- Associated Press - Tuesday, July 28, 2015

July 28—The city of Hazleton finished the 2014 fiscal year with a $447,551 fund balance, even though general fund expenditures outpaced revenue for the year, according to a report compiled by a Harrisburg accounting firm.

Revenue sources for 2016 and beyond remain a concern for both administrators and council members in the wake of an audit undertaken by the Philadelphia based SB & Company.

According to the report, $8,926,868 worth of general fund expenditures exceeded revenue by $303,656 in 2014.

The shortfall, however, was offset by $626,850 in financing sources that the report said were transferred into the general fund. When counting those funds, the city finished the year with $323,194 in revenue over expenditures.

Chris Lehman of SB & Company shared highlights of the financial review at a recent city council meeting.

No members of the city administration were present when Lehman publicly shared findings with city council, but Mayor Joseph Yannuzzi said Monday that highlights of the audit show that the city’s overall financial position increased by more than $106,000 through 2014 as a result of revenue exceeding expenses.

Yannuzzi also pointed to the increased fund balance.

Council’s questions

While council members didn’t say much in public about bottom-line figures released in the draft report, Councilman Dave Sosar questioned public works and recreational funds that he says fluctuated dramatically between 2012 and 2014, as well as long-term debt that appears to have increased over that time frame.

Sosar also questioned the estimated $626,000 in revenue that the report states was transferred into the general fund.

“My problem is, I don’t recall making the transfers,” Sosar said.

Council members also asked why a 2008 Pennsylvania Infrastructure and Investment Authority (PENNVEST) loan was listed among city debts in 2013 and 2014 when the loan had been turned over to Greater Hazleton Joint Sewer Authority in 2013.

Given general fund trends listed in the report, Mope and Sosar also asked if the city will have money available to start 2016 — or if it is in the position to secure a tax anticipation note, if necessary.

“These kinds of things step out at me,” Sosar said. “Do we have enough money to be functioning for the beginning of the year? Like any good family, if you see you are overextending yourself, you may have to start tightening your belt.”

Administration’s take

City Administrator Tom Pribula said Tuesday that while the fund balance increased, he described the city’s overall financial condition as “pretty good, not great.”

“I don’t think it’s real negative,” he said. “The city hasn’t taken a (tax anticipation note) in a couple of years. The biggest negative the city faces, and I’ve said this a number of times in the past, is whether it’s a company or a government, you need predictable, reoccurring revenue. In a municipality, where do you get it? Unfortunately, it’s mostly the taxpayers.”

General fund challenges stem from a shortfall in parking revenue, lack of stormwater maintenance fees and a $75,000 settlement paid to the owner of a Grant Street apartment building who sued the city when his property was declared unsafe for occupancy in 2011, according to Pribula and the mayor.

The $628,000 listed in the audit as a “transfer” into the general fund should be viewed as a fund balance rather than a transfer among different funds that must be approved by city council, Pribula said.

Some trends that impacted financial statements include the city borrowing money from a $400,000 sewage transmission fee fund and repaying that fund in both 2012 and 2013, Pribula said.

The money will no longer be available after 2015 because council used the entire fund to balance this year’s budget, Pribula said.

Accounting practices impacted the public works budget over the past few years, he said.

In 2013, public works expenses totaled $3.2 million but accounted for engineering, highway and garage expenses, as well as liquid fuels funding. In 2014, public works expenses were logged at about $1.2 million, but only accounted for highway and garage expenditures.

Liquid fuels and other expenditures were classified differently, he said.

Similar bookkeeping issues impacted the recreation fund, which audit reports say fluctuated from about $101,000 in 2012 to $122,266 the following year and to about $90,000 in 2014, he said.

Accounting entries also tend to skew audit results, Pribula said.

The 2014 audit reflects a number of “write-offs,” or addresses entries that have been lingering on the books since 2002, Pribula said.

“On a balance sheet, some of the things go back to 2002,” he said. “They were not really handled the right way.”

Changes in accounting standards have also impacted how long-term debts are reported, Pribula said.

While reports show that long-term debts have increased from about $24.4 million in 2012 to $25.8 million in 2013 and to about $27 million as of last year, it’s not because the city has borrowed more money, he said.

General obligation bonds and debt total $11.3 million in 2012, fall to about $10.4 million the following year and drop to nearly $9.6 million in 2014, but the city must also report “compensated absences” owed to employees as well as insurances and other post-employment retirement benefits among its long-term debts, he said.

While those costs are long-term liabilities owed to employees and retirees, they aren’t loans or bonds, Pribula said.

Compensated absences and post-employment benefits subsequently inflate the amount of reported debts by about $13 million in 2012, by $15.3 million in ‘13 and by $17.4 million in ‘14.

Pribula confirmed that the PENNVEST loan has been turned over to the joint sewer authority — and that he spoke with accountants about adjusting the audit accordingly.

The city made payments of about $3,100 on the loan in the first three months of 2013 — and has had no further responsibility for it, Pribula said.

“It will more than likely be pulled from the audit,” Pribula said of the loan.

Councilman Jeff Cusat said that Pribula’s efforts to correct entries over the past 13 years tends to skew results reported this year, but will make for smoother reporting in the years ahead.

“Tom did a great job,” Cusat said. “He used proper accounting to correct invalid entries over the last 13 years. From … this point forward, everything should be easily readable.”

Cusat said he’s not “very optimistic” for the city’s financial condition when considering steps taken by the council majority to balance this year’s budget.

“Knowing what council did with the budget this year, there obviously will be some concerns in late 2015, early 2016,” Cusat said.

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