Boyne City’s audit reveals its general fund is flush with surplus cash—$2.485 million in unassigned fund balance to be exact.
Joe Verlin of Gabridge & Company presented the Boyne City Commission with its audit findings at the commission’s regular Tuesday Oct. 14 meeting.
“In other words, if there was no additional revenue coming in, there is enough set aside in reserves to cover basically 80 percent of an entire year’s worth of operating budget,” Verlin said. “The Government Financer’s Association recommends at least 17 percent—Department of Treasury likes to see that number somewhere between 25 and 50 percent—so, as of April 30, 2014, the city is in healthy financial condition.”
Boyne City Manager Michael Cain said $2 million or more of that fund balance will potentially be spent on the planned city facilities upgrades and reconstruction.
Verlin said those things considered “unassigned fund balance” include cash on hand and liquid resources the city has which could finance day to day operations.
Despite its strong cash position, the city’s pension obligations include a significant unfunded liability.
“The actuarial value of the assets the city has set aside as of Dec. 31, 2013, is $7,281,048,” said Verlin. “The actuarial accrued liability is $9,329,598, leaving an unfunded obligation of $2,048,558.”
He added, “For the most part the city is within two points of being where MERS (Municipal Employees Retirement System) would like every municipality to be in the State of Michigan so overall there’s not a funding issue in Boyne City.”
The city has 23 years to get the unfunded liability paid into the MERS plan.
“The city’s been chipping away at it over time,” Verlin said… “With the ultimate goal of that being zero within 30 years, so the city’s basically seven years into it.”
The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $21,985,442 (net position). Of this amount, $6,544,086 represents unrestricted net position, which may be used to meet the government’s ongoing obligations to citizens and creditors.
At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $3,873,444, an increase of $271,321 in comparison with the prior year. Approximately 64% of this amount ($2,485,027) is available for spending at the government’s discretion (unassigned fund balance).
At the end of the current fiscal year, unassigned fund balance for the general fund was $2,485,027, or approximately 80% of total general fund expenditures and transfers out.
“In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Boyne City, Michigan, as of April 30, 2014, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America,” the auditing firm stated.
Included in the audit report is a snapshot of Boyne City’s municipal assets and liabilities from 2013 and 2014.
“(N)et position over time may serve as a useful indicator of a government’s financial position. In the case of the City, assets exceeded liabilities by $21,985,442, at the close of the most recent fiscal year,” it stated in the report. “By far, the largest portion of the city’s net position ($14,753,059, or 67%) reflects its investment in capital assets (e.g., land, buildings, machinery, equipment, vehicles, and infrastructure), less any related outstanding debt that was used to acquire those assets.”
It further stated, “The City uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.”
Current Assets (2014/2013)
Cash & Cash Equivalents – $5,932,115 • $5,028,687
Due from Other Governmental Units – $103,400 • $143,646
Accounts Receivable – $794,637 • $855,103
Inventories – $43,446 • $49,126
Prepaid Items – $42,324 • $39,336
Note Receivable – $6,235 • $6,235
Total Current Assets – $6,922,157 • $6,122,133
Note Receivable – $20,360 • $26,566
Restricted Cash – $660,216 • $673,975
Capital Assets, net – $21,086,150 • $21,283,563
Total Assets – $28,688,883 • $28,106,237
Accounts Payable – $132,649 • $58,054
Payroll Liabilities – $16,708 • $9,784
Customer Deposits – $22,558 • $20,353
Accrued Interest – $11,499 • $13,833
Current Portion of Long-term Debt – $495,000 • $485,000
Internal Balances – none
Total Current Liabilities – $678,414 • $587,024
Other Post Employment Benefits – $13,332 $4,635
Compensated Absences – $173,604 $145,767
Long-term Debt – $5,838,091 $6,333,091
Total Liabilities – $6,703,441 $7,070,517
Net Investment in Capital Assets – $14,753,059 • $14,460,837
Restricted – $688,297 • $641,567
Unrestricted – $6,544,086 • $5,933,316
Total Net Position – $21,985,442 • $21,035,720
“Cash and cash equivalents increased significantly during the year, from $5,028,687 as of April 30, 2013 to $5,932,115 as of April 30, 2014. This is a direct result of the City actively monitoring the expenditure side of its ledger to keep costs down during the year, which yielded an overall increase in net position for the year of $949,722,” it stated in the report. “Also, accounts payable changed significantly during the year, from $58,054 as of April 30, 2013 to $132,649 as of April 30, 2014. This is primarily a result of the city taking possession of multiple, and larger, capital asset purchases near April 30. This, accordingly, resulted in a temporary increase in accounts payable as the capital assets were not paid until the following fiscal year.”