City audit: unmodified opinion; general fund healthy as TIFs show early deficits

Brent Nelson, a CPA with Johnson Block and Company, presented the City of New Londons audited financial statements for the year ended Dec. 31, 2024, to the Finance Personnel Committee and said the firm issued an unmodified opinion. The audit found the citys financial statements were, in all material respects, presented in accordance with generally accepted accounting principles. The audit matters matter because the opinion and the fund-level trends affect the citys ability to borrow and to fund capital projects and services. Nelson and Finance Director Judy said the city ended 2024 with broadly healthy reserves but flagged early-stage deficits in some tax incremental financing (TIF) districts that the committee should monitor. Nelson told the committee that total governmental fund balance declined about $317,000 in 2024. At the fund level, the general fund increased by $235,000 while the capital projects fund decreased by $437,000. Nelson said capital project balances often fluctuate year to year as projects move from borrowing to spending. He reported a roughly $257,000 decrease in the tourism fund after room tax dollars were transferred to the New London Chamber of Commerce following state statute. Judy and Nelson provided specific measures of reserve strength. The city held $3,451,000 in unassigned general fund balance at Dec. 31, 2024, which Nelson calculated as about 45% of annual general fund expenditures; the citys policy target is 25%. General fund revenues for 2024 were roughly $7.8 million and expenditures were about $8.494 million, producing the modest year-to-year increase in the general fund balance. Nelson said intergovernmental revenue for the city rose about $445,000 in 2024 following changes enacted as part of act 12, which increased state shared revenue to municipalities. He noted that interest income also remained elevated in 202324. Nelson said the electric and water fund net position rose by approximately $667,000 and the sewer utility rose by about $356,000 for 2024. The auditors also reviewed long-term debt. Nelson said governmental activities had about $11,940,000 in bonds and notes outstanding at Dec. 31, 2024, and utilities had about $13,700,000. He noted Wisconsin sets a limit on general obligation debt equal to 5% of equalized property value; for New London that statutory maximum computes to about $29,902,000 versus the citys outstanding general obligation debt of about $12,144,000, leaving capacity within the statutory limit. Nelson said the audit produced no material weaknesses in internal control and that management communications were informational in nature. He encouraged committee members to read the audit communication document and said he was available for follow-up questions. Judy said she will present more detail on individual TIF districts at the committees next meeting and that required filings (including the act 12 maintenance-of-effort reporting and TID reports) had been submitted. Committee discussion emphasized monitoring the early-stage TIF deficits and the timing of capital projects; Nelson and Judy reiterated that fluctuations in capital project funds and TIF deficits are often timing issues related to borrowing and project expenditures. The auditors and finance director distinguished between audit findings (none material) and policy decisions the committee might take about transfers, debt issuance or project timing. The committee did not take a formal vote on the audit itself; Nelson said the audit was finalized earlier in the week and the firm issued its report. The finance director said she will provide updated fund-balance numbers and a district-by-district TIF report at the next meeting so the committee can track increment growth and monitor any need for general fund support.