City audit shows strong reserves; wastewater bond and grants skew year-to-year figures
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Summary
An external audit presented Jan. 13 reported healthy reserves for the City of Fayette but said a $2,050,000 bond issued in June 2025 for a $3,000,000 wastewater project and substantial grant activity distorted year-to-year cash comparisons.
Rick McKay presented the city’s annual audit and told the Fayette City Council that overall finances are strong, with account balances higher than the prior year. He said the city’s bank accounts totaled $13,100,000 but cautioned that a $2,050,000 bond issue dated June 2025 (part of a $3,000,000 wastewater project funded by a $1,000,000 grant and a $2,000,000 loan) appears on the books and makes year-over-year cash comparisons look larger than operational results.
McKay recommended council members review the Management Discussion & Analysis (pages 3–12 of the audit) for a concise explanation and offered to answer follow-up questions. He said, after excluding the bond timing effect, the city’s checking and certificate balances rose by roughly $642,000 for the year and overall debt decreased by about $790,000. On net position, the audit reported about $2,800,000 in change; McKay said that removing grant-related accounting would yield about $854,000 in surplus attributable to operations.
On enterprise funds, McKay said the wastewater system reported approximately a $27,000 operating surplus after $342,000 of depreciation and that the water park showed an $86,000 surplus on the financial statements but a roughly $32,000 cash cost to the general fund after transfers. He noted grants distort the bottom line because project costs are capitalized and amortized over long useful lives, while grant receipts are recognized when received.
McKay also summarized the management letter’s two recurring items: segregation of duties (historical overlap of payment functions) and a credit-union account control matter. He said the city split clerk and treasurer responsibilities to help address segregation-of-duties weaknesses and recommended continued attention to grant accounting and bond timing when reviewing future reports.
The presentation closed with an invitation for council members to meet with McKay or staff for detailed review of the 65‑page audit report.
