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Berlin, Ocean Pines News Worcester County Bayside Gazette Logo Berlin, Ocean Pines News Worcester County Bayside Gazette


Property tax drop causes slight fall in town revenue

BERLIN—Auditors from the Salisbury firm PKS & Company P.A. reported an “unmodified” audit opinion of the financial statements prepared by town officials during the Dec. 9 meeting of the mayor and town council.
PKS representatives Leslie Michalik, a PKS manager, and Mike Kleger, a partner with the firm, noted the term “unmodified opinion” had replaced the previous term for a “clean opinion” in accordance with a change in the terminology used in the Government Auditing Standards.
The town closed its 2013 fiscal year on June 30 with a 5 percent decrease ($350,718) in its general fund balance, which included a $300,000 transfer the town made from the general fund into the new Stormwater Utility Fund, Michalik reported.
The town ended the year with a final general fund balance of $7,088,135, she said. In that year-end total, according to Michalik, was more than $6.5 million in unassigned general fund revenue that could be carried forward into the 2014 fiscal year. The unassigned balance has hovered near $7 million for the past five years, she said, noting that in 2012 the unassigned revenue total was $6,693,257.
The remaining $570,662 in the general fund was either restricted or designated for specific purposes, according to Michalik. The balance represented $363,217 in an assigned fund that the mayor and council had designed for the payment of employee insurance premiums, $793 in a casino slots revenue account that was restricted for specific purposes by the state of Maryland, and $206,652 in an impact fees fund that was set aside for future capital projects, according to the report.
The audit reported a 4 percent ($224,000) drop in general fund revenue collections, to nearly $5.2 million in 2013, from roughly $5.4 million in 2012. Much of the decrease was attributed to revenues from property taxes, licenses and permits, and impact fees, which were decreased.
In 2013, according to the report, the total from property tax revenue dropped to slightly more than $3 million, roughly 59 percent of general fund revenues. In 2012, the more than $3.4 million in property tax revenues collected constituted slightly more than 63 percent of general fund revenue.
The second largest revenue source for the town, intergovernmental revenue, grew to $863,490 in 2013 from $840,247 in 2012.
The town’s general fund expenses grew from nearly $4.85 million in 2012, to nearly $5.25 in 2013, according the report.
No material weaknesses were reported and the auditors found no instances of noncompliance in the town’s financial statements, but they did note one significant deficiency during the audit.
“Management relies on the auditor to prepare the financial statements in accordance with general accepted accounting principles (GAAP). The financial statements are reviewed and approved by management prior to their issuance,” according to the auditors’ report. It added, “[M]anagement relies on the auditor to perform certain tasks such as the calculation of accrued liabilities, update of depreciation schedules, and the posting of approved adjusting entries to the trial balance.”
Kleger noted the situation was not uncommon in small towns with limited staffing resources. But in the report the auditors warned that the deficiency in the town’s internal controls posed a risk that intentional fraud or unintentional errors could be made and not detected. They recommended that the town establish controls to detect, prevent, or correct misstatements in the town’s drafted financial statements.