2014 audit showing ‘pretty strong balance sheet’
Lansdale’s financial audit for 2014 is nearly done, and the news appears to be positive.
Auditor Ed Furman of Maillie LLP gave borough council an update on how the annual financial report his firm is preparing looks so far, and the news is largely good.
“Overall, it’s a pretty strong balance sheet that you wound up finishing 2014 with,” Furman said.
Total net assets of the borough add up to roughly $75 million, and total borough debt after three $10 million bond bor-
rowings since 2010 adds up to roughly one-third of the total assets. Capital assets “did have a significant jump in 2014, mainly with the building that’s going on” of the new borough municipal complex and police station, Furman said.
“The assets in the government funds, which are the main borough assets, have about 80 percent life left in them, so they’re relatively young assets,” he said.
Borough Electric and Sewer department assets, on the other hand, tend to be much older and have already largely been depreciated, with only 30 percent of their useful life left, according to the auditor.
“What that indicates is additional work and projects are going to be needed” for electric and sewer assets, he said. In recent years council has approved several large projects along those lines, including replacement of old electric transformers and upgrades to the capacity of its wastewater treatment plant.
Accounts payable are largely comparable to numbers over the past four years, and bond funds included in the audit reflect the $10 million borrowed last year for those electric and wastewater plant upgrades, he said.
Starting in the 2015 audit which will be developed next year, pension liabilities will be listed differently in the final audit, and at the end of 2014 the borough showed a roughly $3.2 million unfunded police pension liability, Furman told council — a liability that is relatively small compared to total borough assets.
“Recording a $3 million liability against that ($75 million) still keeps a strong net equity balance,” he said, and defined contribution plans for borough employees have also helped keep those expenses relatively low.
“We handle about 25 or so other municipalities, and your police (pension) liabil-
ity is probably on the lower end of that whole population,” Furman said.
Other post-employment benefits, largely medical benefits offered to borough police officers, are increasing by roughly $250,000 per year, Furman told council, and described in a more detailed presentation to council’s administration and finance committee.
“On the positive side, you’re one of few municipalities that has actually put away $2.4 million into a trust fund to start funding that going forward,” he said.
The year-end general fund balance for Lansdale was roughly $9.7 million, which Furman said is down slightly from 2013, but roughly 20 percent of general fund revenues are held in reserve and unassigned — “basically, you’re covering almost three months of revenues with accumulated surplus in the general fund.”
Bond rating agencies tend to look for 8 to 10 percent of the fund balance to be unassigned in case of emergencies, and national best practices put that ratio at 20 percent; Lansdale’s was 22 percent at the end of last year.
“The key point is you’ve got a solid full-accrual balance sheet at the end of 2014, and a very solid general fund fund balance going into 2015,” said Furman.
A draft version of the audit was presented to council and its committee Wednes-
day, with the final version likely coming later this month after final information is provided by finance department staff. As in past years, the final audit will be slightly larger than typical financial statements, because of the extra length needed to produce a Comprehensive Annual Financial Report which is then submitted to the federal Government Finance Officers’ Association. Lansdale’s finance department has been honored by GFOA for its clean audits and clear financial reporting for the past 20 years, and Furman said only about two dozen municipalities in Pennsylvania apply each year, thus making that recognition “a significant asset for the borough.”
Council President Leon Angelichio said the audit showed the borough to be in a “very, very good financial position - we are basically top-tier as far as financials are concerned.” Borough Manager Jake Ziegler echoed that praise, saying the audit showed “the borough’s finances are in good shape, and the projections for the future are also good.”
Lansdale’s borough council next meets at 7 p.m. on June 17 at the North Penn School District’s Educational Service Center, 401 Hancock St. For more information or meeting agendas and materials visit www. Lansdale.org or follow @ LansdalePA on Twitter.