BERLIN — With revenues up and expenditures down, Berlin received a positive annual audit this week from the independent finance group PKS and Company.
While there are some areas that bear watching, including a large slice of town debt, PKS auditors agreed that Berlin is in a better spot than many other American small towns.
CPA Mike Kleger of PKS noted to the Mayor and Council that Berlin’s general fund balance has steadily increased over the last three years in spite of a nationwide recession.
“I think it is a very, very healthy fund balance,” he said..
The actual total revenue Berlin received this year was $5,489,156, up roughly $280,000 from last year’s $5,206,876. As always, the majority of revenue came from property taxes, which constituted 62 percent of the money coming into Berlin. The town also saw increases in several other revenue categories including licenses and permits and service charges.
The only two revenue categories to bring in less this year than last were intergovernmental revenues and other taxes besides property, which dipped about $90,000 and $1,500, respectively.
On the expenditures side, Berlin spent a total of $4,849,770, down more than $930,000 from last year’s $5,781,529. The biggest cost savings came from the capital outlay category, with the town spending over $1.25 million less there than last year. The windfall the town saw through drastically lower capital outlay costs was mitigated somewhat by slight increases in general government, public works, planning and community development, recreation and parks and debt service spending.
Just like most years, public safety was the largest area of expenditures, responsible for 38 percent of the money spent by Berlin, followed by general government at 24 percent.
All in all, the town’s general fund has climbed about $200,000 from its 2011 level. The year prior to that also saw a similar increase to the fund. It currently stands at $7,513,853 with $6,768,257 unassigned and available.
“You have $6.7 million in the unreserved fund balance which is more than one and a half times your budgeted revenue,” Kleger told the council, “so in comparison to other similar sized towns, that’s a hefty fund balance to have.”
Towns of Berlin’s size are usually lucky to have 120 or 130 percent of their annual revenue squirreled away, according to Kleger, so Berlin’s nearly 150 percent unassigned general fund is impressive. However, he pointed out that the town’s rainy day fund is balanced by a large chunk of debt.
“On the flipside of that, you have a significant amount of debt,” said Kleger.
As of June 30, Berlin had an outstanding total debt of $19,917,323 between its water, sewer, and electric funds. That’s up about $2.3 million from 2011’s $17,650,304. The annual cost of paying that debt amounts to $1,244,145 between principal and interest, or about 15 percent of the operating budget.
Kleger underlined large costs like Berlin’s recent upgrade of its waste water plant and the operation of its independent electric utility as measurable sources of debt. Even with that debt, however, Kleger still felt Berlin struck a good balance with steady revenue and limited expenditures.
Much of the debt attached to Berlin, according to Mayor Gee Williams, is connected to long-term investments designed to improve the town’s infrastructure and be cost effective heading into the future.
“We had to make a pretty big investment in the waste water treatment facility … There’s a difference between spending money and investing money,” he said.
Williams used the growing general fund as proof that the council is being responsible with the town’s pocketbook during a period when other municipalities are simply hoping to survive.
“Revenue has climbed for three consecutive years in the general fund … during these times I think it is very good news,” he said.
The council agreed with Councilman Troy Purnell labeling it the best audit report that he had ever heard. Unanimous praise was leveled at Berlin’s finance department, both by the council and by PKS.
CPA Leslie Michalik, one of the town’s auditors, thanked the department for its cooperation, organization and professionalism.
“It looks like you really have a good team in your accounting department under Lynn [Musgrave’s] direction, she said.
Williams, on behalf of the town, agreed and said that the council was “very proud of the work the finance department has done and continues to do.” Besides finance, the mayor also distributed laurels to all of the town’s department heads and employees for making responsible cuts to keep expenditures low, and to Town Administrator Tony Carson for being involved in day-to-day operations.