The City of Dillon received a clean opinion on their audit for the year ending June 30, 2015.
The report was presented to council at their February meeting by Smith Brooks of Kenneth Cobb & Company, P.C., Certified Public Accountants.
The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at fiscal year ending June 30, 2015 by $30.1 million (net position). Of this amount, $2.4 million was restricted and the City’s unrestricted net position (the amount that may be used to meet the City’s ongoing obligations to citizens and creditors) was a $1.9 million deficit for governmental activities and $1.0 million excess for business-type activities. The remaining $28.6 million of net position is for the City’s investment in capital assets.
The City’s total net position decreased by $169,530 (ignoring the effects of the cumulative change in accounting principle related to GASB #68/71).
As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of 3.9 million, an increase of $61,000 in comparison with the prior year. Approximately 70 percent of this total or $2.7 million is unassigned fund balance.
The City’s total bonded debt decreased by $1.0 million during the current fiscal year. The Wellness Center debt was refinanced during the year.
The City implemented GASB Statement No. 68 “Accounting and Financial Reporting for Pensions – an amendment of GASB No. 27” (“GASB #68”) and GASB Statement 71, “Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68” (“GASB #71” and collectively “Statements”) in 2015. These Statements require the City to recognize a net pension liability, deferred outflows of resources, and deferred inflows of resources for its participation in the South Carolina Retirement System and Police Officers Retirement System (“Plans”), cost-sharing multiple-employer defined benefit pension plans, on financial statements prepared on the economic resources measurement focus and accrual basis of accounting (i.e., the statement of net position) and present more extensive note disclosures.
The adoption of these Statements has resulted in the restatement of the City’s net position as of July 1, 2014 to reflect the reporting of net pension liabilities and deferred inflows/outflows of resources for each of its qualified Plans in accordance with the provisions of these Statements. As of July 1, 2014 the net position of the City’s governmental activities and business-type activities were decreased by $4.4 million and $1.4 million respectively, thus reflecting the cumulative change in accounting principle related to the adoption of these Statements.
This change had no impact on the City’s governmental fund financial statements.
Net Position
As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. The City’s combined net position totaled $30.1 million at the close of the most recent fiscal year.
The largest portion of the City’s net position $28.6 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. Although the City’s investment in its fixed assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the fixed assets themselves cannot be used to liquidate these liabilities
A portion of the City’s net position (8 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 total net position for the government as a whole, as well as for its separate governmental and business-type activities.
Changes in Net Position
The City’s net position decreased by $170,000 before considering the cumulative change in accounting principle. Approximately 16 percent of the City’s total revenue came from property taxes, while 14 percent resulted from grants and contributions (including state and federal aid). Charges for various goods and services provided 63 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.
Governmental Activities
Total revenues increased $236,000 compared to the prior year. This was caused by an increase in sanitation rates and drug fund collections. Total expenses increased $216,000 compared to the prior year. This increase occurred mostly in the general government and public safety departments. The City showed an increase in net position of approximately $156,000, prior to the cumulative change in accounting principle related to GASB #68/71.
Business-type Activities
Total revenues increased $16,000 compared to the prior year. Total expenses increased $305,000. This increase occurred mostly in the wastewater treatment department. The City had a decrease in net position of approximately $326,000, prior to the cumulative change in accounting principle related to GASB#68/71.
FINANCIAL ANALYSIS OF THE CITY’S
INDIVIDUAL FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.
Governmental Funds
The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, an unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City’s governmental funds reported total fund balances of $3.9 million. As a measure of liquidity, it may be useful to compare unreserved fund balance to total fund expenditures. An unassigned fund balance of $2.7 million represents 41 percent of total governmental fund expenditures.
The fund balance of the City’s general fund increased by $184,000 during the current fiscal year. This is a 7 percent increase over the prior year fund balance.
Proprietary Funds
The City’s proprietary funds provide the same type of information found in the government wide financial statements, but in more detail.
GENERAL FUND
BUDGETARY
HIGHLIGHTS
The original approved budget was not amended for the fiscal year ended June 30, 2015.
The City’s actual results for the General Fund were different than budgeted amounts due to the following:
• Actual revenues of approximately $5,467,000 exceeded budget by $214,000. All revenue line items were over budget except for property taxes, police fines, and interest.
• Actual expenditures of approximately $5,463,000 exceeded budget by $86,000. The following departments were each over budget by more than $10,000: police, recreation programs, council, and capital outlay.
FIXED ASSET AND DEBT ADMINISTRATION
Fixed Assets
The City’s investment in fixed assets for its governmental and business-type activities as of June 30, 2015, amounts to $60.1 million, less accumulated depreciation of $28.8 million, leaving a net book value of $31.3 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 decrease in the City’s investment in fixed assets for the current fiscal year was 1.6 percent in terms of net book values. Actual expenditures to purchase or construct capital assets were $1.1 million 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 – cross trainer; parks and recreation – playground equipment; police department – video system, 5 vehicles, drug dog, and various equipment received thru the Federal 1033 Program; water and sewer – computer server, 1 vehicle, and many improvements to the water, sewer, and wastewater treatment plant system.
Debt Activity
The City of Dillon’s total debt decreased by $955,000 during the current year.
NEXT YEAR’S
BUDGET
AND RATES
The City has approved a balanced budget for the fiscal year ended June 30, 2016. The following are some of the factors considered in preparing this budget:
• The City increased its sanitation rates to help with the increases from capital purchases and employee salary increases.
• The City’s water and sewer rates were increased by 2 percent, to help with the increases from repairs to the wastewater facilities and employee salary increases.
• The City’s 2% Hospitality Tax funds will be used as needed to help operate the Golf Course. Council approved for management to transfer up to $15,000 per month of 2% Hospitality Tax funds without getting additional approval from Council.
• The South Carolina Retirement System employer rates have continued to increase.
REQUEST FOR
INFORMATION
Questions concerning any of the information provided in this report or request for additional information should be addressed to: City of Dillon, P.O. Box 431, Dillon, S.C. 29536.
