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I Honorable Mayor, City Councilman, and City Manager -3- April 10, 1967 ACTUAL ACTUAL (OVER) ~ TOTAL DEFICIENCY OF REVENUE BUDGEr $472,320 472.320 $ -0- $444,235 $ 28,085 .2..R.l&2 60 165) $(88,250) $ 88,250) Revenue Expendi tures These amounts were taken from the City'S financial report for June 1966, which includes detail comparisons. Actual revenue was 6% under the budget while expendi tures were 13% over. Better budgetary control would result from the use of encumbrance accounting which we have previously recommended. The City's purchase order system would require changes which would result in recording encumbrances against the budget at the time a purchase order is issued rather than waiting to charge the budgetary accounts after the bill for goods or services has been paid. I The issuance of time warrants, with the possibility of refunding at some future date, will relieve the shortage of working capital which existed at December 31. Avoidance of future difficulties should be insured by adoption of these procedures which will give management advance notice that the budget is inadequate or that personnel are placing unplanned orders. Once again our opinion on the financial statements of the City was qualified because of inadequate records for Utility Fund fixed assets. As we first reported to you in our letter of July 19, 1963, the fixed assets are a material part of the total assets shown in the balance sheet, and depreciation expense is a material part of the statement of income; thus, an auditor cannot express an unqualified opinion on the Utility Fund financial statements without accurate records which can be audited. We again recommend that the City complete a physical inventory of all its fixed assets and for those assets not subject either to count (such as mains and lines) or to determination of original cost that the City obtain competent appraisors to assist in this undertaking. In setting the annual tax rate the City has designated a total rate which is divided part for operations and part for the general bonded debt and interest requirements. In the past, tax collections were not allocated to the General Fund and to the Interest and Sinking Fund in the ratio of the tax rate split. In fact, delinquent taxes collected should be split on the basis of the tax rate for the year the tax was levied. Because daily allocation of delinquent tax collections would be very time consuming, we suggest that daily deposits be split between funds using an average ratio and that at month end an adjustment be made between funds to correct to the required distributions. I As part of our work for the City in previous years, we developed the chart of accounts which the City has been using and recommended that an accounting procedures manual be written and include descriptions for use of the accounts and the coding system. Other subjects which should be covered include description and