The City received a very positive audit report from Malcolm E. “Mac” Neel with Alexander Thompson Arnold (ATA) at Tuesday’s City commission meeting. An increased fund balance, an upgraded credit rating and a substantial increase in revenue prompted Neel to describe the City’s financial position as “impressive” in nearly every aspect.
The audit report and risk assessment conducted by ATA took place on June 30 and included analyzation of controls, documentation through flow charts and determining the audit risk.
“Anymore with the new risk assessment standards, we have to look at the City as a whole — not just the books, so we look at external factors that could impact the financial statements,” Neel said.
The audit risk assessment show how well officials monitor the operations of the City, and Neel called that the most important component of the risk assessment.
Financial highlights for the year included a net position that increased by $391,744 — from $98.4 million in June 2018 to almost $98.8 million in June 2019.
The City’s total assets and deferred outflows totaled $374 million and its total liabilities and deferred inflows totaled $276 million for the year.
“You are in a very healthy position,” Neel told commissioners.
What Neel called “the big issue” that every local government is currently dealing with was the net pension liability numbers, and the City of Owensboro is no different, he said. The City’s net pension liability increased from $70.8 million in 2018 to $75.5 million in 2019.
“Those are going to be challenges. I think we’re all aware of what’s been going on in Frankfort, and that’s going to be a challenge for municipalities for the next few years,” he said.
The breakdown of the City’s government-wide financial statements with the Riverport and OMU combined, the City’s total assets and deferred outflows total $965 million and total liabilities and deferred inflows of $615 million. The City’s net position of over $316 million was what Neel called “very strong.”
Other financial highlights included a $5.7 million increase in the City’s fund balance over the 2019 fiscal year, up from the $2.4 million increase in 2018.
Citywide occupational and net profits taxes increased by $7 million, and the ending fund balance was $16.9 million, representing 117.5 days of expenditures.
“The Government Finance Association recommends you keep at least 60 days. Other peoples’ rule of thumb is 90 days so, either way, you’re in a very healthy position,” Neel said.
Neel also mentioned the City’s credit rating being upgraded from A2 to A1, which he called “very impressive.”
In 2015, there was $16.5 million in the City’s general fund and in 2019, there was $25.3 million in the general fund.
“That’s a primary factor in cost control and ensuring you had a healthy increase of your fund balance,” Neel said.
Neel revealed bar graphs that showed the City operating at a deficit of $2.8 million in their fund balance from 2015 to 2017. In 2018, the City saw a $2.4 million increase in their fund balance and operated at a fund balance of $5.7 million in 2019.
“That’s very impressive and good to see,” Neel said, adding that the City’s fund balance has nearly doubled from 2017 to 2019, increasing from $8.9 million to $16.9 million over two years’ time.
The net pension liability issue affecting all municipalities showed Owensboro’s numbers had increased from $41.6 million in 2015 to $75.7 million in 2019.
“That’s going to be a challenge for everybody, and that’s going to probably have to come from your resources,” Neel said.
City Manager Nate Pagan commended the City’s Director of Finance and Support Services Angela Hamric and the City’s Deputy Director of Finance Dane Galloway for their efforts in monitoring the City’s finances.
“As Mac reported, we had a wonderful fiscal year last year,” Pagan said. “We had a positive contribution to the fund balance that was substantial. Our revenue was through the roof, and our net profit tax in particular was up 37 percent above budget.”
