The Boyne City Gazette has condensed the 79-page 2015 Boyne City financial audit into a three-page news story complete with highlights of the city’s major funds, its revenue, liabilities, long-term obligations and whether it met governmental accounting standards.
Boyne City’s most recent financial audit once again shows a municipality in order.
The financial report prepared by Gabridge & Company was presented to the Boyne City Commission Today, Tuesday Oct. 27.
“[D]uring our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses,” Gabridge & Company stated.
Meanwhile, a material weakness is a deficiency which prevents a material misstatement of the entity’s financial statements from being prevented or detected and corrected on a timely basis.
A significant deficiency is less severe than a material weakness but important enough to merit attention.
“The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported,” Gabridge stated in the report. According to the report, Boyne City management is responsible for the selection and use of appropriate accounting policies.
“We noted no transactions entered into by the city during the year for which there is a lack of authoritative guidance or consensus,” it states in the report. “All significant transactions have been recognized in the financial statements in the proper period.”
Gabridge also found the city’s financial statement disclosures concerning accounting estimates were, “neutral, consistent, and clear.”
Boyne City’s financial position
“At the end of the current fiscal year, the city is able to report positive balances in all reported categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities,” Gabridge stated. “The same situation held true for the prior fiscal year.”
According to the report, Boyne City’s assets exceeded its liabilities by $24,126,810.
“By far, the largest portion of the City’s net position—$15,913,534, or 66 percent—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 states in the report.
“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.”
Gabridge further stated, “An additional portion of the City’s net position—$989,756, or 4 percent—represents resources that are subject to external restrictions on how they may be used. The remaining balance of $7,223,520 is unrestricted and may be used to meet the government’s ongoing obligations to its citizens and creditors.”
The report reveals cash and cash equivalents increased significantly during the year, from $5,932,115 as of April 30, 2014 to $6,995,045 as of April 30, 2015.
“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 $2,148,368,” stated Gabridge.
“Also, unearned revenue changed significantly during the year, from zero as of April 30, 2014 to $138,610 as of April 30, 2015. This is the result of the city collecting registrations and sponsorships for the July 2015 Boyne Thunder poker run.” The further stated, “The City’s overall net position increased $2,148,368 from the prior fiscal year.”
According to the report, reasons for the increase include governmental activities, which increased the city’s net position by $1,801,685.
The total increase was the result of total revenues of $6,772,211 less total expenses of $4,970,526.
“The large increase in net position is due to two capital grants in the major streets fund for $817,211,” Gabridge said in the report. “Total expenses also decreased by $339,247 with the majority of the expenses decreasing in recreation and culture and public works.”
And, they added, “Business-type activities increased the city’s net position by $339,683. The total revenues and expenses were consistent with previous years.”
“We encountered no significant difficulties in dealing with management in performing and completing our audit,” they stated.
Gabridge did not audit financial statements of the Boyne City Housing Commission—which represents 25 percent of the assets, 24 percent net position, and 57 percent revenues—because those statements were audited by other auditors.
Those reports were made available to Gabridge during its audit.
“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,” Gabridge stated in the report.
At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $4,341,964, an increase of $468,520 in comparison with the prior year.
Approximately 61 percent of this amount or $2,673,178 is available for spending at the government’s discretion.
The unassigned fund balance for the general fund was $2,673,178, or approximately 82 percent of total general fund expenditures and transfers out.
Financial Analysis of Governmental Funds
At April 30, 2015, the city’s governmental funds reported combined fund balances of $4,341,964, an increase of $468,520 in comparison with the prior year.
Approximately 61 percent of this amount ($2,673,178) constitutes unassigned fund balance, which is available for spending at the government’s discretion.
The remainder of the fund balance is either nonspendable, assigned, or restricted to indicate that it is:
1. Not in spendable form – $61,056 for inventories and prepaid items
2. Restricted for particular purposes – $342,380 for major and local streets
3. Committed – $152,706 for compensated absences
4. Assigned – $1,112,644 for various purposes
The general fund is the chief operating fund of the City.
At the end of the current fiscal year, unassigned fund balance of the general fund was $2,673,178, while total fund balance increased to $3,182,126.
As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures.
Unassigned fund balance represents approximately 82 percent of total general fund expenditures and transfers out, while total fund balance represents approximately 98 percent of that same amount.
The fund balance of the city’s general fund increased by $247,517 during the current fiscal year.
The major streets fund had a $291,703 increase in fund balance during the current fiscal year which put the overall fund balance at $307,649.
The ambulance fund had a $57,541 decrease in fund balance during the current fiscal year which put the overall fund balance at $55,382.
General Fund Budgetary Highlights Original budget compared to final budget.
During the year there was a need to adjust expenditures in the final budget to $2,260,715 from the originally budgeted expenditures of $4,233,155.
This is a result of decreased estimated expenditures in capital outlay of $960,450. All other budget amendments during the year were relatively minor.
Capital Assets and Debt Administration Capital Assets
The City’s investment in capital assets for its governmental and business-type activities as of April 30, 2015, amounts to $21,751,625 (net of accumulated depreciation).
This investment in capital assets includes land, buildings, machinery, equipment, vehicles, and water and sewer infrastructure.
The following summarizes the City’s capital assets: Long-term Debt As described in note 6 to the financial statements, the City had $5,838,091 long-term debt at the end of the fiscal year.
The City was in process of issuing a new bond as of year end.
The City is well under its legal debt limit as of year-end.
Economic Condition and Outlook
Boyne City officials believe the city’s economic outlook remains strong, and will so for the foreseeable future barring unforeseen problems.
For qualified employee retirements, the city is required to contribute at an actuarially determined rate ranging from 12.19 to 20.28 percent of annual covered payroll.
City employees are required to contribute 4.7% of all covered wages.
The contribution requirements of the City are established and may be amended by the Retirement Board of MERS.
The contribution requirements of plan members are established and may be amended by the City, depending on the MERS contribution program adopted by the City.
Annual Pension Cost For the year ended April 30, 2015, the city’s annual pension cost of $213,415 for MERS was equal to the City’s required and actual contributions. Actuarial Methods and Assumptions.
The required contribution was determined using the entry age actuarial cost method.
The actuarial assumptions included (a) a rate of return on the investment of present and future assets of 8%, (b) additional projected salary increases up to 4.2% per year, depending on age, attributable to seniority/merit, and (c) an inflationary rate of 4.5%.
The actuarial value of MERS assets was determined on the basis of a valuation method that assumes the fund earns the expected rate of return, and includes an adjustment to reflect fair value.
The City’s unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis.
The remaining amortization period at December 31, 2014, the date of the last actuarial valuation, was 22 years.
Funded Status and Funding Progress
As of Dec. 31, 2014, the most recent actuarial valuation date, the plan was 79 percent funded.
The actuarial accrued liability for benefits was $8,630,468 and the actuarial value of assets was $6,809,720, resulting in an unfunded actuarial accrued liability of approximately $1,820,748.
The covered payroll—annual payroll of active employees covered by the plan—was $1,003,608.
Other Post-employment Benefits
Boyne City administers a single-employer defined benefit healthcare plan. In addition to the retirement benefits, the plan provides health insurance benefits to certain retirees and their beneficiaries, which are advance-funded on a discretionary basis.
In accordance with city policy, certain individuals and their beneficiaries receive medical, dental, prescription, and eyeglass coverage for varying periods of timing, depending on bargaining unit and years of service.
As of April 30, 2015, the date of the last plan valuation, the plan covered 31 members—25 active plan members and six retirees receiving benefits.
Funded Status and Funding Progress
As of April 30, 2015, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $441,674, all of which was unfunded. The covered payroll or annual payroll of the active employees covered by the plan, was not available.