CHICKASHA — An audit of the city’s books for Fiscal Year 2021 finally was delivered recently, two years late, but City Hall received good marks overall.
Three areas of concern were noted by auditors. Nevertheless, “It’s a clean report,” said Andy Cromer, director of HSPG & Associates of Oklahoma City.
At the close of FY 2021 the unassigned balance of the General Fund was $1.944 million, or 11.5% of annual General Fund revenues, auditors calculated.
Chickasha’s General Fund reserves are sufficient to support municipal government for about six to eight weeks “if the city lost all of its income,” Cromer said. One to three months of reserves “is a good place to be.”
The city had approximately $14.92 million in long-term outstanding debt on June 30, 2021, an increase of about $830,000 from the previous year, the auditors reported. The net increase “was due mostly to an increase in net pension liability and other post-employment benefits liability,” they wrote.
The net position for governmental and business-type activities increased by $3.47 million in FY 2021: to $107.97 million.
The net position for governmental activities (public safety, health and welfare, streets, parks and recreation, and administration) grew to $45,058,000. The net position for business-type activities (water, wastewater and trash collection/disposal, airport activities, and economic and social development activities of the Chickasha Industrial Authority) increased to $62,912,000.
The “operating grants and contributions” category soared by 123% “due mostly to the $1.3 million CARES Act grant” from the federal government, the auditors said.
The Coronavirus Aid, Relief, and Economic Security Act allotted $2.2 trillion to provide fast and direct economic aid to the American people and government agencies negatively impacted by the COVID-19 pandemic.
A total of $2.88 million in ARPA funds also was allocated to the City of Chickasha, to be delivered in two tranches; $1.434 million was received in September 2021 and the remaining $1.448 million in the current Fiscal Year 2023.
The $1.9 trillion American Rescue Plan Act was an economic stimulus bill to speed up the country’s recovery from the economic and health effects of the coronavirus pandemic and the ongoing recession.
HSPG auditors did point to three problem areas – Chickasha’s EMS fund, utility billings, and the tardy audit – all of which Mayor Chris Mosley said are already being addressed
The City’s EMS fund began Fiscal Year 2021 (which started July 1, 2020) with a deficit balance of $613,000, but produced a profit of approximately $200,000 that year. However, as of June 30, 2021 (the last day of that fiscal year), the EMS fund was still approximately $374,000 ‘in the red.’
Consequently, the City was not in compliance with state law, Cromer noted
Management is “closely monitoring” the fund, the auditors were told by city officials. “We are closing the gap,” City Manager Keith Johnson told the council on April 17.
The City’s finance and fire departments will work with the City Council to develop options to resolve the fund balance deficit, auditors were told.
The audit itself should have been completed within nine months after the end of FY 2021 but was late because of “turnover in key positions within the City,” HSPG reported. John Noblitt resigned as city manager in January 2021 and City Manager Tyler Brooks resigned in June 2022. In addition, city officials were notified belatedly that their previous auditor had retired.
Utility billings issue difficult to resolve
As for utility billings: that has been a difficult issue to resolve, Mosley told Southwest Ledger.
“You buy water from Fort Cobb Reservoir,” Cromer noted. The amount of water for which utility customers are billed indicates “you have leaks,” he said. The volume of water purchased and the amount that customers are billed for “are magnitudes off.”
In Fiscal Year 2021 the city could not “reasonably verify or corroborate” that its customers were being billed for the correct volume of water they consumed, Cromer said.
The catalyst for improvement occurred in May 2021 when Mosley was notified by Fort Cobb Reservoir that Chickasha’s monthly water bill was being raised by 33%.
One of the first steps taken was a search for leaks, and a massive one was discovered just south of the lake in Caddo County. Some 1.6 million gallons of water were flowing from a break in a gravity-fed main and into a nearby creek every day, Mosley recalled. The leak was repaired last November, he said.
The city was being billed for 3.5 million gallons of water usage daily until the leak was fixed; since then the bill has been halved, to about 1.7 mgd, he said. Depending on how brutal the summer weather gets, the City of Chickasha consumes about 675 million gallons of water from Fort Cobb Reservoir each year, Mosley said.
The city collects a fee of $1 per month for all water meters, which helps finance system repairs. Water and sewer improvements also are financed with the proceeds of a $9.875 million loan authorized in 2014 and secured with a ¾-cent sales tax; the 10-year loan is scheduled to be retired by the Chickasha Municipal Authority on March 1, 2024.
Besides repairing the water leak, city finance personnel participated in a training program, the city changed billing/collection vendors in Fiscal Year 2022, every utility account was audited, and all water meters were inspected.
The city discovered that some customers who were thought to have one meter actually had multiple meters (such as one for the home and another for an irrigation system to water the yard and flower beds); some meters were inoperable and others were running slow; and some meters were calibrated for incorrect waterline sizes (for example, the meter was set for a 1-inch line but was attached to a 2-inch or a 4-inch line).
“We are cleaning up our processes,” the mayor said.
On a positive note, the city evaded risk in four critical areas, the HSPG audit relates.
• Custodial credit risk occurs in the event of a bank failure because the government’s deposits may not be returned to it. As of June 30, 2021, the City of Chickasha “was not exposed to custodial credit risk,” auditors said.
• Investment interest rate risk is when changes in interest rates adversely affect the fair value of an investment. As of June 30, 2021, the city’s investments with maturity dates “were limited to time deposits that were not exposed to interest rate risk.”
• The city had no investment credit risk in FY 2021 because it “has no investment policy that limits its investment choices other than the limitations of state law...”
• Concentration of investment credit risk occurs when investments in any single issuer represent a significant percentage of the municipality’s total investments. As of June 30, 2021, the City of Chickasha “had no concentration of credit risk,” auditors wrote.
The city is exposed to “various risks of loss” from torts; theft of, damage to, or destruction of assets; errors and omissions; injuries to employees; employee health and life; and natural disasters, the auditors pointed out. However, the city manages those risks via multiple sources of insurance.