Auditor says Hillsville’s rainy day fund growing

By David Broyles - dbroyles@thecarrollnews.com
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An auditor’s report at the Town of Hillsville’s January 22 regular meeting gave the town a good review and said it is making progress on growing its “rainy day fund.”

“The first document is a letter, by itself. It is a reverse engagement letter to let you know what we were engaged to do and if there were any difficulties throughout the audit,” said Juan Garcia of Hicok, Fern, Brown & Garcia as he opened the presentation on the 2016-2017 Audit Report. “Basically this was a form letter. There are no difficulties we wish to report. Everything is clean from that point of view.”

Garcia voiced approval of the job the Town has been doing with its internal controls and compliance with “yellow book” or governmental auditing standards, giving another clean or unqualified opinion. Vice Mayor Edward Terry asked Garcia about “significant deficiencies” in previous years.

“We might have had significant deficiencies within a number of years but we haven’t had that in the last three years that I know of. There might have been some material adjustments we had to make for accounts payable and accounts receivable. This year we found one instance of an accounts payable that needed to be recorded and reported it to your consultant who does an excellent job,” Garcia said. “She may need to expand that a few more days and look for this specific one. It’s one you get every year. It always comes in September and October. So we knew to look for it but in the normal testing your consultant does, it just didn’t get picked up. We have informed her of that and it was the only finding we did have. It was a control deficiency. A separate letter that would not affect the financial statements or a reader’s opinion of these statements. Everything looked great this year.”

Garcia told Council that Hillsville’s balance sheet for general activities shows a little less than $6.1 million in assets. Business activities are a little more than $10.3 million in assets (a total of $16.4 million in assets). He said deferred outflows related to pensions amounts to ab0ut $290,000, with liabilities for general government about $2.17 million, and on business activities $7.7 million for a total of approximately $9.9 million.

“Then you have some deferred inflows associated with your pension and deferred tax. Virginia accesses tax on the first day of the year. You have to show this is a receivable and back it out as a referral. That’s why that $713,000 is there,” Garcia said. “Your governmental activities have $3.326 million, and assets in excess of liabilities your business activities have $2.65 million in excess, which comes to approximately $6 million in excess of your liabilities. Of that, $2.7 million is unrestricted. The remainder is restricted for future debt pay down so overall the Town is pretty healthy to have about half of its net assets in unrestricted money. That is rainy day fund. That is good.”

He said Hillsville’s total assets have increased from 2013 to 2017 (with a decrease in capital assets related to depreciation). Garcia noted Hillsville had a general increase in its net position every year except for 2015-2016, when it had to report liabilities per the Governmental Accounting Standards Board (GASB 68) pension liability reporting. (The intent of GASB 68 is governments recognize unfunded pension obligations when measuring overall fiscal position for financial transparency and accuracy.)

“Mostly, there hasn’t been much change in everything. You’ll see a dip in your net position but it has came back up since that dip. After the GASB 68 liability had to be recorded you started up 5.737 and now your are at 5.977 as an increase. Some highlights on where the Town of Hillsille’s revenue is increasing, you’ve had a substantial increase in your meal’s and lodging tax in the last 10 years,” said Garcia. “The meal’s tax has increased in relation to 2008 (by) 151 percent. Lodging has increased 194 percent. Your property taxes have increased from that time 21 percent but that is total for 10 years, which averages to about a 2 percent increase. So, that tax being assessed to the residents is actually being increased less than inflation. That is a positive sign you are not highly taxing the residents. Your charges for service have increased substantially over the last three years. In 2015 it was approximately $45,000. It increased in 2016 to $144,000 and this year you had $431,000. “

Garcia said his firm had noticed over the past few years an increase in property tax collections. He reported in 2013 collections were about $650,000. Currently, collections are running $719,000.

“So your collections have increased substantially due to the DMV stops and collection procedures that your staff is doing. Everything is looking good. When you are collecting 98 to 99 percent of your tax that says a positive thing about how the town is run,” Garcia said. “The next graph noted delinquent taxes from 2016 to 2017 have sharply decreased and your penalties and interest have increased. That means people who are late are being assessed these penalties and then they are going through the collection process and it is being collected. In the last few years we have noticed the Town is working and obtaining more capital grants from outside sources. So, in 2015 you have zero with an average of those five years being a thousand to two thousand. Over the last two years you’ve had an average of $50,000 in those grants.”

According to Garcia, charges for sewer and water have remained “in the same neighborhood” with no sharp increases over the last five years. He said using one of four cities used for comparison, even though population is higher in Bluefield. (about double Hillsville’s) the services are similar. Hillsville’s assets are about $16.4 million with Bluefield at $15.9 million. Hillsville has $8.8 million in liabilities; Bluefield has $7 million. Net assets: $6 million for Hillsville; Bluefield about $7.6 million. Total Revenue is $4.9 million; total expenses: $4.3 million. (Hillsville’s increase was a $584,000 increase while Bluefield had $7.2 million in revenues and $7.147 million in expenses, or $62,000 revenues in excess of expenses.

“The Town of Hillsville is growing their assets better than Bluefield for their rainy day fund. This speaks directly on management and how the town is ran,” Garcia said.

David Broyles may be reached at 276-779-4013 or on Twitter@CarrollNewsDave.

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By David Broyles

dbroyles@thecarrollnews.com