IRONWOOD — The city of Ironwood received a “clean opinion” in the 2011-12 audit that was reviewed by the city commission in a work session on Monday.
Tony Pollack, of Joki, Makela, Pollack and Ahonen, reviewed the 100-plus-page audit for the one-year period extending to July 1, 2012.
A clean opinion is the best type of report an audited municipality may receive from an auditing firm.
Pollack said there was a $1,264,000 general fund balance and it had increased $219,000 during the fiscal year, a good sign.
The audit was somewhat unusual in that it reflected huge profits in the utility fund because of grant money that was received for the city’s infrastructure improvement projects.
The Michigan Department of Transportation administered the city’s Hemlock Street project and that caused some overspending in the street funds category, commissioners learned.
City treasurer Paul Linn said MDOT now reports what’s being spent online and that should help the city keep better track of projects on a more timely basis.
Pollack noted overspending in any category is technically a violation of the budget code that a city can be held liable for by the state. City manager Scott Erickson noted, however, any budget is merely “an estimate to the best of our abilities.”
Linn said the city has been maintaining a fund balance to cover about two months, or around $590,000.
When a municipality has no cash reserves, or fund balance, it is required to borrow money, adding interest payments to its finances.
Pollack said there is no set figure for a fund balance, but it is a matter that each city commission must determine and be comfortable with.
Linn said about 17 or 18 percent of a budget is the industry standard for a fund balance.
Pollack said the city needs to develop a more timely reporting system of its accounts and commissioners should be asking for monthly status reports.
Pollack urged city commissioners to review the entire audit and contact him if they have any additional questions.