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9.a) Staff Report-2014 AuditJ SCAlVDIA Staff RepoVt Date of Meeting: April 21, 2015 To: City Council From: Kristina Handt, City Administrator Re: 2014 Audited Financial Statements Background: Jon Archer from Schlenner Wenner will be at the Council meeting to provide a brief overview of the 2014 audited financial statements. Issue: Should the Council accept the 2014 financial statements? Proposal Details: A copy of the audit and memo from Schlenner Wenner are included in your packet. In the general fund, revenues exceeded budgeted amounts by $131,199. Building permits continue to exceed projections as they have the couple years. The 2015 budget has begun to recognize this as we increased projected revenues by $25,000 over 2014. The largest variance on the revenue side is in charges for services. Under our new accounting practices, it was discovered this year that $125,000 related to the Tiller EIS in 2012 was not properly accounted for. This means revenues were understated in 2012 and overstated in 2014 to correct the error. Had this not occurred, 2014 revenues would have come in at only $6,200 over budget. In general fund expenses, planning and building came in under budget as expected due to the new accounting method of offsetting third party charges with fees from applicants. Unexpectedly, the fire department actual expenses were almost $50,000 under budget despite a decrease in the departmental budget of over 4% in 2014. Other departments were 6% or less under budget with the exception of Parks and Rec which exceeded their budget (mainly due to unplanned unemployment expenses). Sewer budgets performed as expected. The 201 expenses exceeded revenues but it was planned to use fund balance to provide for some system improvements -pumps, control panels, SCADA system. Fiscal Impact: Unassigned fund balance above 50% of general fund expenditures should be allocated to a Capital Improvement Fund per the City's Fund Balance Policy. Unless direction to do otherwise is received from the Council, staff will allocate these funds to the Local Road Improvement Fund in 2016 consistent with past practices. The Council could provide direction to allocate these funds, or a portion, to another capital improvement fund. Options: 1) Accept the 2014 Audited Financial Statements 2) Do Not Accept the 2014 Audited Financial Statements Recommendation: Option 1.