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FY24 audit: Ellsworth’s general fund stable but wastewater depreciation drives operating deficit
Summary
External auditor Ron Smith told council the FY24 audit returned a clean opinion and showed about $4.7 million in governmental fund balance, while highlighting capital timing, expected project overruns, and a roughly $2.5 million operational deficit in the wastewater fund tied to infrastructure depreciation.
The auditors delivered an unmodified ("highest opinion") audit for fiscal year 2024 and presented detailed fund balances and structural issues for the council to address.
Ron Smith, serving with RHR Smith, summarized the audit findings: the city’s governmental assets totaled about $10.5 million against roughly $5.8 million in liabilities, leaving a general fund balance near $4.7 million (about 90 days of operating budget). The auditor cautioned that capital projects and timing issues have driven fund movements and that the capital projects fund is expected to be an area of heavy activity in the next fiscal year.
The audit presentation highlighted the wastewater enterprise fund’s operational deficit—about $2.5 million—which auditors tied primarily to accumulated infrastructure depreciation (Smith noted an annual depreciation figure of roughly $811,000). Councilors and staff discussed reserve practices, a condition assessment completed for utilities, and whether the small annual reserve transfers (the wastewater reserve was cited as $35,000 per year in one exchange) are sufficient against long‑term depreciation needs.
City Manager Charlie Pierce and staff acknowledged the challenges raised in the audit, including the fiscal software conversion that contributed to reconciliation strain in FY24. City staff said they are engaging municipal finance consultant Sue Lessard (on retainer) and will provide corrective action items at finance committee meetings. Council members asked for ongoing finance committee review of depreciation schedules, debt retirement timelines and enterprise‑fund rate structures to address the gap.
The auditor offered to assist in a condition‑assessment review and follow up on debt retirement schedules that may relieve operational pressure as loans mature in coming years. Council asked staff to incorporate the audit’s management letter recommendations into a corrective action plan and to report progress at upcoming finance committee meetings.
