With the presentation of the 154-page annual audit of the City of Falls Church’s financial operations, Billy Robinson representing the certified public accounting firm of Brown Edwards, told Monday’s meeting of the Falls Church City Council, “You are in a strong position, especially given the (small) size of your staff, and have done a good job given your resources” for keeping the City’s financial house in order.
He said that since the Council had voted to add $9.2 million from the sale of its water system to Fairfax County in 2014, the City’s position with respect to its pension fund is at a plus 115 percent, and he said “I know of no other locality in Virginia” whose position is as strong.
The report identified “one significant deficiency relating to the audit of financial statements” that dealt with “internal control over financial reporting and on compliance and other matters,” and Robinson explained to the Council that this dealt only with a potential risk, and was due to the small size of the Falls Church finance office, having nothing to do with any suspicions. “This merely acknowledges that an opportunity exists, with no evidence anything has happened.”
City Manager Wyatt Shields further explained to the News-Press Monday that this has been a long-standing issue that has been identified and watched carefully for many years and is due to the limitations of staffing.
When asked by Council member Phil Duncan if something like an internal audit function were added the City could correct this issue, Robinson suggested that it would not achieve anything more than has already been accomplished, which is to identify the issue and to watch it carefully.
“You’re in a strong position, and my advice is to have policies in place to adhere to, such as fund balance and debt service policies, which you do. You’re doing this and while your policies are not very liberal, if you decide to modify them you have to understand the reasons why,” he said.
But while the City’s position with respect to its pension fund is the strongest in the state at a plus-$447,293, the same is not true for its School Board, which is listed with a pension liability of $32,257,424.
The Schools are enrolled in the state’s Virginia Retirement System pension plan which legislators in Richmond have been under-capitalizing in favor of other political priorities, leaving its component entities in the fiscal lurch for the time being at least.
But for the time being, this is merely a financial reporting issue, according to City Hall, because this deficit has been known for a long time. The only new thing is that under new accounting reporting rules adopted by the state, the sum of this liability must now be shown on the books.
However, the auditor report stated that “because similar information has been disclosed in prior years, both in the notes to the financial statements and in required supplementary information, the effect of this new (reporting-ed.) standard is not expected to negatively affect how most governmental entities are viewed by sophisticated readers of their financial statements.”
In other words, the City’s credit rating with the New York credit agencies should not be impacted, one way or the other.
The $32,257,424 liability sum is the City’s share of the statewide liability to the VRS system. Every locality is liable for its proportional share. The Schools invest into the system by drawing five percent from the salaries of all its participating employees, which is uniform statewide.
Robinson also confirmed Monday night that the City’s fund balance is actually in excess of the City’s policy guidelines, at $14,301,563 over 20 percent of the $70,469,212 in total assets and liabilities for the last fiscal year.