Town of Lovell receives positive audit report

By: 
David Peck

Town of Lovell finances are looking strong, CPA James Seckman informed the Lovell Town Council last week following the annual audit of the town books.

Addressing the council at the September 10 meeting, Seckman said most of the town accounts are in excellent shape, with far more than the recommended money in reserves.

There are three primary purposes of an audit, Seckman said:

1) Determining whether the town’s financial statements are done in accordance with generally accepted accounting principles, which they are, Seckman said, declaring a “clean” audit.

2) Assessing deficiencies on the town’s internal controls. Seckman noted that segregation of duties is a deficiency in all small towns, and in Lovell’s case, the town has the administrator approve all journal entries and review all bank reconciliations, which he said is a “compensating factor.” As well, the town council is part of internal controls through the bill review and approval process, plus the signing of checks. A good example of the council working as an internal control took place just before his report, Seckman noted, when councilwoman Carol Miller asked a number of questions about the list of bills to be paid.

3) Determining whether the town is in compliance with all laws, contracts, grant agreements, loan agreements, state statutes and Internal Revenue Service requirements, and the answer is yes, Seckman said, adding, “The results of our tests disclosed no instances of noncompliance” required to be reported under government auditing standards.

Getting into the details of the audit, Seckman said the town is in excellent shape for cash reserves in three of the four main accounts.

In the general fund, the town revenues have exceeded expectations by $486,520, and the fund has cash in the amount of $4.4 million and operating expenses of $2.1 million, leaving reserves of 2.1 times operating expenses, or 24 months, when six to 12 months is recommended.

Assessing the water fund, Seckman said the fund grew in cash by $39,640, and the fund has $1.1 million in cash and $963,319 in operating expenses, leaving 1.1 times or 14 months of reserves when 12 to 36 months is recommended.

“Water is a little tight, but we’re still building cash,” Seckman said, adding that the 2025 audit will show an increase in reserves.

In the sewer fund, cash increased by $67,440, and there is $1.07 million in cash compared to $491,820 in operating expenses, for 2.18 times or 26 months of reserves, when 12 to 36 months is recommended.

“I feel very good about your sewer fund,” Seckman said.

Seckman expressed some concern with the sanitation (garbage) fund, which has cash in the amount of $252,368 and operating expenses of $463,251 in annual operating expenses, or six months of reserves. Cash decreased by $388,536 this year, in part due to the purchase of a new garbage truck, but he said the fund shows a negative cash flow, even without the truck purchase.

Funds need to grow to purchase a truck every few years, Seckman said, and town administrator Jed Nebel said the town tries to obtain a new truck about every five years, though the current new truck took nine years due to supply chain issues. But with a negative cash flow in the fund, it’s difficult to come up with the funds to build up a reserve for the next truck, Seckman noted.

“I’m a little bit concerned about generating negative cash flow (in the sanitation fund),” Seckman said. “With enterprise funds, we want to be able to cover 50 percent of depreciation expenses.”

He said the water fund is covering 70 percent of depreciation with a positive cash flow of $39,640, and the sewer fund is covering 75 percent of depreciation, with a positive cash flow of $67,440. But the sanitation fund is covering 0 percent of depreciation, with a negative cash flow of $25,405.

Looking at the overall picture, Seckman said, “The only thing I would look at is the sanitation fund. The negative cash flow is a concern to us. There’s no truck (to be purchased) in the foreseeable future, but we still need to build a reserve. There’s $250,000 in reserves, but right now that’s going backwards by $25,000 a year.

“I hate to have to do a rate increase,” mayor Tom Newman said. “We’ll hold a work meeting and sort some things out.”

Nebel pointed out that the cost of dumpsters and delivery (fuel) have increased significantly over the years.

Town hall work

Nebel reported that he has been working on an MRG Grant from the State of Wyoming to expand and remodel Town Hall. He said he has been working with Pryor Mountain Engineering on the project, and engineers have warned that the remodel might require a fire suppression system throughout the building. Pryor Mountain recommended seeking a $1.3 million grant, which would require a 50 percent town match for $650,000.

Nebel said the town is looking into a low interest capital improvement loan through the State Loan and Investment Board or a loan through a local financial institution for the match.

“We’ve outgrown our footprint for storage,” Nebel said, noting that the grant will be “very competitive.” He suggested applying for the grant, with the application due September 19, and if awarded, the town is not required to accept it.

The council voted to approve the application and accompanying resolution for the grant.

With the council earlier moving significant sums of money to savings to generate interest, Tippetts requested that the council transfer money back from reserves to checking. 

“The checking is doing OK, but I’m getting nervous,” she said. “I’d like authorization to transfer money if need be.”

The council voted to transfer up to $100,000 from savings to checking.

Water savings

Public Works director Adrin Mayes reported a significant savings in water use after Wilson Brothers Construction repaired a water line cross section at Third and Jersey. He said a failed gasket had been leaking since 2006. He said he’ll look at the numbers for a few more months, but August to August, it appears that 1.4 million gallons of water was leaking, which will save the town around $20,000 per year. He said the savings will pay for the cost of the repair in one year.

“That’s a sizable leak, and we’ll continue to look at it,” Mayes said.

In other action September 10:

• The council approved Pay Request No. 3 to Midway Construction and Dirt Work for $39,805 for the Constitution Park Project.

• After being presented by clerk/treasurer Colleen Tippetts, the council approved the mayor signature on the Local Government Annual Report Summary to be sent to the State of Wyoming Department of Audit.

• The council voted to hold the annual fall cleanup from October 1 through November 30.

• Nebel reported that Pete Baxendale of Midway Construction has agreed to contribute an in-kind donation for the new amphitheater at Armory Park by doing stamping and staining on the amphitheater floor cement.

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