Tryon’s fund balance drops from 40 to 13 percent over last three fiscal years

Published 10:00 pm Friday, March 3, 2017

TRYON – The Town of Tryon’s fund balance, or rainy day fund, has decreased significantly over the last three fiscal years, according to the latest audit report for year-end 2015-2016.

Tryon Town Council met Feb. 21 and heard from Terry Andersen, with Carland & Andersen Inc. regarding last fiscal year’s audit report.

Andersen said the town’s total general fund balance was $979,400, of which $769,300 is assigned and $210,120, or 13.6 percent is remaining for spending.

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Andersen also noted the fire department was $118,000 over budget last year with the general fund having to transfer that amount to the fire department.

The audit report was for fiscal year 2015-2016, which ended on June 30, 2016.

In comparison, at year-end 2014, Tryon had an available fund balance of $539,638, or 40.2 percent of its general fund expenditures. At year-end 2015, Tryon had an available fund balance of $514,822, or 31.1 percent of its general fund expenditures.

The Bulletin asked the town questions regarding the current audit report with town manager Zach Ollis providing answers this week.

Ollis said in response to a question regarding what the fund balance is currently, that the $210,120 is the unrestricted fund balance.

“Basically this is our fund balance after you take out all the restricted funds,” said Ollis. “This $210,000 is calculated after removing the $185,000 for the streetscape project.”

Ollis said since the actual number of the town’s fund can vary from day to day, it is easiest to estimate the current fund balance at $351,398.55, which includes the $210,000 as of June 30, 2016 plus another $141,398.55 from the sale of the South Trade Street building the town was gifted.

On the fire department budget overage, Ollis responded that the $118,000 transferred from the general fund was used to cover any line item that went over in that department.

“At the end of the year, a total amount was needed to balance the budget due to various expenditures being over,” Ollis said. “It did not cover one specific item but a multitude of overages in various line items.”

The Bulletin also asked if the fire department has an agreement to pay back the general fund for the overage.

Ollis said there is a plan that was put into place before he was hired. He said the fire department owed the town $203,958 at the beginning of fiscal year 2016-2017. The fire department received $20,000 for the sale of a brush truck, according to Ollis, which was put toward the amount owed, leaving $183,958 owed to the town. A new Ford Explorer at the fire department was placed in the administration budget for the administration office to use instead of the fire department, so the town moved the $9,712 payment the fire department had budgeted and put it toward what the fire department owed the town, Ollis said. Including that and $249 in surplus equipment, the fire department is currently left with a debt to the general fund of $173,997, according to Olllis.

“The original plan was to put $32,000 a year back to repay the town,” Ollis said. “At this current rate, it will take six years to repay the town. How we rebuild the budget may affect the speed at which the repayment is finished.”

Part of the fire department budget that was over was in the capital outlay line item, which was over budget $38,328.88, according to the audit report. Ollis said the overage was for a number of items, but most charges related to the improvements made at the fire department last year. Some of those improvements included renovating the upstairs.

The detailed expenditures for the capital outlay budget of the fire department included $6,981 in supplies, materials; $5,993.36 in travel, schools; $7,664.52 in building grounds and $17,690 in equipment, according to Ollis.

Andersen said the fire department’s revenue was more last year than the previous year because of an increase in tax revenue. Last year Tryon received a 1.5 percent tax increase for the fire department, which is decided by the Polk County Board of Commissioners. In the current fiscal year Tryon’s fire department did not receive a tax increase.

In reporting on the audit at the Feb. 21 town council meeting, Andersen also noted material weaknesses and deficiencies, including the town’s period-end financial reporting process; a lack of control over the town’s credit cards; the fact that Tryon does only one budget amendment at the end of the year; interfund transfers; general fund and operating transfers and internal control and segregation of duties.

One of the main issues mentioned in a letter to the town from the auditors was transfers the town makes from its general fund balance to cover other departments.

“Over the last several years, the general fund of the town has been required to make operating tranfers to other funds in order to eliminate deficit fund balance or net position amounts,” states the letter to the town.

The letter notes the $118,641 transfer to the fire department and another deficit in the sanitation fund where the general fund had to transfer $21,846 to the sanitation department.

“Without continued increases in revenue, combined with adequate spending controls, these funds cannot continue to sustain operations and also build adequate reserves for future operations,” states the letter. “The general fund is not in position, and should not be considered as a continuing resource, to subsidize the operations of these other funds. As of June 30, 2016, the amount of unassigned fund balance in the general fund stands at $210,120, the equivalent of 13.6 percent of general fund expenditures for the 2015-2016 fiscal year. We recommend that consideration be given to potential increases to the town’s ad valorem tax rate applicable to the fire department fund and to continue to review and implement changes to the rate structure for the sanitation fund in order to enable the town to maintain and build the fund balance/net position of these funds.”

The town was also noted for only having one budget amendment during the year, which occurred during the close of the year.

“We recommend that consideration be given to reviewing and amending the budget as necessary, on a more regular basis, so that when the pre-audit certification is completed the finance officer is certifying that budgeted funds have been appropriated and are available for a particular expense item before the disbursement is made,” states the letter. “This will provide additional assurance to management and the town council that the town is remaining in compliance with the council adopted budget documents as specified by the North Carolina General Statutes.”

The Bulletin asked the town why it only does one large budget amendment at the end of the year and if the town plans to change that practice in the future.

Ollis said he cannot speak to why the town has done only one budget amendment per year in the past. Ollis was hired as the town’s new manager in August 2016, after the end of last fiscal year. He will submit his first budget proposal in the next few months as the current fiscal year will end on June 30, 2017.

“I have actively held discussions with staff as to the changes we plan to implement,” Ollis said. “We plan to perform budget amendments as needed to reflect the town’s finances correctly. We have already started to practice this policy by performing a budget amendment at the January board meeting.”

On credit cards, the auditors said they noted a general lack of controls over the use of the town’s credit cards, including a lack of an adequate policy covering the types of purchases that are authorized to be made by town employees in possession of credit cards.

“Policies should be established dictating which town employees are authorized to possess the credit cards, what types of expenditures are authorized to be made with the credit cards, and an approval process whereby a staff member, other than the individual making the charge, is consistently reviewing and approving the items being charged to the town’s credit cards,” the letter says.

Ollis said the town currently only has two employees who have town credit cards, himself and the police chief.

“If an employee needs a credit card, we can allow them to use it,” Ollis said. “There will be changes going forward. The town is working on a credit card policy for the future.”

The Bulletin also asked what the town plans to do to increase its fund balance to a healthy level, asking if a tax increase is on the horizon for either the general fund or the fire department. The state requires that a local government keep a minimum of an eight percent fund balance but most local governments keep at least a 20 percent fund balance. The Town of Columbus, in comparison had a 57.48 percent fund balance for fiscal year ending 2016 and the last reported fund balance for the City of Saluda was for fiscal year ending 2015, which was 55.54 percent. Polk County’s fund balance as of June 30, 2016, was 31.1 percent.

Ollis said one of the main goals for the town is to increase its fund balance to a healthy level.

“We will start by making adjustments to our budget that implement strategic cuts,” Ollis said. “These cuts will not affect our current level of high quality service. We are looking to become more efficient in how we work by focusing our resources on prioritized projects. We also plan to stop outsourcing as many things as possible.

“I cannot speak to what role taxes will play in this year’s budget process yet. I think the board has been very vocal both publicly and privately that taxes are always a last resort. We will do everything we can to avoid tax discussions but we will only know when we get deep into building the budget.”

Town of Tryon 2016 Audit Letters

Town of Tryon 2016 Audit