Purpose of Audit

The purpose of our audit was to review the financial condition of the City’s general, water and sewer funds for the period January 1, 2008, to December 31, 2011.

Background

The City of Saratoga Springs is located in Saratoga County and has a population of approximately 28,000. The City is governed by its Charter and other general laws of the State of New York. The City Council, consisting of five members, has overall responsibility for the City’s operations. The City’s annual budget for the 2012 fiscal year was $37.2 million for the general fund, $2.9 million for the water fund, and $3.7 million for the sewer fund.

Key Findings

• Since our last audit of the City’s financial condition, the general fund’s unexpended surplus has significantly increased from $165,723 on December 31, 2006 to $6.2 million on December 31, 2011. As of October 31, 2012, the fiscal year 2012 general fund budget of $37.2 million appears on track with City officials not anticipating an operating deficit. Also, while the financial condition of the water and sewer funds has improved during our audit period, the water fund balance continues to remain in a deficit. As of October 31, 2012, the fiscal year 2012 water budget of $2.97 million and sewer budget of $3.67 million appear generally on track with City officials anticipating a small operating deficit in each fund.
• During the period reviewed, the Council did not address cash flow problems in the water and sewer funds. Instead, the Council routinely relied on increasing amounts of inter-fund loans from the general fund to finance operations in the water and sewer funds. The combined balance of outstanding inter-fund loans from the general fund to the water and sewer funds has increased from approximately $1.4 million on January 1, 2008 to $1.8 million on December 31, 2011, with no plan for repayment.

Key Recommendations

• Monitor whether recurring revenue sources are sufficient to finance operations in the water and sewer funds and take appropriate action as necessary to improve the funds’ financial condition.
• Establish a plan to repay the inter-fund loans between the general, water and sewer funds.