City passes 2019-2020 audit with flying colors

DAVISON — Auditors had nothing but praise for the city administration in its handling of finances for this past fiscal year when giving their annual presentation to the city council, Oct. 26.

Pamela Hill with Plante Moran and associates Christopher Gilbert and Stephen Poppe gave the audit report to the council after completing 250 hours of work auditing books and records of the city – all done remotely due to COVID-19, according to Hill.

The audit covers the last fiscal year, which ended June 30, and in that report Plante Moran found nothing out of order in the city’s books.

Hill thanked Treasurer Julie Pray and her team as well as City Manager Andrea Schroeder, Mayor Tim Bishop and the city staff.

“We wouldn’t be able to get it done without all the work Julie and her team put in,” said Hill. “We feel good about the process, especially considering what this year looked like.”

Despite the challenges of working remotely due to the COVID-19 crisis, Hill said the audit was conducted and found the city in good shape.

She said in 2019-2020 there was a decrease in intergovernmental revenue, which means the city received less grants in comparison to fiscal year 2019.

While the city worked on improvement projects with the Department of Public Work, there was an overall public works reduction in expenditures of about $170,000, said Gilbert.

In 2019 he said the city spent $1,247,818 on the DPW projects compared to $1,077,060 in 2020. There was also a slight reduction in public safety expenditures with costs in 2019 of $1,400,891 compared to $1,384,656 in 2020.

“2020 shows two positive directions the city is going. First, general fund expenditures decreased from 2019,” said Gilbert. “As well as the unassigned fund balance increasing.”

Hill said to sum it up, the city had a good year in facing the unassigned fund balance.

“But lets just be clear that was not by accident,” said Hill. “I think management and council, you should feel really good about the actions that were taken in order to put you in this position. We saw that revenues went down; we know state shared revenue went down and there’s not any indication we’re expecting to see a large increase in that in the current fiscal year you are in.

“So, council and management took action to reduce expenditures due to COVID-19, that’s really what allowed you to see that increase in your fund balance.”

Hill said the city came in about $130,000 below its budgets, within about 5 percent of its budgeted expenditures.

She said the administration came in under by cutting some items because it knew there were going to be reduced revenue sources.

“I want to make sure we touch on that if you had not taken those actions, you might not have seen this increase in unassigned fund balance,” said Hill. “Really, that just means you should feel good about the due diligence and the foresight you had in those last couple months to really watch those expenses.”

Hill said the auditors talked to the city management about keeping an eye on revenues continuing through the current fiscal year and to watch updates from the state. That, she said, will allow the city to still see strong results when there will be reduced revenues in 2021.

Poppe gave a report on the sewer and water funds and he said in 2019 operating revenue was $2,747,842, with operating expenses of $2,878,681 for an operating income of minus- $130,839. He compared this to 2020 when revenue was $2,881,680 and expenses were $2,578,074 with $303,606 in operating income.

“Those numbers reflect if the users of this system are paying for the system. In a five-year trend it shows most years a slight operating income, except for 2019 when there was a slight loss,” said Poppe.

He said the loss was related to planned decision by the council to hold water rates for a one-year period, coupled by an increase in some of the legacy costs allocated to the employees who handle the water and sewer department.

Poppe said the city needs to keep an eye on that number to make sure current users of the water system are covering the expense of them using that system.

In the city’s two pension plans – union and non-union (MERS) – Poppe said the city’s liabilities are covered, but the administration needs to watch those numbers carefully and to continue putting extra money toward the liabilities each year.

Note some steps city has taken in the past few years in order to address and make changes to the plans. Focus when possible to make contributions in excess of what was required in order to help fund this liability the last several years.

Hill then reported on the End of Audit letter which contains no findings because she said there was nothing to report.

“The news is what’s not in this letter. Any findings from our audit we’d be reporting them in this letter and I’m happy to say we don’t have any findings in this letter,” said Hill. “It’s really a testament to (Pray) and her team and the great work they do throughout the year. It’s even more important in a year like this because of all the uncertainty surrounding your revenue stream.”

Bishop said he was “very happy” with the work Plante Moran does every year and he praised Pray and her team for their good work.

“It’s a whole team effort. I work with a bunch of great department heads and I appreciate council for all your support too,” said Pray. “We’re a good team.”