the City compared to the previous year. It attributes the increase in assets in business-type activities as the result of lower expenses in both water and sewer operations. The governmental activities increase is the result of budgeted cost savings measures to offset decreasing revenues in state-shared revenues, along with significant amounts of capital additions.

“During the year, the City invested $1,639,137 or 49 percent of governmental activities expenses in public safety,” the audit stated.

Under budgetary highlights, the audit identifies the early retirement of one police lieutenant and indicated the budget change will be recouped during the budget year 2011-2012. The results of the 2010 census increased state-shared revenue by 22 percent.

“The water fund realized a small increase… due to careful monitoring of expenditures,” the audit stated. “The sewer fund saw a small decrease due to increased maintenance required on some underground pipes and lift stations. The PARCC Side Treatment Plant continues to function well and expenses remain under budget.”

Major and local street funds finished the year higher than projected due to some projects carrying over into the new fiscal year. Winter salt and sand use was higher than anticipated.

In a section titled “Economic Factors and Next Year’s Budgets and Rates,” the audit noted that the City maintained its millage of 10.9 mills, “which is one of the four lowest rates among local cities which do not levy an income tax.” The following bulleted highlights were noted:

• A salary freeze was accepted by all departments, including non-unionized staff. Property values again declined throughout the City, however there were some positive growth signs on the building side.

• Health insurance premiums increased by a little over 20 percent. Pension costs remained relatively flat.

• Employee contributions to health care costs increased by seven percent this year and eight percent next year beginning January 1, 2012.

• Projects budgeted for next year include the completion of the Rogue River Nature Trail, and records software management for the police department, as well as various preventative maintenance programs in the street, water and sewer funds.

In a summary of the accounting practices of the City, the audit noted the City was incorporated June 17, 1935, and operates as a Council-Manager form of government. Services include providing police and fire, major and local streets, culture and recreation, public improvements, planning and zoning, and general administrative services.

The City participates in a joint venture as a participant in the North Kent Sewer Authority with a purpose to develop and maintain sanitary sewer infrastructure. “The City pays for these services based on its share of sewage flow through the system to cover debt service, maintenance and administration. For the year ended June 30, 2011, the City paid $935,026 to the Authority…”

The audit described the City’s major funds. The three major governmental funds are the General Fund, which accounts for all financial resources not accounted within another fund. The Capital Improvements Fund accounts for the accumulation of resources for, and purchase of, capital assets. Proprietary funds for the City include the Sewer Enterprise Fund and the Water Enterprise Fund.

In addition, the City has a Special Revenue Fund, a Debt Service Fund, a Capital Projects Fund, a Permanent Fund, and an Agency Fund.

The audit noted that the City is exposed to risk of loss related to torts, theft, damage or destruction of assets, errors and omissions, injuries to employees, and natural disasters, but has had no settled claims resulting from these risks that exceeded commercial coverage in any of the past three fiscal years.

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