Annual Audit Shows City

Is Decreasing Its

Indebtedness and

Balancing Its Funds.

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BONDED DEBT OF NEW

ULM IS NOW $370,600

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Depreciation Is Now Taken Into Consideration. $144,142.83 Is Total

Of This Item.

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Since the budget system was adopted by the city of New Ulm a year ago the financial status has “looked up” considerably. At the end of the last fiscal year, as of date, February 28,1926, the bonded indebtedness was $370,600. This is a decrease of $112,000 over the previous year. This is set out in detail elsewhere. In addition to decreasing the bonded indebtedness, the city on Feb. 28, had to its credit in the banks of the city in cash on deposit and certificates of deposit the sum of $161,401.30. There also was $40,532.24 in bills receivable at that time, while the bills payable were listed at $10,749.90.

If the budget system is adhered to for the next few years, the city should be paying its way, and the indebtedness should be liquidated.

Depreciation was taken into consideration in the annual report compiled by R. T. Schreider, certified public accountant, in the employ of Charles H. Preston & Co., of Minneapolis. He has deducted the item of $144,142.83, as depreciation from the assets of the city. It can be said that this item is book fieuros in each department with the exception of the Heating department, where it is in the form of certificates of deposit. The depreciation reserve in this fund is $18,576.04.

Report Accepted.

The report of the certified public accountant was accepted at a meet-ing of the council, Thursday evening, and a committee consisting of City Clerk W. P. Backer and City Attorney H. N. Somsen, together with the accountant was charged by the council with the work of presenting a plan whereby a depreciation fund can be built up for the other funds. This is especially gratifying to the editor of the Journal, as year after year, in this report and the Journal’s comment on same, the attention of the council has been called to this glaring defect in the city’s financial status. The city has plant and property that is worth on the market from $1,000,000 to $1,500,000 and a depreciation reserve has not been heretofore considered.

Street Status.

From the report it is evident the weak spot in the city’s activities is the street department. There is an overdraft in this fund of $1,306.93, but this does not tell the tale. The total revenue of this department during the past year was $41,288.74, while the total expenditures were $54,891.15. This shows an excess of expenditures over receipts of $13,602.41.

Cash and Certificates.

The cash balance on February 28,1926, in the current fund account was $40,925.69,while the certificates on deposit at the various banks of the city totaled $120,475.61, making a total of $161,401.30. In summing up the assets the above figure is a portion of the current assets, which also include certificates of deposit, special assessments receivable, $28,293.35; delinquent taxes, $7.54 and accounts receivable, $12,231.35. The capital assets of real estate. $35,823.78; buildings, equipment and mains, $647, -262.53; furniture and fixtures, $7, -659.82; fire apparatus, $16,461.84; road machinery, vehicles, etc., $1,200; sewers, $145,314.67; stores and material on hand, $13,097.45 are also included. The total of the foregoing items included in current and capital assets is $1,068,753.63.

Liabilities listed.

The liabilities are listed in a total of $471,055.11. This is in excess of assets over liabilities of $453,555.69and depreciation in the sum of $144, -142.83. The liabilities consist of bills payable on La France truck, $5,749.90; bills payable on La France tractor, $5,000; bonded indebtedness and sewer warrants, $370,600; sinking funds, $89,705.21.

Net Balance in Bank.

The report shows that the city of New Ulm has a net cash balance in the banks of the city in the sum of $40,925.69. Some funds have balances,while others have overdrafts. The statement of those, which have balances follows:

Electric Light fund ………..$38,485.70

Water Works fund …………$1,051.57

Heating fund …………12,989.94

Administration fund ……..5,248.61

Cemetery fund ………..8,974.99

Park fund …………202.20

Sewer fund …….5,257.12

Total ……..$72,210.02

Those funds, which show overdrafts follow:

Fire Department fund $1,230.73

Interest and Sinking fund 28,746.67

Street fund 1,306.93

Total $31,284,33

The condition of the cash balances of the funds is improved over what it was a year ago. There were transfers made shortly after March 1,1925,which wiped out the overdraft in all the funds, but that in the interest and sinking fund. This fund will be built up through tax levy in the future and will eventually show a cash balance, instead of an overdraft, as at present.

Certificates of Deposit.

The accountant verified the certificates of deposit and found that this Item was $120,475.61, divided between the various funds as follows:

Electric Light fund….$111,000

Electric light bonds…$172,800

Water works bonds…72,000

Certificates of Indebtedness…4,800

Sewer warrants…..10,000

Total…..$370,600

The following bonds were retired during the past fiscal year: State loan, $90,000; funding bonds, $7,000; electric light bonds, $8,000; water service bonds, $1,000; Jefferson street grading bonds, $3,000; water main certificates of indebtedness on Washington street and Broadway, $1,000; sewer warrants, $2,000. This is a total of $112,000.

The audit contains the following mention as to the Sinking fund account of the Electric Light department: “In the Electric Light department, we find there are outstanding $172,800 of bonds, and you have a sinking fund of $8,000 now set up to cover this amount. Notice in the analysis of surplus of the Electric Light department, there has been made an adjustment to the Sinking Fund account. This Sinking Fund account has been carried at the wrong amount for several years inasmuch as the amount was not available for the retirement of bonds. Bonds had been retired from time to time out of the current funds and the necessary adjustment had not been made to the Sinking fund.” The adjustment was made in the audit, so the sinking fund shows an $8,000 balance.

“Certificates of deposit are now held to cover the sinking fund in each department, and, in addition to that, the city has certificates of deposit to cover the reserve for depreciation in the Heating fund and also certificates of deposit for the Insurance reserve, an carried in the Interest and Sinking fund.” states the report. “At the present time there is no balance in the Interest and Sinking fund.”

Operations of Utilities.

The income from all sources in the th Electric Light department to be $107, -235.85, of which private consumers paid $76,256.73, and the balance of $39, -923.29 was paid by the City departments for services. There are recoveries on bad debts in the amount of $55.83. The total expenses were $88, -074.61, leaving the net income to be carried to surplus, $19,161.24. Depreciation was charged this year in the sum of $15,864, and the amount of interest paid on bonds was $8,956.68.”The accounting in the various utilities is generally being reorganized, so that each one carried its own burden of expense and takes credit for all of its own income,” stated the report. “In the expenses of the Electric Light department, we notice a peculiar circumstance which is ‘Return water from heating system, $1,325.80, and we do not find where the heating system has been charged for any water whatsoever. This return water cannot be only from the live steam, which was put into the Heating department and it would seem that if it is going to charge the Electric Light department for the return water, then the Heating department should pay for all the steam it receives, whether live steam or exhaust steam. There was an amount of $16,000 set aside from the Electric Light department surplus to the Sinking fund, $8,000 of which was used to retire bonds, leaving $8,000 now on hand in the Sinking fund.”

Water Works Net

Income $1,256.61.

The total income from the Water Works department was $28,339.90 and the total expenses $27,083.29, leaving a net income to be carried to surplus of $1,256.61. The expenses includes an amount of depreciation of $5,280.36,and interest on bonds of $3,862.83. “It was decided at the beginning of the year to reduce the rates changed the Water Works department by the Electric Light department for pumping,” states the report. “The kilowatts is greatly in excess of what it was for the year ended February 28, 1925, so that although the rate had been materially reduced, the Water Department did not gain much from this reduction in rate. We would suggest that the meters on the pumps for pumping water be checked up a little more closely and only the actual number of kilowatts be charged to the Water Works department — no estimates being allowed by anyone. We note, however, that there was a small amount of surplus from the year’s operations. There was transferred from Water department surplus a sum of $5,987.59 to Water Works department Sinking fund.”

Heating Net Income, $11,455.35.

The total income in the Heating department is $21,172.30 and the total expenses $9,716.95, leaving a net income to surplus of $11,455.35. “This income still appears to be out of ratio with that of the other utilities, and we believe that there should be a small charge made for waste steam from the Electric Light department to Heating department,” advises the accountant. “This could be made and the net income reduced to show a fair profit without increasing the rate.”

Revenues and Expenditures.

Under the caption of “Revenues and Expenditures of Fund Accounts” the auditor deals with the various funds of the city. He has this to say with regard to the Administration fund. The total revenues in the Administration department were $9,002.35, and the total expenditures $17,292.25, or an excess of expenditures over receipts of $8,289.90. Inasmuch as this fund had a large cash balance at the beginning of the year, the tax apportionment to the Administration fund was reduced. However, the balance is now a little over $5,000 and a tax levy sufficient to carry the Administration fund will have to be set up for future operations.”

Brown County Journal

May 14, 1926

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