Serving Northern St. Louis County, Minnesota

Auditor cites growing deficits

Other issues raised in annual financial report

Marshall Helmberger
Posted 6/13/18

TOWER— The city’s auditor offered a mixed report on the city of Tower’s 2017 finances on Monday. While noting that the financial information was complete enough to allow for an unmodified …

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Auditor cites growing deficits

Other issues raised in annual financial report

Posted

TOWER— The city’s auditor offered a mixed report on the city of Tower’s 2017 finances on Monday. While noting that the financial information was complete enough to allow for an unmodified opinion, Greg Knutson of Walker, Giroux, and Hahne, cited growing deficits in several city accounts and flagged investments in the Gunderson Trust that are not authorized by state law.

The city also lost nearly $50,000 in its water and sewer fund, as revenues failed to keep pace with expenditures.

At the same time, the city’s general fund balance dipped by $81,000, to $805,004. Virtually all of that fund balance was the result of the accumulated $810,000 in the city’s ambulance account. “The ambulance is basically carrying the general fund,” said Knutson.

The city’s main general fund account had a fund balance of just $1,063, according to Knutson.

The forestry fund had a positive balance of $148,000 as of year-end, while the Hoodoo Point Campground account was nearly $200,000 in deficit, added Knutson.

Across all governmental funds, the city’s financial position declined by $197,000, including growing deficits in the city’s capital projects and the historic harbor account. Nearly $50,000 of that decline, however, is due to an increased number of loans from the city’s commercial rehabilitation account, which ebbs and flows depending on requests.

Knutson repeated his push for the city to take steps to eliminate deficits in capital project accounts, which is a pitch he’s made in other recent years, with only minimal effect.

In his management letter, Knutson addressed issues like inadequate segregation of financial duties, a common problem with small governmental bodies, and one that requires additional oversight by the city council.

Knutson also cited a number of other issues that the audit had revealed, including untimely expenditures on an airport grant, inadequate documentation of receipts from area townships for the ambulance fund and changes in an IRRRB grant. Knutson also noted that the Gunderson Trust had two investments in annuities, which he said are not authorized by state law. “And one of these annuities still had the previous secretary listed as the annuitant,” said Knutson. “We recommend the city invest funds from the annuities in investments authorized by state statutes.”

The city council had no questions for Knutson on the audit.

In other action, the city council:

 Received a drinking water quality report from the Department of Health, which shows the trihalomethane and haloacetic acid levels continuing to improve. The levels are now well within safe limits, according to the MDH.

 Approved a change order for Low Impact Excavating totaling $6,361 for additional work on the marina dock demolition.

 Approved a pay estimate for Low Impact for $76,305 for the marina work.

 Approved a change order adding $2,594 to the cost of the Hoodoo Point sewer project. The additional cost was incurred to purchase electrical wire and eight electrical pedestals for campsites. The city will need to hire an electrician to do the installation. Part of the expense is being deducted from the original contract with Utility Systems of America. City engineer Jason Chopp said the project will still likely come in below estimate because the contractor did not encounter any ledge rock in the construction. The contract had included $17,500 in allowances for the removal of ledge rock, which was incorporated into a second change order approved by the council.

 Approved pay estimate #4 for Utility Systems of America, totaling $79,489.

 Approved a final pay estimate totaling $8,708 for hangar apron work at the Tower Airport by KGM. The project dates back to September 2016.

 Approved an airport engineering agreement with SEH totaling $15,000 for construction administration associated with the installation of a sign and a 50-foot segment of an airport fence, along with relocation of the airport’s wind sock. The city had previously approved $15,000 for design work on the project.

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Lee Peterson

The article says: "While noting that the financial information was complete enough to allow for an unmodified opinion, Greg Knutson of Walker, Giroux, and Hahne. cited growing deficits in several city accounts..."

I'm wondering if the "financial information" is now complete enough to verify the astonishingly low balance of $1,063 in the general fund? And, how much is left in the water and sewer fund? The latter is an important number, considering the recent reporting of problems of not enough capacity to treat city wastewater and this Spring's apparently emergency wastewater discharges from the treatment ponds.

Monday, June 18, 2018