Audit brings positive financial news about Farms

By: K. Michelle Moran | Grosse Pointe Times | Published January 30, 2018

GROSSE POINTE FARMS — Although the purpose of an audit isn’t to weigh in on the financial health of a municipality, Grosse Pointe Farms’ most recent audit — for the 2016-17 fiscal year — shows that the city remains strong financially.

As of the end of the last fiscal year on June 30, 2017, City Controller/Treasurer Debra Peck said the Farms had a general fund balance of roughly $5.2 million, of which just under $4 million is unassigned. The city added $69,618 to its fund balance last year, she said.

The unassigned fund balance is equal to approximately 28 percent of the general fund budget for the following fiscal year — in this case, the 2017-18 fiscal year — and Peck said maintaining such a strong fund balance is “absolutely” one of the reasons the Farms achieved a AAA bond rating in 2015, the highest rating possible. The Farms was the first municipality to reach AAA status; Grosse Pointes Shores and City have since also earned AAA bond ratings.

“It’s all about having the right amount in your rainy day fund so if something (unexpected) were to happen, you have the flexibility to deal with it in a responsible way,” Peck said of the importance of maintaining a good fund balance.

The Farms’ Finance Department goes above and beyond financial reporting requirements by producing the Comprehensive Annual Financial Report, a more detailed audit report that includes historical and other data, and offers readers a thorough look at the city itself and its finances. Under former City Controller/Treasurer John Lamerato — who retired last summer — the Farms began producing the CAFR, for which the city has received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada for the last 24 years.

Once again, the city received an “unmodified opinion” from its auditors at Plante Moran, Peck said.

“It was a clean and unmodified opinion, so it’s the highest rating we can get from our auditors,” she said.

City Manager Shane Reeside offered “high praise” for Peck, who he said provided data to the auditors “in an efficient manner.” He said the auditors determined that the financial data was “very accurate.”

“There was no surprise, really, which is nice,” Reeside said of the audit. “The numbers tracked very closely to our budget in terms of our revenues and expenses, and very consistent with prior years in terms of expenditures. … Each department stayed within its budget.”

For those who don’t have an accounting background or who don’t have time to read the lengthy audit report, the Farms produces an annual brochure, the Popular Annual Financial Report, that provides a concise, user-friendly overview of the city’s finances. The most recent PAFR, the seventh edition of this document, was included in the city’s winter newsletter, an insert in a recent edition of the Grosse Pointe Times.

“The PAFR is a wonderful tool,” Peck said. “I think every city should offer a PAFR. The PAFR gives important highlights in a much more condensed (format). You can read through it in a few minutes and get a sense of how the city is doing.”

The audit and PAFR are both posted on the city’s website. Extra copies of the PAFR can be picked up at City Hall as well during normal weekday business hours.

“We encourage every resident to take a look at that report,” Reeside said of the PAFR. “It lays out in clear terms how the tax dollars are being spent, and it provides a historical perspective of budget spending.”

The Farms has been honored annually by the GFOA for each of its PAFR and CAFR reports, and Peck said they anticipate receiving these honors again this year. For 2016 audits — which were recognized by the GFOA in 2017 — she said the Farms was one of only about five cities in Michigan that received awards for both the CAFR and PAFR, including Grosse Pointe Woods, Troy and Rochester Hills.

Residents might be surprised to see that, of every dollar they pay in property taxes, only about 29 cents goes to the city. The remainder goes to other entities, including the school system, the library system, Wayne County and Wayne County Community College.

“The city (share) represents less than 30 percent of each dollar spent in property taxes,” Reeside said.

The Farms is on better financial footing than most other cities in Michigan with regard to its legacy costs. Peck said that for this year’s audit, cities are required to include more disclosures about liability with regard to retiree health care. Next year, she said, cities will be required to go further, recording the full liability with regard to other post-employment benefits, better known as OPEB.

In the Farms, she said, retiree health care for public safety employees is 46 percent funded, while for general employees, it’s 21 percent funded. That may not sound impressive, but Peck said most other communities aren’t that well-funded.

“It is such a significant liability that many, many cities have put zero aside, and it’s just pay as you go,” Peck said. “Grosse Pointe Farms is pre-funding OPEB costs already. We’re not fully funded, but we’re making strides in that area.”

The Farms pensions are in better shape. Peck said the public safety pension is 111 percent funded, while the pension for general employees is 93.5 percent funded. That means the Farms is “absolutely” in better condition than most other municipalities, she said.

“The fiscal responsibility that’s been exercised here, and the forethought, has really put the city in a positive financial position,” Peck said.

To see the audit or the PAFR, click on the Finance tab at www.grossepointefarms.org and look under the Budget and Comprehensive Annual Financial Report section.