Finance committee waives audit exit conference; staff reports midyear balances and accounting issues

The finance committee voted to waive an exit conference with the city’s auditors after the auditors issued a draft report with no findings, and staff presented midyear financial statements that showed $22.9 million across all funds and several encumbrances on major projects.

The recommendation to waive the exit conference came from the finance director. “Our audit is wrapping up and they do have a draft of the audited financials. Those are not, been released formally by the Auditor of State yet, so they're not public documents yet until the Auditor of State publishes those. As part of our wrapping up of the audit, we have the option to either have an exit conference with the auditors or we can waive that exit conference. They had no findings. There are no management letter comments,” said Mr. Dandrian, finance director. He added that, in his view, there was no follow-up needed and recommended waiving the conference and allowing the finance committee chair to sign the documents.

Why it matters: waiving the exit conference shortens the closeout process when auditors identify no issues, but the committee still must formally sign audit documents after the Auditor of State releases them.

Committee members said the audit went smoothly despite a change in auditors this year. “We had new auditors; we had to put it out for proposal. Charles E. E. Harris had been here in the past but it's been 5 years and it went smooth,” Dandrian said.

On motions and formal action, Mr. Cassidy moved to waive the exit conference; the meeting chair seconded the motion and the committee approved the waiver. The finance director and the finance committee chair were directed to sign off on the audit documents once the Auditor of State publishes the report.

Staff also presented midyear financial details. The finance director reported $22,900,000 in balances across all funds and said the general fund held about $12,000,000, of which $1,800,000 had already been encumbered for projects. He noted that of the total $22,000,000 at the end of June, roughly $7.3–7.4 million was encumbered with open purchase orders for projects including a splash pad, airport terminal work and an inclusive playground.

On revenues and fund performance, staff said income tax revenue is up 6.5% year to date through June and that the water fund’s financial position was improving. The finance director cautioned that recent rate increases (including ones effective July 1 and Jan. 1) affect year-to-date comparisons and that some of the apparent strength was timing-related.

The finance director flagged an accounting issue stemming from last August’s utility software upgrade: stormwater and water compliance fees billed in May are posting as received in the sewer fund rather than the stormwater fund. He estimated approximately $150,000 will need to be transferred from sewer to stormwater for the year and said staff is working with CMI, the software vendor, to correct the postings.

On expenditures and budget timing, staff said the general fund’s debt service line item showed 71% of budget spent through midyear because the city advanced funds up front into grant funds (including a federal aviation grant) to pay reimbursable expenses; other expense categories were at 90% because the city moved a $600,000 statutorily required income-tax transfer to other funds early in the year.

Committee members asked about timing differences between salaries and fringe benefits; staff noted annual payments such as workers’ compensation and unemployment can cause fringe benefit spending to lag through the year. Staff also warned that unplanned infrastructure failures — such as broken water lines — could erode any reserve improvements.

The committee approved minutes for the May 20 and June 17 meetings earlier in the session.

Less-critical follow-ups: staff said they will provide additional detail about water fund reserves and encumbrances ahead of a scheduled meeting with state officials so the city can discuss the prospect of ending a state-level “school emergency” status; the finance director said he will do further homework on reserve projections.

No other formal policy changes or budget amendments were adopted at the meeting.