Phil Campbell gets ‘clean opinion’ on audit

PHIL CAMPBELL — Certified public accountant Don Wallace told town council members on Jan. 20 there were no problems with this year’s audit.

“This is what we call a clean opinion,” Wallace told the council. “We had no disagreements with management, no uncorrected misstatements and no significant findings to report.”

Wallace said the town reported total revenues of $1,086,704 for the most recent fiscal year with total expenses (with depreciation) of about $1,155,919. He said the roughly $69,000 decrease largely reflected depreciation and recent equipment purchases.

“Depreciation alone is around $235,000 of that,” Wallace said. “You’ve added several vehicles and pieces of equipment in recent years, and that factors into those numbers.”

At the end of the fiscal year, the town reported about $3,868,000 in assets and $231,000 in liabilities. Wallace said more than half of the reported liabilities, about $118,000, related to pension reporting requirements that municipalities must show but cannot control.

“So really, your actual payables are a little over $100,000,” Wallace said.

Wallace also reviewed the town’s general fund activity, which he said is where most budgeting and day-to-day operations occur. He said the town ended the year with about $541,000 in general fund reserves, representing roughly six months of operating expenses.

Two major vehicle purchases for the street and sanitation departments accounted for much of the year’s spending, he said.

The audit showed the town carried less than $22,000 in outstanding debt at the end of the fiscal year, primarily related to a tractor and vehicle loan. Wallace said the town reported no significant long-term debt.

Total cash balances across all accounts were about $733,000 at year’s end. Wallace said although some accounts exceed standard Federal Deposit Insurance Corporation limits, public funds remain protected under state law through pledged collateral requirements for public deposits.

Wallace reported one compliance issue involving a fire department bank account that had not been included in the town’s SAFE letter. SAFE stands for Security for Alabama Funds Enhancement, a state banking program that requires municipalities to list all official accounts, so public funds are properly secured and insured.

He said the account had been mistakenly left off for several years because of a classification error.

“It’s a compliance issue, but not a misuse-of-funds issue,” Wallace said. “It wasn’t a large amount of money, but it does need to be corrected.”

Wallace said the town clerk had already begun addressing the issue.

As part of the audit, Wallace said his office reviewed disbursements, receipts and payroll tax reporting.

“Payroll taxes are an area where governments and businesses can get into trouble quickly if there are errors,” Wallace said. “We didn’t find any problems there.”

Wallace said sales and use tax revenue continued to perform well during the fiscal year. He said the town collected about $84,999 in simplified sellers use tax revenue, an increase of roughly 13%.

“That revenue source has been strong statewide,” Wallace said, noting a pending lawsuit filed by other municipalities could affect future collections.

Wallace also addressed funds donated to the town for work related to deteriorated buildings in the downtown business district. He said the town recorded the money as unearned revenue because the project has not moved forward, and the funds may need to be returned to donors.

“If the project moves forward, those funds can be reclassified and recognized appropriately,” Wallace said.

License and franchise fee revenues increased during the year after the town began collecting those fees directly rather than through a third party. Wallace said the category rose by about 15%.

“You didn’t lose revenue by making the change,” he said.

Wallace also discussed the number of separate bank accounts maintained by the town. He said some accounts must remain separate because state law restricts how certain funds may be spent, but others are not legally required to be separate.

“I don’t see a reason to maintain multiple accounts for relatively small amounts of revenue,” Wallace said. “It creates more administrative work and makes it harder to see the town’s overall financial picture.”

He recommended consolidating accounts where possible, including accounts related to sales tax, property funds, and the town’s annual festival.

“Many towns don’t maintain a separate festival account,” Wallace said. “They track revenue and expenses within regular accounts and still maintain clear records.”

Wallace said the audit document can also serve as a reference for budgeting and financial planning if the town moves toward a more formal budget process.

“You can use this as a starting point,” Wallace said. “It gives you a clear picture of how money comes in and how it goes out.”