City Awarded Clean Audit, With Warning –Make Changes Or Difficulties Predicted

Read the entire audit statement provided in the meeting here: City of Ava Audit Report Statement

By Sue Curry Jones

With the absence of Mayor Eddie Maggard, Burrely Loftin, president of the Board of Aldermen, presided over city council meeting last week and convened the meeting, which was held on Thursday, Dec. 11, at 6 p.m. The most important topic on the evening agenda was the city’s annual audit analysis presented by Andrew A. Marmouget, accountant and partner of KPM CPAs and Advisors, of Springfield, Mo.

Councilmen also heard from two local property owners who question the validity of the new utility rules for owners of rental properties; and, following-up on items from the November council meeting, Airport Manager David Davidson updated officials on the facility’s continued needs and on-going improvements.

As stated by Andrew Marmouget, of KPM in Springfield, Mo., the City of Ava’s audit for the financial year ending June 30, 2014, garnered a clean opinion. The analysis letter, which is written by the firm, cited the following financial highlights:

  • The net position of the City’s governmental activities increased by $28,553 as a result of current year activities.   The net position of the business-type activities decreased by $480,205 for the year.
  • The assets of the City exceeded its liabilities as of June 30, 2014, by $9.8 million (net position). Of this amount $1.7 million was unrestricted and may be used to meet future obligations of the City.
  • The City street department spent $125,000 on paving projects and another $75,000 to MoDOT for completion of sidewalks and storm water drainage along the main business route to the Ava Square.
  • The City purchased the Town & Country Bank building on South Jefferson for $200,000 to be used as the future City Hall and Utilities office. A $50,000 down payment was made, with the remaining $150,000 to be paid over a three-year period at 4.37% rate of interest.
  • The City electric department spent $60,000 for storm sirens as part of the City’s emergency management program.
  • The City sewer and wastewater departments spent $56,000 on smoke testing as part of the Inflow and Infiltration program.
  • The city sanitation department purchased a new trash compactor for $40,000.

Financial analysis of the City’s funds: The combined fund balances of the City’s governmental funds as of June 30, 2014, were $400,328. The General Fund decreased by $28,081. The Park Fund decreased by $65,776.

Capital assets and debt administration: Capital assets of the governmental activities were $3,471,519 (net of accumulated depreciation) as of June 30, 2014. This represents a $17,471 decrease from the prior year. Net capital assets for business-type activities were $8,862,674 as of June 30, 2014. This represents a decrease of $203,958 from the prior year.

Debt: Total debt of governmental activities as of June 30, 2014, was $839,102. Total debt of business-type activities as of June 30, 2014, was $3,765,045, which is down by $128,037 from the prior year. This is due to principal payments on the City’s revenue bonds.

In the analysis, KPM cited the City was not in compliance with certain bond covenants. The bond transcripts require the City to have net revenues of not less than 110% of the requirement principal and interest payments during the fiscal year. During 2014, the net revenues of the City’s combined water and sewer fund totaled $168,642, while the 110% of required principal and interest payments were $443,186, thus having a deficit of $274,544 of the requirement.

During the current year the City of Ava saw decreases in balances in every fund with the exception of the Sanitation Fund. Adequate cash reserves are necessary for the City to meet its obligations without developing cash flow difficulties requiring short-term loans. As of June 30, 2014, the General Fund had a fund balance of $62,635, $76,156 of this balance is non-spendable, resulting in a negative unassigned fund balance of (-) $13,521.

Therefore, auditors recommended the City review all budget items to ensure no deficits are budgeted.   They noted the City should monitor on an ongoing basis all revenues and expenditures to allow for adequate operating funds on hand for all funds. They should also begin building cash reserves to reach a level that the Board and management consider necessary to avoid future cash flow difficulties. One measure the City may consider as adequate reserves is three months payroll.

The audit noted the City’s General Fund had an interfund loan payable to the Park Fund in the amount of $178,843. The City currently does not have a written plan on how this money will be repaid to the Park fund. The auditors recommended the establishment of a written plan, and annual payments from the City’s General Fund to the Park Fund until the balance is paid.

In the presentation, Marmouget said the City has “tough choices to make before running into cash flow difficulties…”

He also advised that the Electric Fund, which is down by $500,000 due to the lack of subsidy funding, cannot continue to finance and cover the expenses associated with other city fund balances. Marmouget said the Electric Fund is only going to be able to sustain one more year of transfers.

City of Ava Audit Report Statement

In a 3-0 vote, aldermen authorized Mayor Eddie Maggard to sign a business contract with Sapp Design Associates Architects of Springfield, Mo. Sapp is the architectural firm council selected for the proposed remodeling of the vacant Town & Country Bank building, located at 404 South Jefferson Street, in Ava.

Motions to proceed with the contract were tendered by aldermen David Norman and Keith Jones.

Airport Manager David Davidson reported the tree removal project on the southeast end of the runway continues. In response, Alderman Loftin said a verbal agreement between the City of Ava and the property owner has been reached, and a local attorney is preparing a contract accordingly.

Davidson said MoDOT inspected the airport runway as the site is due for sealing, and it would be timely to begin the application process for a 90-10 grant opportunity that is now available. The cost of resealing and restriping the runway is $200,000, and if awarded the grant, the city’s investment would be $20,000.

Davidson commented the runway surface is in good shape.

During the Nov. 13 city council meeting, Davidson and Ray Davison asked councilmen to consider the purchase of an Automated Weather Observing System (AWOS), a unit that disseminates accurate weather data, wind speeds and vital updates for pilots. However, in the initial presentation, it was cited that the system may be used in a variety of ways, for a variety of community venues, as the equipment can be an informational asset to local citizens and other entities. According to Davison and Davidson, a new AWOS unit costs around $70,000, but they had recently located system components in Georgia, and the price was $4300. The partial unit was unused, and has been stored in a protected area.

After a brief discussion, council opted to purchase the unit in a 3-0 vote, with motions by aldermen David Norman and Keith Jones. However, in the motion, it was noted the purchase is contingent on securing necessary funds from the maintenance budget, or the capitol expenditure fund.

Davidson advised additional items are needed before the system can be operational, and those pieces are estimated to cost around $8,000.

The municipal court docket was approved as presented. Aldermen Jones and Norman gave the motions, with the vote to accept 3-0.

Two property owners appeared before council, asking aldermen to reconsider or possibly postpone the implementation of new standards on utility deposits for rental property owners. They stated the new rules were deemed unfair and unfounded for landlords who have upheld reliable and trustworthy payment records.

The property-owners expressed “that as long as monthly utility bills are paid, why should the city dictate who pays the utilities…as long as utilities are paid.” The owners also asked councilmen to consider this problem on an individual-by-individual basis, and not punish owners who have handled properties well, and paid utility bills on time.

Councilman Loftin advised the City had recently adopted the new utility standard for rental properties in an attempt to stop the frequency and enormity of unpaid utility bills, especially from rental properties within city limits. The new rule, which was slated to go into effect Friday, Dec. 12, asked landlords to maintain a floating $200 deposit, in case of renter’s default of payment. The new agreement also asked for contact and credit information on renters, so outstanding bill amounts could be assessed and collected.

Loftin explained, in past years, the City has assumed responsibility for all unpaid rental (utility) debts, which have totaled around $75,000. Council’s new policy was a plan to recoup unpaid bills and cover costs. Under the circumstances, however, council agreed to abstain from the policy for a grace period, and re-evaluate the details and overall plan. It was also suggested imple­menting new deposit standards at Christmas may not have been the best time of year.

City Building Inspector Kurtis McGee provided aldermen with a new set of updated sign regulations, as revised and edited by planning and zoning. McGee asked aldermen to read the proposed regulations, and consider for approval next session. The proposed sign regulations were 14 pages long.

During closed, councilmen voted unanimously to continue pursuing a litigation issue.

Councilmen in attendance for the meeting were east ward aldermen Keith Jones and Burrely Loftin, and David Norman, of the west ward.

Bill Long, also representing the west ward, was absent.

Council is slated to reconvene on Tuesday, Dec. 23, at 5:00 p.m. at Ava City Hall; however, unless an issue arises, the session will likely be canceled due to Christmas.