Auditor says Colfax financials in good shape

By LeAnn R. Ralph

COLFAX — Following an audit of Colfax’s 2016 finances, Eric Davidson of Bauman Associates says the village’s financial statements are in good shape except for a few minor issues.

Davidson, who has conducted the audit for Colfax for several years, presented a report on the 2016 audit at the Colfax Village Board’s August 28 meeting.

As in years past, one “deficiency” for the village is a proper segregation of financial functions.

Lynn Niggemann, administrator-clerk-treasurer, and Sheila Riemer, deputy clerk, spread out those financial duties wherever they can, but it is not feasible for the village to split the duties as much as they should be, Davidson said.

Colfax would have to hire more people for the financial duties, and the village is not likely to be in a financial position to do that, he said.

Gary Stene, village president, wondered if all smaller municipalities have the same problem with segregation of financial duties.

“Yes. It’s the nature of the beast,” Davidson said.

Rescue squad billing

In recent years, invoicing for the Colfax Rescue Squad has shifted to the village administrator’s office.

Niggemann and Riemer have become more comfortable with the ambulance billing, Davidson noted.

The rescue squad’s accounts receivable is maintained in separate billing software and is not integrated with the village’s general ledger. Because of the separate nature of the rescue squad billing, Davidson made several recommendations.

The first recommendation is that all billing adjustments for the rescue squad should be printed out monthly and approved by the administrator-clerk-treasurer, and the village board or the public safety committee should also review and approve the adjustments.

The second recommendation is that all write-offs for uncollectible amounts should be approved by the  administrator-clerk-treasurer monthly, and the village board or the public safety committee should review and approve the write-offs.

The third recommendation is that an annual allowance for uncollectible accounts should be based on a an estimate of the write-offs after reviewing the write-off history or as a percentage of revenue, whichever is a more accurate estimate. The annual allowance for uncollectible accounts should be a year-end journal entry that debits bad debt expense and credits the allowance for uncollectible accounts.

Davidson said that as Niggemann and Riemer continue to work toward implementing the recommendations for the rescue squad accounting, those recommendations will “go away” in subsequent audit reports.

“I think Lynn and Sheila have done a very good job (with the ambulance billing),” he said.

Taxes receivable

The receipts for taxes receivable and related revenues were not properly recorded in the village’s financial statements, Davidson said.

Bauman Associates spent significant additional time reconciling receipts and revenues and to propose journal entries to properly reflect the taxes received and the revenues for the year as well as recording items not included in the bank statements for the tax accounts, Davidson said.

Bauman Associates provided accounting assistance for the tax accounts that was outside of the audit and reviewed the procedures with Niggemann, he said.

In the future, the  administrator-clerk-treasurer will take care of the tax accounts, he said.

IT

The controls for information technology and computerized functions in the village could use some improvement, Davidson said.

Colfax does not have a written IT strategic plan or any written policies dealing with information technology, he said.

The village should develop a written strategic plan for information technology that includes an annual risk assessment, documentation of policies that includes updating user passwords and a formal disaster recovery plan, Davidson said.

The IT strategic plan does not need to be particularly complex, but it would help improve the controls over information technology, he said.

Niggemann noted that the 2018 budget would include items related to an information technology strategic plan.

State statute

The legally-adopted budget for 2016 for Colfax contains some differences that require formatting of a budgetary comparison schedule for the general fund with reconciliation adjustments to actual amounts, Davidson said.

The budgetary comparison schedule showed some over expenditures of the general fund budget of certain amounts in general government, conservation and development and capital outlay, he said.

Being over budget is a violation of Wisconsin Statute 65.90(5)(a), which requires a two-thirds vote of the village board to amend the budget line items, Davidson said.

The violation of state law does not carry any penalties, he noted.

Bauman Associates is recommending the village board review the budget at the end of the year after the audit and amend the budget, if necessary, to keep the expenditures within the amounts that were legally adopted by the village board, Davidson said.

Audit opinion

In other words, Colfax is “pretty much doing things the way they should be done, except for a few items that Lynn and Sheila are working on,” Stene said.

Davidson agreed and said his report is a “clean audit opinion.”

“Lynn has done a good job of getting us squared away,” Stene said.

“Things definitely have improved. You’ve done a really good job — both Lynn and Sheila,” Davidson said.

Restricted funds

Colfax has several restricted funds and assigned funds.

Money designated as restricted cannot be moved out of the account and must be spent on the item for which it is restricted.

Assigned funds can be moved out of the accounts with a motion approved by the village board.

Restricted fund amounts include $28,500 for perpetual care of the cemetery; $18,149 for future library operations; $77,912 for future improvements on the village hall and includes donations and grants; TIF No. 3 and No. 4 debt service and future general obligation debt service in the amount of $245,810.

All together, the restricted fund balance is $376,986.

Assigned funds include $198,123 for future major equipment replacement in various departments; $76,292 for future rescue squad operations; $2,363 for a spreading garden, fencing and improvements to the cemetery; $31,261 for library operations; $214,878 for street improvements; $3,230 for holiday decorations; and $84,233 for future improvements to the village hall.

The total assigned fund balance is $610,470.

The village’s undesignated fund has a total of $736,472.

The undesignated fund is like the village’s savings account and is separate from the restricted funds and assigned funds.

Water and sewer

The village’s water utility had total operating revenues of $245,991 and total operating expenses of $154,502, leaving an operating income of $91,490.

The village’s sewer utility had operating revenues of $169,301, and total operating expenses of $146,898, leaving an operating income of $22,403.

Since the water and sewer utilities both have operating incomes, rate increases will not need to be considered at this point in time, Niggemann said.

Other numbers

Here are some of the other numbers included in the 52-page 2016 audit report for the Village of Colfax:

• For the year ending December 31, 2016, Colfax had revenues of $1,519,337.

• For the year ending December 31, 2016, Colfax had expenses of $1,939,015.

• Capital outlay was $509,124 and included the Third Avenue street project.

• Public safety had expenditures of $660,482.

• Public works had expenditures of $221,413.

• Culture, recreation and education had expenditures of $149,018.

• Conservation and development had expenditures of $33,372.

• Debt service had a principal of $105,649 along with interest and other charges of $33,460.