Rexburg auditor: financial statements materially accurate but general fund trending down; wastewater headworks bid may require bond

Theresa Flannery, the city’s external auditor, told Rexburg City officials that the fiscal-year 2024 financial statements are "materially accurate," but she warned that the city should watch several budget and capital pressures.

Flannery said total assets exceeded liabilities—"about $175,000,000"—and described a general fund balance at roughly $5.8 million, or about 38.5% of fund balance, down from prior years. "All said and done, we feel that what's being presented to you is materially accurate," she said.

The auditor and city staff spoke at length about several topics that could affect future budgets and borrowing: a recently bid wastewater headworks project that came in at more than $6 million; a water loan the city still owes about $6.9 million on; and a wastewater revenue bond that will be paid off next year (about $790,000). Flannery said city staff’s capital improvement plan suggests the city may need to issue a bond in roughly three years if the wastewater CIP proceeds on the proposed timeline, and that a judicial confirmation process (rather than a public vote) would likely be the route because the city believes it will be able to repay the debt.

Staff also reviewed operating reserves across utilities. City cash-and-investment totals cited during the briefing included sanitation roughly $2.2 million, water roughly $9.8 million, and wastewater roughly $12.7 million (these figures were described as a combination of operations and capital reserves).

Leases and fleet: new government accounting (GASB) rules require lease liabilities to appear on the balance sheet. The city’s lease liabilities increased (an approximate $300,000 increase was noted) after several vehicle lease additions; the police fleet has about 32 vehicles on lease. Staff and councilors discussed whether leasing remains the most cost-effective option and whether to reassess leasing vendors and terms.

Program-level items and fees: Recreation subsidy from the general fund fell to about $5,700 last year as staff raised program fees; by contrast prior years’ subsidies had been far higher. The golf course had a strong year but staff warned those revenues fall quickly in a downturn and asked the council to consider two requested full-time positions in the next budget. Rexburg Rapids reported an operating loss of about $56,000, larger than its typical $15,000 loss in an average year. Cultural arts subsidies totaled roughly $1.3 million in the year cited, largely driven by one-time project costs.

Impact fees and construction transfers: Impact fees were described as strong in FY2024 (impact fees of about $784,000 and a parks impact figure discussed at roughly $530,000 in one segment), and the city transferred nearly $4 million into street reconstruction projects after the state provided an extra payment of roughly $1.1 million. Staff said LID-related funds and street reserves have increased, and that staff has encouraged the use of LIDs for projects where appropriate.

Grants, corrections and audit results: The auditors identified a prior‑period restatement related to federal COVID relief (CSLFRF) revenue recognition. About $730,000–$1,000,000 of CSLFRF funding that had been recorded as revenue in earlier years should have been recognized as deferred revenue (grants received in advance) until spent; the city encumbered much of that amount for wastewater equipment. The audit opinion on the FY2024 financial statements was otherwise unmodified; federal major‑program testing (including the community block grant and CSLFRF) produced a finding of compliance in all material respects. The auditors issued one internal-control finding tied to the prior‑period revenue recognition correction; the auditors described the issue in the management letter and noted steps taken to correct presentation and process.

Topics the council raised but did not decide included possible new or raised fees (for example, a discussion about an irrigation or golf capital replacement fee), continued evaluation of vehicle-lease vendors, and potential future bonding plans tied to the wastewater CIP. Staff also noted the city has saved funds toward future projects (examples cited: police building reserves and airport relocation reserves), and encouraged public communication about the city’s forward planning to explain any future bond requests.

The audit presentation and related schedules will be included in the packet the council will consider when it votes to accept the restated financial statements at a subsequent meeting.