Village earns clean audit

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Plante and Moran CPA, Tadd Har...

HOLLY, Michigan – The village of Holly was issued a “clean opinion” in the matter of its fiscal year 2011 audit this week as Plante and Moran Certified Public Accountant, Tadd Harburn walked council members through the particulars during Tuesday’s Village Council meeting.

“What that means is that the financial statements that you received and were sent to the state basically indicated they were free from material mistakes, and in accordance with generally accepted accounting principles,” Harburn explained.

Total Revenues, expenditures and fund balance
Using a graph depicting a three year trend analysis, Harburn said expenditures from the General Fund decreased by approximately 4 percent or $130,000 over last year. Additionally, Harburn noted that total revenues to the general fund also had a significant drop of approximately 12 percent.

Total revenues for 2011 amounted to $2,819,814, whereby total expenditures and transfers out of the General Fund were $3,125,460.

“The special police millage went away, and there was a drop in taxable values, so that combination had an effect of decreasing the property taxes for the General Fund by about $436,000 compared to the previous year,” Harburn said.

The combined decreases, Harburn said, leaves the fund balance down by approximately $305,646 from last year. “It dropped collectively to $712,952 for the last fiscal year, and that $712,000 represents about 26 percent of your annual revenues – so a quarter of your revenues are sitting in fund balance,” he said.


GASB 54 and special revenue funds
Harburn said a new accounting standard known as GASB 54 now allows municipalities to roll certain special revenue funds back into the General Fund.

As a result, the village of Holly added the Municipal Street, Parks and Recreation, Cemetery, Building Inspection and Council-Committed funds (cemetery endowment) all back into the General Fund.

Harburn said the amounts were rolled back into the General Fund mainly because in most cases, all of the special revenue funds began by a transfer from the General Fund. “Even though some of them may have external revenue sources, by and large, what’s sitting there was generated from the transfer of the General Fund and now those are all rolled back into the General Fund,” he said.

Harburn said fund balance is divided into different categories including restricted, committed, assigned or unassigned.

Currently, the village of Holly has approximately $7,185 in restricted funds, or money received in the form of a state grant and set aside for dispatch training.

Harburn said Committed Funds are based on previous council resolutions, and represent money set aside for a certain projects. In the village’s case, $181,010 is set aside for the cemetery endowment.

Assigned funds represent tentative plans for certain projects, Harburn said. Currently, the village of Holly has $34,779 set aside for  Tri-party agreements, $121,081 for village sidewalks, $100,000 for millpond maintenance and issues, $73,754 for capital improvements, and $32,644 for cemetery care.

The final category represents unassigned funds, which currently totals $156,499 for the village of Holly.

“Assigned funds can be changed as well as the committed funds,” Harburn said. “The committed amount can be changed, too, but it takes council action to make that happen.”

Other governmental funds
Collectively, other governmental funds including the Major and Local Street, Lake Improvement, Solid Waste, Community Development Block Grant (CDBG), and Transportation funds all increased, Harburn said.

Harburn said governmental funds increased fund balance by up to $512,426 for 2011, an increase of $137,667 over 2010.  “Typically with these special revenue funds, they go up and down depending on accumulated dollars so that you have enough funds to complete a project,” he said. “You build up the funds over a few years, spend it on the project, and then spend the next few years building up again.”

Of the governmental funds, the $214,848 is restricted, while the remaining $297,580 is assigned, Harburn said.


Operating revenue and expenditures for sewer and water
In a three year trend analysis, Harburn said revenues for sewer and water increased collectively for 2011. For the first time in three years, Harburn said revenues were slightly greater than operating expenses.

Operating revenue for 2011 was $2,335,376, up from 2010’s operating revenue of $2,345,788. Operating expenses for 2011 were $2,293,337, down from last year’s $2,312,541.

Operating income for 2011 was $42,039, up over last year’s negative balance of $66,753.

Unrestricted net assets for 2011 decreased to $316,065, down significantly from last year’s $430,821. “Your net assets actually went down because you do have some capital expenses,” Harburn said.

Cash flow analysis for water and sewer funds
Harburn said the sewer fund has a balance of $558,080. The water fund has a balance of $801,326, $715,579 of which is restricted for bond payments, leaving $85,747 in cash available for operations and capital improvements.

“When you looked at changing your rates, part of it was to try and develop some cash resources that aren’t restricted for bonds, and are available for capital improvements,” Harburn said. “Hopefully, that $85,000 in this particular year can grow, and you’re setting aside some funds for future capital improvements.”

The village of Holly will pay $860,000 in principle and $733,158 in interest for a total of $1,593,158 in water and sewer bond payments for 2012. Those numbers are projected to increase through 2014, only beginning to steadily decrease in 2015, with payments being made on the bonds through the year 2020.