Crawford's audit 'looks good' but hard times may lie ahead
By Tamie Meck
Published Thursday, September 1, 2016 9:57 am
At the Aug. 17 Crawford Town Council work session, town auditor Pete Blair, of Blair & Associates, gave a presentation on the audit and Independent Auditor's Report for fiscal year 2015.
Blair said that, overall, the town looks good and is "probably right in line with other small towns" that are wondering what's going to happen next in these times of economic uncertainty. With some local businesses closing, and the Delta County School District, of which Blair is board treasurer, losing about 10 percent of its enrollment in recent years, "I do know that there might be some hard times coming."
Blair said that normally the town keeps its books on cash basis, with the exception of utility (water and sewer) billing. Generally accepted accounting principles (GAAP) require they be done on full accrual basis. Auditors made 13 journal entry adjustments, many of which will bring the town back to a full accrual accounting basis, said Blair.
In going over the high points, Blair noted one new accounting policy, Governmental Accounting Standards Board (GASB) Statement No. 68, adopted in 2015 to improve accounting and financial reporting by state and local governments for employee pensions. The town's employee retirement fund is invested in the state Public Employees Retirement Association (PERA). Because PERA is currently under-funded, under GASB 68, the town must pick up a net pension liability based on where PERA is in its funding. The amount of the liability for Crawford in 2015 is $184,263.
Blair said that even though there's a good chance they will never have to budget for it, the town has to show that liability. "Hopefully things will turn around and it will actually be a positive," said Blair. While PERA is under-funded, the amount of under-funding is going down a little, but not much, he added. By 2054 PERA should be operating in the black.
Blair clarified two entries, including one for $12,052 for the Conservation Trust Fund (from Colorado Lottery proceeds). A journal entry for $120,000 was transferred from the general fund to the capital improvement fund for the remodel of Town Hall. If that transfer isn't done, said Blair, the capital improvement fund would show a negative balance of about $130,000.
The town was not required to have an audit in 2013 and 2014, said Blair. In looking at historical information he found it "quite interesting" that the town's cash balance of $411,000 at the end of 2015 mirrored the cash balance of $415,000 at the end of 2012. "So that's pretty good," said Blair.
Crawford also had a positive change of $565,093 in its net position, described as the difference between assets, deferred outflow of resources, liabilities, and deferred inflow of resources. While that's a big change for a small town, the change reflects the value of the remodel of Town Hall, which was completed in 2015, and the grant money used to pay for much of it.
Enterprise funds (water and sewer) should be self-supporting, but when using accrual accounting, with depreciation, there is a decrease in the net position of $28,233 in the water fund and $5,866 in the sewer fund, for a total of $34,099, said Blair. Those losses don't show when using the cash basis of accounting. What that is telling the town, said Blair, is that it's not putting enough money away to cover depreciation or their investment expenses for later on down the road.
Blair said he knows the town recently raised water and sewer rates, and that they may have to look at raising them again in the future.
According to the auditor's Notes to the Financial Statement, most of the town's cash and investments are either in bank or money market accounts, with about $37,000 sitting in a certificate of deposit. Interest rates are really low right now and probably will be for some time, said Blair. Some countries are even talking about charging to have money on deposit.
Also in the notes, looking at the town's custodial credit risk, which addresses what the town will do in the event of a bank failure, Crawford does not have a policy as of Dec. 31. The town has $425,190 on deposit, of which $250,000 is federally insured, with the balance as collateralized under the Colorado Public Deposit Protection Act.
In the statement of revenues for expenditures and changes in fund balances, the ending balance for the general fund was $257,226. The town's normal annual expenditures is about $107,000. That number used to be $125,000 or $130,000, said Blair, so the town is doing a good job of cutting expenses. "So right now have enough for about two years of operating" at a bare-bones minimum, said Blair.
With severance tax and mineral lease revenues associated with mine closures going down, it's hard to know the full losses to the town at this point. Blair said all of the other towns and the school district are also trying to figure out how they're going to make up for the losses.