Audit: Norwood water fund overdrawn by $186K

Audit: Norwood water fund overdrawn by $186K
Norwood's latest state audit is out, and the city remains in fiscal emergency. (Source: FOX19 NOW/file)

NORWOOD, Ohio (FOX19) -Norwood’s water fund had a negative cash fund balance of $186,130 at end of last year, the city’s latest audit determined.

City officials “provided no response to this finding,” auditors wrote.

Norwood remains in fiscal emergency, according to its latest audit for 2018, released early Tuesday.

The city has been in fiscal emergency due to deficit fund balances since October 2016 and, before that, spent 12 years prior in fiscal watch.

“Negative cash fund balances are an indication that receipts from other sources were used to pay obligations of these funds," auditors wrote in their latest look at the city of about 19,870 residents.

“Fund activity should be monitored to prevent future disbursements in excess of available resources. The City should not make any expenditure from any fund if the resulting expenditure will exceed the fund cash balance,” auditors wrote.

The city’s water fund had “significant reductions in GAAP-basis fund balance and cash balances during 2018,” the audit continues.

"During economic downturns, management needs to take additional steps to ensure its improved financial position and future stability.

"Additional steps might include additional financial planning measures to attempt to increase revenues or further decrease expenditures, and additional financial monitoring to ensure management is intimately aware of the City’s financial position to help ensure that effective financial strategies are developed and initiated. The City should review its financial planning, financial monitoring, and budgetary processing procedures to ensure that sufficient steps are taken that will positively impact the City’s current financial position.

We are reaching out to Norwood city leaders and will update this story throughout the day.

State Auditor Keith Faber’s office reviewed Norwood’s independent audit, prepared by J.L. Uhrig and Associates, Inc., and accepts it in place of the normal state-conducted one.

“The Auditor of State did not audit the accompanying financial statements and, accordingly, we are unable to express, and do not express an opinion on them,” he wrote in a letter to Norwood City Council.

“Our review was made in reference to the applicable sections of legislative criteria, as reflected by the Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditor of State, regulations and grant requirements. The City of Norwood is responsible for compliance with these laws and regulations.”

Other financial highlights from the audit:

  • The City’s total governmental activities’ net position increased $1,731,368 from 2017. Business-type activities net position realized a decrease of $423,177 from 2017.
  • For governmental activities, general revenues accounted for $31,895,691 of all revenues. Program receipts in the form of charges for services, operating and capital grants, contributions and interest accounted for $1,715,813 of total revenues of $33,611,504.
  • The City had $31,880,136 in expenses related to governmental activities; only $1,715,813 of these expenses was offset by program specific charges for services. General revenues (primarily property and municipal income taxes) were $31,895,691 but were sufficient to cover the remaining governmental expenses.
  • Enterprise funds reflected an operating loss of ($423,177). The water and refuse funds realized an operating loss and income of ($508,200) and $85,023, respectively.

A city is placed in fiscal emergency if any one of the six conditions:

  • Default on a debt obligation
  • Failure to make payment of all payroll
  • An increase in the minimum levy of the city which results in the reduction in the minimum levy of another subdivision
  • Significant past due accounts payable
  • Substantial deficit balances in city funds
  • A sizeable deficiency when the city’s treasury balance is compared to the positive cash balances of the city’s funds.

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