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A recent review of the city’s finances highlighted a positive outlook for Elgin’s previous fiscal year, despite a few areas needing attention.
Mike Brooks, partner at Brookswatson & Co., presented the annual audit report for the period ending Sept. 30, 2023, confirming that the city’s financial statements were free of material misstatements and fully disclosed, earning an unmodified opinion — the highest level of assurance.
Financial position
As of the end of the year, total assets exceeded total liabilities by about $47.8 million. This indicates the city’s financial stability, according to Brooks.
Governmental funds, excluding utilities, had a combined ending balance of $16.2 million, a decrease of $4.8 million compared to the previous year. However, the unassigned fund balance within the general fund stood at $5 million.
Revenues
The city’s total revenue for the year was $16.7 million, a decrease of $1.8 million from the prior year.
Property taxes were the largest revenue source at $5.7 million, an increase of $911,000. Sales taxes generated $2.5 million, reflecting a $195,000 rise, while charges for services brought in $4.3 million, a decline of $950,000 primarily due to reduced permitting fees, the report said.
Grants and contributions also totaled just over $2 million, representing a significant drop of $3.2 million.
Expenditure
The city’s total expenditure for the year reached $16.1 million, at an increase of $2.9 million.
Public safety was the largest expense at $5.1 million, reflecting a $1.7 million increase. Public works expenditures totaled $2.6 million, a slight decrease of $55,000, while general government expenses rose by over $700,000 to $3 million. Parks and recreation spending also increased by about $430,000, reaching $2.6 million.
The general fund ended the year with an increase of $435,000, bringing its balance to just over $5 million — about 40% of annual expenditures, or roughly five months of reserves.
According to Brooks, capital projects funds experienced a $6 million decrease, typical for longterm, debt-funded projects. The debt service fund showed a slight $49,000 increase, maintaining a balance sufficient to meet obligations without excess. Non-major governmental funds, which include special revenue and smaller funds, saw a rise of $811,000.
In the utility fund, the net position increased by $4.8 million, largely due to impact fees, the report said. Brooks noted that the utility fund remains “financially healthy,” with rates adequately supporting operations, debt service and capital improvements.
Areas for Improvement
Brooks did identify a few areas of concern for the city’s financial practices.
He noted that bank reconciliations had not been consistently maintained in a timely manner, partly due to staff turnover — a recurring issue from the prior year’s audit. Timely reconciliations, he emphasized, are critical for ensuring all financial transactions are properly recorded.
Regarding the city’s pooled cash system, where multiple funds share a single bank account, Brooks pointed out that occasional instances of one fund unintentionally borrowing from another had occurred. He recommended addressing these situations promptly to prevent negative fund balances within the pooled cash system.
The audit also revealed some non-compliance with certain reporting requirements under the Public Funds Investment Act. Brooks urged the city to take the necessary steps to meet these requirements, ensuring transparency and adherence to legal standards for investments.
In addition, the report highlighted upcoming changes to accounting standards under GASB No. 101. These changes will require the city to recognize compensated absences, such as unused sick leave, as liabilities on its balance sheet — an adjustment that has not been reflected in prior years.
City’s Response and Next Steps
Mayor Theresa McShan acknowledged the complexity of the audit findings and recommended that the council take the report home for further review. She assured the public that addressing the audit findings, particularly the staffing and operational issues, would be a priority for the city.
“That’s going to be a top priority in the first few years to make sure we get what we need to have, so we won’t have any audit findings,” McShan said.
Brooks concluded by reassuring the council that the city was in a healthy financial position despite some of the findings. He encouraged continued monitoring and improvement in internal controls, particularly with staffing, cash management and compliance with financial regulations.
