By Betsy Finklea
The City of Dillon received a clean opinion on their audit which was presented at the council’s last meeting.
Smith Brooks of Kenneth Cobb & Company, P.C., presented the audit which covers the period from July1, 2012 to June 30, 2013.
Brooks said the city received an unqualified opinion, which is the best opinion that one can receive. He said the audit was clean with no exceptions.
Brooks said the findings that appear in this audit were the findings that they have had for years.
The findings included:
“#2013-1 Preparation of annual financial statements and disclosures (initially reported 12/31/07)
“Condition: The city does not prepare its annual financial statements or note disclosures. The city’s staff works with the auditor in the preparation and subsequently reviews and approves the financial statements and note disclosures before issuance.
“Criteria: Internal controls should be in place that provide reasonable assurance that the financial statements are free of material misstatements and that the independent auditor is not part of this control system.
“Effect: The city relies on the auditor to prepare the financial statements and the note disclosures and then they review the final product. Caution must be exercised so that the auditor is not deemed to be part of the control system.
“Recommendation: The city can accept this condition and concentrate on the review and approval process or prepare all financial statements and note disclosures in house or hire an outside source to prepare the financial statements and note disclosures.
“Response: The city accepts this condition and will continue to concentrate on the review and approval process. The Finance Director continues to work on learning how to prepare the financial statements.”
*
#2013-2 Inadequate segregation of duties (initially reported 12/31/07)
“Condition: Due to a small staff size, the city does not have complete segregation of duties.
“Criteria: The ideal internal control system would not allow one person to perform a transaction from beginning to end.
“Effect: An error in financial reporting may not be detected in a timely manner or the misappropriation of assets could be concealed.
“Recommendation: We recommend that the Mayor, City Council and management use supervisory reviews such as monitoring financial statements and budget reports, and segregate duties where cost beneficial to do so.
“Response: When it becomes cost effective the city will segregate duties. Currently the Mayor and Council receive monthly financial statements and budget reports to review and question the City Manager and Finance Director accordingly.
*
#2013-3 Purchasing goods and services (initially reported 10/29/10)
“Condition: During the disbursement testing the following instances were noted: 3 instances of no purchase orders; 5 instances of no bids being taken; and 2 instances of no advertising done prior to purchase. There were 166 items tested.
“Criteria: City policy requires the following: a) bids be taken for items greater than $1,000; b) advertising is required when a purchase exceeds $20,000; c) approved purchase orders are also required on all purchases over $500. All three of the above items should be performed prior to the purchase, unless an item is specifically excluded under the policy.
“Effect: The lowest prices may not be obtained and city funds may be obligated without the approval of management.
“Recommendation: The city needs to ensure that proper documentation is maintained for all purchasing procedures.
“Response: The City Manager and Finance Director continue to talk with department heads on the importance of following the city’s purchase order procedures.
According to the audit report, some of the financial highlights include:
-“The assets of the city exceeded its liabilities at fiscal year ending June 30, 2013 by $35.9 million (net position). Of this amount, $6.8 million may be used to meet the city’s ongoing obligations to citizens and creditors.”
-“The city’s total net position decreased by $86,810 (includes prior period adjustment of $24,027).”
– “As of the close of the current fiscal year, the city’s governmental funds reported combined ending fund balances of $4.0 million, an increase of $18,119 in comparison with the prior year. Approximately 70 percent of this total or $2.8 million is unassigned fund balance.”
-“The city’s total bonded debt decreased by $1.25 million during the current fiscal year. There was no new debt issued during the year.”
The report states that
“The statement of net position presents all of the government’s assets and liabilities, with differences between the two reported as net position. Over time, increases or decreases in the city’s net position may serve as a useful indicator of whether the financial position of the city is improving or deteriorating.”
“The city’s combined net position totaled $35.9 million at the close of the most recent fiscal year.”
“The largest portion of the city’s net position $26.2 million reflects its investment in fixed assets such as land, buildings, equipment, and infrastructure (road, bridges, and other immovable assets), less any related debt used to acquire those assets that is still outstanding. The city uses these fixed assets to provide services to citizens; consequentially, these assets are not available for future spending.”
The audit explains:
In governmental activities, the city’s current assets totaled $4,182,000. Capital assets were $7,155,000. Other assets were $57,000. The city’s total assets were $11,394,000.
Long term liabilities totaled $2,670,000. Other liabilities were $299,000. Total liabilities were $2,969,000. $4,665,000 was invested in fixed assets, net of related debt. $1,190,000 is restricted. $2,570,000 is unrestricted.
The city’s total net position in governmental activities is $8, 425,000 in 2013 compared to $8,461,000 in 2012.
In business-type activities, the city’s current assets were $4,853,000. Capital assets were $23,771,000. Other assets were $1,441,000. Total assets were $30,065,000. Long term liabilities were $2,468,000. Other liabilities were $87,000. Total liabilities were $2,555,000. $21,509,000 is invested in fixed assets, net of related debt. $1,809,000 is restricted. $4,192,000 is unrestricted. The total net position in business-type activities is $27,510,000.
The total of governmental and business-type activities are as follows: Current Assets – $9,035,000, Capital Assets – $30,926000, Other Assets – $1,498,000, Total Assets – $41,459,000; Long-term liabilities – $5,138,000, Other Liabilities – $386,000, Total Liabilities – $5,524,000; Invested in Fixed Assets, Net of Related Debt – $26,174,000, Restricted – $2,999,000, Unrestricted – $6,762,000. The total net position is $35,935,000 in 2013 compared to $36,021,000 in 2012.
The report states that
“A portion of the city’s net position (8.3 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position may be used to meet the city’s ongoing obligations to citizens and creditors. Internally imposed designations of resources are not presented as restricted net position.”
“At the end of the current fiscal year, the city is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities.”
The city had a decrease in net position of $86,810. The report says that “Approximately 18.5 percent of the city’s total revenue came from taxes, while 7.8 percent resulted from grants and contributions (including state and federal aid). Charges for various goods and services provided 68.7 percent of the total revenues. The city’s expenses cover a range of services. The largest expenses were for public safety and water and sewer.”
Among the revenues were program revenues including charges for services – $6,449,000, operating grants and contributions – $693,000, and capital grants and contributions – $36,000.
Also among the revenues were general revenues including taxes – $1,736,000, investment earnings – $15,000, hospitality tax – $460,000, and other – $185,000. A $184,000 loss is shown in the sale/disposal line item. The total revenues were $9,390,000. Expenses included the following: $1,361,000 for general government, $2,097,000 for public safety, $649,000 for highways and streets, $530,000 for sanitation, $110,000 for accommodation tax, $861,000 for parks and recreation, $57,000 for the golf course, $26,000 for grants, $102,000 for interest and other charges, and $3,707,000 for water and sewer. The total expenses were $9,500,000.
In Governmental activities, “Total revenues decreased $572,000 compared to the prior year. Total expenses decreased $53,000 compared to the prior year. These decreases were spread over all activities. The city showed a decrease in net position of approximately $60,000,” the report said.
In Business-type activities, “Total revenues decreased $159,000 compared to the prior year. This decrease was due mostly to a decline in water usage by the city’s customers. Total expenses increased $319,000. The city had a decrease in net position of approximately $50,000,” said the report.
The report states, “As of the end of the current fiscal year, the city’s governmental funds reported total fund balances of $4.0 million. As a measure of liquidity, it may be useful to compare unreserved fund balance to total fund expenditures. An unassigned fund balance of $2.8 million represents 47 percent of total governmental fund expenditures. The fund balance of the city’s general fund increased by $160,000 during the current fiscal year. This is a 6.0 percent increase over the prior year fund balance.”
The report notes that the original budget was not amended during the fiscal year.
“The city’s investment in fixed assets for its governmental and business-type activities as of June 30, 2013, amounts to $56.9 million, less accumulated depreciation of $25.9 million, leaving a net book value of $31 million. This investment in fixed assets includes land, buildings, improvements, equipment, and infrastructure. Infrastructure assets are items that are normally immovable and of value only to the city, such as roads, bridges, drainage systems and similar items, “ the report says.
“The decrease in the city’s investment in fixed assets for the current fiscal year was 2.4 percent in terms of net book values. Actual expenditures to purchase or construct capital assets was $808,000 for the year. The decrease in the city’s fixed assets was caused by depreciation expense netted with the following assets that were added to the depreciation schedule: wellness center-aerobic room sound system, zero turn mower and walking trail, street department-tractor, recreation-mower, police-three vehicles, golf course-computer and software, fairway and greens mowers and blower, water and sewer-sewer pumps, aerators, one truck, well pump, and many improvements at the wastewater treatment plant.”
“The City of Dillon’s total debt decreased by $1.25 million during the current year.”
Notes of Interest
from the Audit
-“The city was incorporated December 22, 1888 by an Act of Legislature of South Carolina. On April 4, 1901, a charter was issued to the city by the Secretary of State. Section 47-26 of the 1962 Code of Laws, as amended (Home Rule Act), required that municipalities adopt a specific form of government, and on January 30, 1976, a charter was issued for the city adopting the council-manager form of government.”
-’The city allows an employee to accumulate up to 30 vacation days and 60 sick leave days. These vacation and sick leave days are earned, as employed, on a daily basis. The vacation days are payable upon an employee leaving the city’s employment. There would be no restitution, upon leaving, for any unused sick leave days.”
-”At year end, the carrying amount of deposits for the city was $7,792,468. The combined bank balance was $7,963, 136. The difference between bank and book balances is due to outstanding deposits and checks. Of the bank balance, $750,000 was covered by Federal Depository Insurance Corporation. The $7,213,136 remaining balance is collateralized with pledged securities. These pledged securities are held by the custodial bank’s trust department but not in the city’s name. All deposits are made and held by the city’s local banks. Cash is stated at cost (which approximates market).”
-”The City’s investments of $380,857 are held with the U.S. Bank Corporate Trust Department, in money market treasury funds. These investments are all category 1 (insured or registered, or securities held by the government or its agent in the government’s name) investments.”
Depreciation:
* Total depreciation expense – governmental activities $ 366,794
* Total depreciation expense – business-type activities: $1,014,689
-”During the year, the city paid Dillon Internal Medicine, with whom Councilman Phil Wallace is affiliated, $10,724 in medical fees and Braddy Insurance Agency, with whom Councilman John Braddy is affiliated, $554 for insurance.”
-”Approximately 41% of the Water & Sewer Enterprise Fund’s sales revenue is generated by sewer sales to Perdue Farms, Incorporated.”
