Auditors find city's financials to be in order

(11/10) At the November Council meeting, the town received a briefing by the Town’s auditor in the audit city's financial accounts. Overall, the auditor found the town's financials to be in order.

The largest portion of the town's assets are in the from of capital assets (e.g., land, buildings, machinery, equipment, infrastructure). Of the remaining Town assets, $14,488,883 is accounted for in cash and cash equivalents (including certificates of deposit), $1,930,233 in receivables, $157,038 in inventory, and $27,268 in prepaid expenses.

Town income and expenses are tracked in two accounts, one for Governmental activities, usually referred to as the General Fund, which covers routine day-to-day expenses like staff salaries, insurance, road and park maintenance, &c and the Enterprise fund, which covers income and expenses related to the operation of the Town's water system.

Total revenue flowing into the Governmental Activities Fund last year was $5,243,426, an increase of $907,126 over last year. Total expenses were $5,521,756, an increase of $1,221,952 over last year. At the end of the town's fiscal year, the Governmental Activities Fund had $17,644,466 sitting in it, and an increase of $566,921 over last year's balance.

The largest source of revenue for the Governmental fund where state and local income tax distributions ($2,606,096), followed by property taxes ($1,405,016), and ARP grants ($349,714).

Key routine expenses included staff salaries and insurance ($551,802), Police ($1,538,559), road and maintenance ($1,003,480), trash collection ($426,432) and parks and recreation ($255,049).

While expenses are fairly stable, ongoing discussions regarding the possibility of offering 24/7 police protection to Town residents will result in an increase in costs in future years that the Town will have to budget for. The cost was $1,498,762 for five resident troopers in FY 2023, which represented a 23% increase over the FY 2022 cost.

(To date, the town has been awarded $5.1 million in ARPA funds in two installments, the first early in fiscal year 2022 and the second in September 2022. Of this amount the town has spent a total of $2 million with $3.1 million remaining unspent at this time. The water fund benefited greatly from ARPA funding in the total of $1.5 million.

The property tax income is based upon a tax rate of 14¢ per $100 of assessed property value for FY 2023, consistent with prior years. The Town continues to operate with one of the lowest real estate tax rates in the State of Maryland.)

The Town’s Enterprise Fund, what is associated with the costs of operating the Town's wate system, increased by $1,678,858 to $6,77,899.

The principle source of revenue for the Enterprise fund last year was quarterly water payments of $1,817,740 and $1,531,556 in ARP grant funds. The principle expense for the fund was the cost of operating the water plant at $1,701,943. At the end of the town's fiscal year, the Enterprise Fund had $6,779,898 sitting in it, an increase of $503,718 over last year's balance.

However the audit noted that the water system operating revenues were down again this year by $142,071, mostly as a result of a $144,954 decrease in connection fees as there was less construction in the current year, compared to prior year. With no plans for significant construction projects requiring water service, they told the Council the Town should expect very little revenue from connection fees going forward.

The town also has a pension liability in the amount of $882,727 that will eventually have to be paid.

According to the auditor, over time, increases or decreases in fund balances serves as a useful indicator of whether the financial position of Walkersville is improving or deteriorating.

The auditor noted that: "It is the desired goal of the Town to continue to operate conservatively and manage resources responsibly, but begin to spend some surplus funds. With infrastructure upgrades needed in the form of roadways and water main projects, this goal will be tested in the coming years."