Auditor gives Nevis a clean bill of health
Jon Roscoe with Miller McDonald, Inc. said the city's 2021 financial statements were fairly reported, requiring a few adjustments, with enough cash reserves to operate for "a lot of months."
The Nevis City Council on Monday approved an audit report on the city’s 2021 finances.
Jon Roscoe with Miller McDonald, Inc. of Bemidji reported that the city received an “unmodified” opinion on its financial statements, which according to the firm’s written report means the city’s financial statements “present fairly, in all material respects, the cash financial position of each major fund and the aggregate remaining fund information … as of Dec. 31, 2021,” as well as the city’s revenues and expenditures for that year.
Meantime, Roscoe reported, the city also received an “adverse opinion on U.S. generally accepted accounting principles,” due to the office of the state auditor permitting smaller cities to report their finances on a cash basis.
Roscoe said the auditors had no difficulties working with city staff. He noted some material adjustments had to be made, mainly relating to investments, the Nevis Trailblazers custodial fund balance and management fees that were double-counted in the water fund instead of split between water and sewer.
He noted that the sewer fund had an increase in disbursements due to the city paying off its sewer debt. The report shows the city’s actual disbursements exceeded budgeted disbursements by $85,923 in 2021.
The city had $92,000 of remaining debt at the end of the year, Roscoe said. The report noted that in 2022, the city is scheduled to pay $19,633 in bond principal plus interest as well as $13,786 in lease principal plus interest.
The report quotes the city’s net pension liability at $97,000, but Roscoe said this does not represent a cash liability. The city contributes 7.5% of covered members’ wages toward the Public Employees Retirement Association’s coordinated plan.
Roscoe noted an increasing trend in the city’s cash position during the past few years, other than paying off its sewer debt last year.
“Typically, your disbursements are exceeding your cash,” he said, regarding five-year trends in the general fund, adding that the city balances its budget with transfers from the liquor store fund. “This year, the receipts did exceed the disbursements, but that’s only because of the proceeds for the street project.”
Roscoe explained that variances between budget and actual during 2021 were due to additional revenues from a federal COVID-19 relief grant and a Small Cities Assistance grant from the state for the road project. On the disbursement side, the city hadn’t budgeted for the auditors’ fees, resulting in a negative variance of almost $16,000.
Also due to the sewer debt being paid off, the audit showed a change in the revenue allocations between the water and sewer funds. A cash decrease in the liquor fund was due to a $35,000 transfer to the general fund, plus an increase in payroll costs.
Regarding the city’s overall financial position – comparing reserves to operating costs – Roscoe said the city has “a lot of months of operation” in cash reserves.
“All your funds are sitting in a good state,” he said. “Both the water and sewer funds have large balances. Unfortunately, they have large costs, though, when needed, so that does eat that up.
“It’s not unusual to have that in a reserve, versus more of your two- to five-(year) operating. It’s just more planning how they’re gonna be used and if it does cover your projects on a five- to 10-year basis.”
Council member Sue Gray made a motion to approve the audit report, and it passed unanimously.