Mayor’s Office

FY14 Audit Documents Major Improvements in Citys Financial Position Including First Positive General Fund Unassigned Fund Balance since 2009

FOR IMMEDIATE RELEASE

February 9, 2015
Contact:  Mike Kanarick
                    802.735.7962

 
FY14 Audit Documents Major Improvements in City’s Financial Position Including First Positive General Fund Unassigned Fund Balance since 2009
Auditor Issues “Unqualified Opinion” for First Time since before BT Crisis, Finds City Internal Controls and Financial Practices Dramatically Improved
 
Burlington, VT – The City of Burlington fiscal year 2014 audit, which will be presented to the City Council for approval and acceptance at tonight’s meeting, documents major improvements in the City’s financial position, including the City’s first positive General Fund unassigned fund balance since 2009.  The “unqualified opinion” issued by the auditor represents the first such designation since before the Burlington Telecom (BT) crisis.  The auditor found that the City’s internal controls and financial practices have dramatically improved.
 
“The FY14 audit is further evidence that our community’s commitment over the past three years to fixing the City’s finances has resulted in significant improvements to the City’s financial position across the board,” said Mayor Miro Weinberger.  “While our work to restore the City’s finances is far from done, the improvements we have achieved already are saving Burlingtonians money and, as long as we continue in our current direction, we will keep tens of millions of dollars in the pockets of Burlingtonians instead of transferring them to Wall Street bondholders collecting high interest rates.”
 
City in the Black for First Time since 2009
The City’s General Fund unassigned fund balance improved from a negative $16,790,895 on June 30, 2011 to a positive $70,000 on June 30, 2014, representing the first audited positive fund balance since 2009.  Contributing factors included the $9 million Fiscal Stability Bond, an approximately $5 million repayment to the General Fund from Department of Public Works (DPW) capital and enterprise funds, and FY14 General Fund actual revenues over and expenses under budget.
Audit Documents Dramatic Improvements in City’s Financial Practices and Internal Controls
The Management Letter accompanying the audit shows a dramatic improvement in the City’s financial practices and internal controls as indicated through the reduction in both deficiencies and material weaknesses, as indicated below:
  • FY12 audit found 27 deficiencies, including 12 material weaknesses; and
  • FY14 audit found 9 deficiencies, including 4 material weaknesses; and
  • Auditors indicated progress being made on a majority of these 9 deficiencies.
City Earns First “Clean” Audit since 2009
For the years since the BT crisis, the City had received “qualified” audits, indicating a failure to meet Generally Accepted Accounting Principles (GAAP).  In at least one prior rating report, Moody’s Investors Service indicated that it would determine future ratings actions based in part on the City’s ability to address audit “qualifications.”  The City’s FY14 audit represents the first time since before the BT crisis that the City earned an “unqualified” audit.
Write-Down of Burlington Telecom Receivable
The reason the FY14 audit before the City Council for acceptance is “unqualified” is because the audit includes a write-down of the $16.9 million receivable from BT that the City has carried on its books since 2009.  Important elements of the write-down include the following:
  • GAAP, the standard framework of guidelines for financial accounting, requires any receivable unlikely to be realized within one year to be written down.
  • While the Blue Water agreement negotiated by the City to resolve the BT lawsuit has, for the first time since the BT crisis began, given the City a route to partial recovery of the $16.9 of taxpayer funds improperly spent on BT, the agreement makes it clear that any repayment is multiple years away.  To continue to show the receivable would be inconsistent with GAAP and, therefore, state statue, which recommends that municipalities conform to GAAP.
  • The write-down has no legal or practical impact on the City’s efforts to recover as much as possible of the taxpayer money spent improperly on BT through the terms identified in the Blue Water agreements.
  • A decision by the City not to write-down the BT receivable would materially complicate and negatively impact the City’s efforts to secure credit rating upgrades and favorable bond financing.  Such a decision likely would result in additional costs to the taxpayers, while having no positive impact on the City’s efforts to secure repayment of taxpayer dollars spent on BT.
  • The write-down has been recommended by the City’s auditor, the Chief Administrative Officer, the Chair of the Burlington Telecom Advisory Board (BTAB), and the City’s BT business consultant Terry Dorman. (Please see attached CAO memo and BTAB Chair memo.)
Timeline for Presentation of Financial Documents Improved
The City’s initial financial reports were presented to the Board of Finance (BOF) at its December 15, 2014 meeting, marking the earliest presentation of these documents in nine years. 
City Councilor Karen Paul (Ward 6), who serves on the BOF, stated:  “As someone who is committed to and has long advocated for best financial and auditing practices, I have been very impressed by the transformative way our City Administration has been managing our finances.  The attention to transparency, efficiency, and accuracy has been a welcome change that has produced very tangible benefits for our City.  Credit ratings are up, interest rates available to the City are down, and more money stays in the hands of Burlingtonians.”
“There’s nothing more important than careful oversight of taxpayer dollars,” said City Councilor Dave Hartnett (Ward 4).  “The people of Burlington work too hard to see their contributions to the City squandered.  This Administration has tackled the very tough job of turning the ship around – the Mayor and his team are looking out for all the members of our community, working to stretch every dollar, to spend wisely, and to find ways to keep money with the people.”
*Please visit the following documents by clicking on the links below:
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Press Release Date: 
02/09/2015
City Department: 
Mayor's Office