City of Haleyville receives audit report

HALEYVILLE   -  News came to city leaders regarding the status of the city’s finances, in an audit report, showing assets exceeded liabilities by $10,245,669.
The audit cited several reasons for this figure, such as  road projects as well as debt related to the Health Care Authority of Haleyville and Winston County, and the city issuing general obligation warrants to the Haleyville City Board of Education.
The audit report--presented to Mayor Ken Sunseri and members of the city council by Jennifer M. Brinley, CPA with Sparks CPA Firm of Florence--showed the largest portion of the city’s net position reflectd its investment in capital assets, including  roads, land, buildings, mobile equipment and furniture and equipment.
 

Brinley reported two findings from the audit, one being a carryover from the previous year regarding purchase orders.
Brinley noted she realized that some city departments are having a harder time being able to use those purchase orders.
“Next year, I believe we’re going to test that in a way, that helps pinpoint which area there is a weakness, so it can be better addressed and improved,” Brinley stated.
Mayor Sunseri noted that city department heads are required to do a purchase order on any purchase over $500.
“What they’re saying is the city clerk is responsible for ensuring that takes place,” Sunseri said. “Part of the problem is some of the department heads are coming in after they have made a purchase to do their purchase order.
“Part of that is because at that time they didn’t know the exact cost,” Sunseri stated.
The remedy this situation, each department head is responsible for their own purchase orders, Sunseri continued to explain.
“The city clerk is no longer responsible for them to ensure they have a purchase order,” Sunseri said. “So each department head will be notified when they do a purchase order, or when they fail to do a purchase order, so we won’t have that problem again.”
The second finding from the audit was the city holding onto cash too long, according to Brinley. “It wasn’t a lot of money, but it just showed up....so it’s included as a finding,” she said.
“We do suggest deposits every single day of money,” said Brinley, “just to make sure everything  is accounted for, even if it’s just only $10.
“Those are the only two findings,” Brinley noted
Mayor Sunseri responded the city has been required to make three deposits a week, on Monday, Wednesday and Friday.
“The problem is we may only have $5, $10 to deposit or we may have $2,000 to deposit,” the mayor said. “We never know on a daily basis what we are going to have to deposit.”
The city will rectify this by making daily deposits, Sunseri said.
 The city’s financial position is a product of several financial transactions including the net results of activities, acquisition and payment of debt, and acquisition,disposal of capital assets and the depreciation of those capital assets, the audit summary report further realized.
“The city used these capital assets to provide services to its citizens,” the audit summary report reads.
The city also presented a negative $7,305,545 in unrestricted net position, which was created because the city issued General Obligation warrants for the city BOE and due to the health care authority activity, Brinley reported.
The city of Haleyville Obligation School Warrants Series 2014 was acquired by Haleyville City Schools in November of 2019, noted Candy Marbutt, chief school financial officer for HCS.
The warrant was incurred for the construction of the middle school. The city maintained the debt on their books since the inception, with the school system in turn making payments to the city, Marbutt explained.
In order to simplify and show true ownership of the debt, HCS refunded series 2014 General Obligation School Warrants issued by the city presently outstanding in the amount of $8,835,000, which pay the cost of issuance, Marbutt said.
Debt service savings were structured, she added,  in order to have no extension of the final maturity of the warrants dated Sept. 1, 2037.
A breakdown of this showed that during 2014, the city partially advanced refunded the 2007 general obligation warrants with 2014 general obligation warrants, according to the audit summary.
Proceeds from the 2014 General Obligation warrants were used to advance a refund of $8 million of the 2007 warrants and provide additional funds for capital improvements needed by the BOE, the report further stated.
The bond issue originally taken out  by HCS for the construction of the middle school, was done through the city for tax advantage, the mayor said.
When the school renewed that bond issue, it has been removed from the city books and will not be reflected on the city’s long-term debt and not listed in figures in next year’s audit, according to Brinley.
“So, that frees up an additional $8 million that’s available for the city,” Mayor Sunseri said.
In 2007, the obligation warrants were issued for the construction of Haleyville Middle School.
Even though the bonds reflected negatively on the city’s financial position, the bonds were issued to help the board of education better meet the needs of the students of Haleyville, the report noted.
Also, another portion of this negative balance, as recorded earlier, was created due to the health care authority’s contributions and debt related to Lakeland Community Hospital.
The health care authority, which was created during the process of saving Lakeland from closure, is the owner and operator of hospital operations.
“Even though this reflects negatively on the city’s financial position, the debt and operation contributions associated with Lakeland Community Hospital are for the good of the city and surrounding areas,” the report pointed out.
“I do want to point out that there are some pretty wide variances between 2018 and 2019,” Brinley stated, “mostly because during 2019, we had to include the health care authority as a blended component unit.”
This means finances related to the health care authority are blended into the city’s financial statements due to the funding agreement that the Authority  has with the city.
The finances related to the Authority do show on the city’s finances and their line of credit, Brinley remarked.
The city’s total net position exceeded its liabilities by $10,245,669. At the government-wide level, total assets and deferred outflows of resources increased by $1,354,083. Total liabilities and deferred inflows of resources increased by $3,017,863 from the prior year, the audit summary showed.
“For the city’s portion of activity, that is mostly due to repaving. We did a lot of repaving during 2019, and then also grant receivable connected with the Neighborhood Improvement Project,” Brinley stated.
“Everything else  is the health care authority,” she pointed out. “A very large portion of that is the health care authority’s investment in Lakeland Community Hospital.”
Brinley reported the city’s total revenue had increased from the previous fiscal year. In fact, the city’s governmental funds reported a combined ending fund balance of $5,809,537, an increase of $1,941,073 from the prior year, the summary report noted.
Concerning this increase, $2,057,563 represented adjustments to record the healthcare authority’s beginning balances and to adjust for accrued revenue, Brinley explained.
The portion of the total ending fund balance, that can be spent at the city’s discretion, is $2,969, 306.
Total revenues for the city’s governmental activities increased by $1,709,379 or 21.78 percent from the previous year, according to Brinley.
“Again, it’s the healthcare authority,” she explained. “It was the first full year  the sales tax was collected and remitted to the healthcare authority.”
Brinley was referring to the one cent sales tax increase levied by the Haleyville City Council with proceeds going to help the hospital through the healthcare authority.  The Winston County Commission also levied a two mill ad valorem tax for this purpose.
In fact, $1.4 million of the healthcare authority revenue was due to the Haleyville sales tax increase, according to Brinley.
“Your expenses were also up $4 million, and you can see the healthcare authority is a good portion of that amount,” she pointed out, noting this amount does not include interest  and other fees.
“It’s really hard to get a good picture of the city  on those financial statements, but it was a pretty smooth year between 2018 and 2019, because it was mostly paving projects and paying off debt,” Brinley continued.
Total expenditures for the city’s governmental activities increased by $4,082,503 or 60.41 percent from the previous year, the audit report showed.
The majority of this increase was due to expenditures related to the healthcare authority of Haleyville and Winston County, she again noted.
Excess of expenditures over revenues is $3.7 million. “If you take out all the healthcare authority related items, then it is only about $940,000, and again that is capital improvements and debt payments,” said Brinley.
Cash flow, without the healthcare authority remained steady at a $40,000 decrease, she noted.
Total fund balance decreased by $116,000.  Without the healthcare authority, the decrease would have been around $234,000, Brinley reported.
“Again, capital improvements, debt payments,” she stressed. “That was pretty much the sole focus in 2019.”
Mayor Sunseri explained the healthcare authority is in a similar funding category as Haleyville City Schools, which also have received a portion of funding from city each year, as explained earlier.
“In other words, we have to have the schools’ audit in order to be part of our audit,” the Mayor explained.
“It’s the same situation with the healthcare authority,” he added. “Their audit has got to be included as a portion of our audit.”