Memo-02-12-2019-Item-14

February 12, 2019

MEMO TO:           Randy Martin, Interim Town Manager

FROM:                  Laura Rotchford, Finance Director

SUBJECT:           June 30, 2018 Financial Audit - (Summary & Suggested Motions)

I am pleased to present the Comprehensive Annual Financial Report (CAFR) for the Fiscal Year Ended June 30, 2018.  A copy of the CAFR is attached for your review.  In addition to the presentation of the financial results to the Board of Commissioners we have also submitted a copy of the CAFR to the NC Local Government Commission for their review process.  The CAFR is now available on the Town’s website, and we will submit a copy of the report to the Government Finance Officers Association for application to the Certificate of Achievement for Excellence in Financial Reporting award program.

This is the Town’s second year working with the staff at S. Preston Douglas and Associates, LLP of Lumberton, NC.  Lee Grissom, CPA and his team continue to be very professional and timely in their work with the Town.  They began their audit process in August, 2018, and continued to work with Town staff through email and phone communications to compete the project.  S. Preston Douglas and Associates assist in the preparation of the financial statements in addition to the audit.  Finalization of the audited report was delayed due to Town staff changing focus to recovery efforts resulting from the hurricane.  However, a time-extension in filing our report was granted by the NC State Treasurer’s office, as well as the Government Finance Officers Association’s award program.  Lee and his team at S. Preston Douglas continue to be a pleasure to work with, and we look forward to working with them again in future years.

The Audit was conducted in accordance with generally accepted auditing standards, which are standards contained in Government Auditing Standards, issued by the Comptroller General of the United States.  As in prior years we have again, received an unmodified opinion (or a “clean opinion”) from the auditors.  As stated in the Auditor’s Report, the Town’s financial statements for the fiscal year ended, June 30, 2018, “present fairly, in all material respects…”   Additionally, our auditors provided an opinion on each major grant received during the fiscal year.  Our auditor’s reported the Town is in compliance with major State grant programs.

There are several financial highlights which can be found in the detail of the CAFR, and are briefly mentioned below:

  • The Town had $5,421,009 of both unrestricted and restricted cash and cash equivalents on hand as of June 30, 2018.  The Town also had total net receivables of $53,076 as of June 30, 2018.  Additionally, a total of $783,244 was due from other governments, which is primarily comprised of sales and utility taxes earned during the 4th quarter.
  • The Town had total capital assets, net of depreciation of $24,509,075 as of June 30, 2018.  The bulk of these assets are land, buildings, and other improvements in the community.  During FY 2018 the Town acquired a 29.37 acre tract of land for recreational

purposes along with the inclusion of assets from Emerald Isle EMS, Inc. for the Town’s new EMS department, which added to the Town’s overall capital assets on hand.

  • The Town's total liabilities as of June 30, 2018 were $4,130,658.  The recognition of pension liabilities account for $1,307,413 of this amount, whereas, accounts payable and accrued liabilities represent $353,748.  A total of $2,236,859 of this amount is the Town's outstanding loans as of June 30, 2018.
  • The Town reported net position of $27,080,556 as of June 30, 2018.  Total net position increased by $3,916,457.  The overall increase is attributed to the annual increase to the Beach Nourishment Fund, through the collection of special district property taxes held for the purpose of future beach renourishment, along with significant grant funds and contribution for the acquisition of the 29.37 acre tract of land valued at $3 million.
  • The Town had total revenues of $11,147,763 across all funds during FY 2018.  The Town had total expenditures of $10,731,765 across all funds during FY 2018, resulting in an overall increase in fund balance of $1,015,998.  Additions to the Future Beach Nourishment's fund balance of $765,766 are associated with reserve funds for future beach nourishment activities, while a transfer from that fund to a new capital project for the Eastern Emerald Isle Beach Renourishment project was established in the amount of $1.15 million.
  • As of the close of the current fiscal year, the Town's governmental funds reported combined ending fund balances of $5,809,727, an increase in comparison to the prior year.   Increases to fund balance were related the annual increase in the Future Beach Nourishment Fund from the collection of special district property taxes held for the purpose of future beach renourishment, along with a slight surplus in the General Fund.
  • The General Fund, the Town's primary annual operating fund, had total revenues of $9,661,514 and total expenditures of $8,975,635 during FY 2018.  After transfers to the Bicycle and Pedestrian Capital Project Fund ($7,400) and to the Future Beach Nourishment Fund of ($450,000) the Town's General Fund balance increased by $229,686.  The overall increase in the General Fund was primarily attributed to lower than anticipated expenditures related to the creation of a new Town department for Emergency Medical Services, as opposed to a contracted service.  Additionally, other savings in various departments as well as minor increases in development permit fees and other revenues attributed to the increase.
  • As of June 30, 2018, the Town's General Fund had a total fund balance of $2,409,074, of which $1,494,682 is classified as unassigned fund balance. 
  • The total General Fund balance of $2,409,074 is equal to 25.54% of total General Fund expenditures during FY 2018 ($9,433,035, including transfers out).  This percentage is up from the previous year (22.8%), due to two key factors; 1) additional surplus in FY 2018 due to cost savings in the transition to a new EMS department along with other departmental savings, and 2) a decrease in transfers out to capital projects during FY 2018 compared to the prior fiscal year.  Total General Fund balance represents 24.05% percent of the FY 18-19 adopted budget of $10,018,100 (including transfers out). 
  • The total unassigned General Fund balance amount of $1,494,682 is equal to 15.85% of total General Fund expenditures during FY 2018 ($9,433,035, including transfers out).  Unassigned General Fund balance represents 14.92% of the FY 18-19 adopted budget of $10,018,100 (including transfers out).
  • The Town's Future Beach Nourishment Fund had a year-end fund balance of $2,120,793, as the Town collected another year of special district property taxes that are reserved for future beach nourishment activities.  Additionally, the Town makes annual transfers from the General Fund to the Future Beach Nourishment Fund to supplement tax receipts from the ocean front-inlet front special district.
  • The Town established a new Capital Project Fund from the reserves of the Future Beach Nourishment Fund, transferring $1,150,000 of the Future Beach Nourishment Fund Balance for a planned renourishment project specific to approximately 3 miles of beach strand along the Eastern Emerald Isle Town limits.  Work on the project is planned to begin in FY 2019.
  • The Town's total loans outstanding at June 30, 2018 is $2,236,859.  This includes four (4) existing installment purchase agreements.  The Town's total outstanding debt is equal to approximately 0.08% of the Town's total assessed valuation at June 30, 2018, which continues to remain a very low percentage.   

I look forward to discussing the results of the financial statements with you further, and I am happy to answer any questions you may have.