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Park Rapids audit shows healthy fund balance

The Park Rapids 2010 audit showed a healthy fund balance but an increased tax rate for the city.

Steve Wischmann, with Kern, DeWenter, Viere, Ltd., presented the audit at Tuesday's City Council meeting.

The city had repeat findings that are all common with small cities, Wischmann said.

The main finding shows a lack of internal control in regard to financial statement preparation. The city does not have an internal control system designed to provide for the preparation of the financial statements being audited.

"This circumstance is not unusual in a city of your size," according to the audit report.

Park Rapids also has a lack of segregation of accounting duties due to a limited number of office employees. A complete segregation of accounting duties is impractical to correct, however, the report states.

In the financial analysis portion of the audit, revenues decreased slightly between 2009 and 2010. The city had $2,634,811 in revenues in 2009 and $2,550,136 in 2010, a 3.2 percent decrease.

Taxes increased $241,316 due to an increase in the levy and collecting more delinquent taxes than anticipated. However, intergovernmental revenue decreased $215,879 due to decreases in Local Government Aid and Market Value Credit due to unallotment. Charges for services also decreased $108,930.

General fund expenditures have remained consistent, increasing just $7,095 from 2006 to 2010. Expenditures increased 3.8 percent, from $2,289,407 in 2009 to $2,376,488 in 2010.

Overall, expenditures in 2010 were under budget by $143,162, shown across all departments in the city.

The city's general fund balance increased to $1,606,529 in 2010. This represents about eight months of expenditures, Wischmann said.

The State Auditor has issued a statement of position recommending cities maintain an unreserved fund balance between 35 and 50 percent of fund operating revenues or no less than five months of operating expenditures.

Although Park Rapids has a higher fund balance, Wischmann said he applauded the city, especially because of the economic uncertainty in the state.

The city's tax capacity has increased by 32.7 percent between 2006 and 2010 from $2,648,939 to $3,514,711 but decreased between 2009 and 2010. Over the same five year time frame the city's certified levy increased from $1,450,468 to $1,983,127, or 36.7 percent.

As a result, the city's tax rate has increased from 47.86 percent in 2009 to 56.42 percent in 2010.

Compared to other cities, Wischmann said Park Rapids is doing well and has a much healthier fund balance.

"You're right up at the top," Wischmann said in comparing Park Rapids to other cities.

Anna Erickson
Anna Erickson is editor of the Wadena Pioneer Journal.
(218) 631-2561