Audit: City saw $122K shortfall for last fiscal year

Posted 1/20/21

By DANIEL KITTREDGE Cranston ended the last fiscal year with a combined shortfall of roughly $122,000, according to the initial findings of an annual audit, although officials described the loss as "e;modest"e; in light of the circumstances and in keeping

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Audit: City saw $122K shortfall for last fiscal year


Cranston ended the last fiscal year with a combined shortfall of roughly $122,000, according to the initial findings of an annual audit, although officials described the loss as “modest” in light of the circumstances and in keeping with trends seen regionally and nationally.

“It’s been a tough fiscal year … but we ended up very well, considering all the obstacles we had to face,” Finance Director Robert Strom told members of the City Council in December, when Ron Nossek of the firm BlumShapiro presented an outline of the audit’s findings.

He added: “As a whole, a city that has a $300 million budget and ended up with a deficit combined of $122,000, is relatively, it’s a balanced budget. And I’m proud to say that between the efforts of ourselves and the schools and the city, I think we did well considering all the obstacles that we had to deal with.”

Overall, BlumShapiro’s figures show a $237,373 operating shortfall for the municipal side of city operations. Cranston Public Schools, meanwhile, posted an operating surplus of $115,159, producing the combined shortfall of $122,214.

The city’s undesignated fund balance, more commonly known as the “rainy day” fund, stood at $18,066,441 as of June 30, according to BlumShapiro’s figures. That represents 7.8 percent of the city’s total expenditures.

Nossek’s presentation notes that the “rainy day” fund balance has decreased in each of the last three fiscal years. It had declined from $20,225,654 (8.99 percent of total expenditures) for the year ending June 30, 2018, to $18,335,669 (8.07 percent) for the year ending June 30, 2019. City voters in November adopted a charter amendment requiring a minimum balance for the “rainy day” fund of at least 5 percent of total expenditures.

“It has declined a little bit, but certainly not of any significant amounts in any one fiscal period,” Nossek told council members in December. “But it has trended down. That’s not a unique thing, clearly in this fiscal year that we’re talking about … due to the pandemic.”

Nossek said the “rainy day” balance is “one of the primary indicators that rating agencies look at when they’re evaluating a community relative to bond rating,” although he suggested the fallout from COVID-19 may lead to changes in how that figure is evaluated.

“To be quite honest with you, because of the pandemic I think that whole world has been turned upside down, and there’ll be a new evaluation of what the range should be, I think, moving forward,” he said.

In broad terms on the municipal side, revenues under performed estimates by $932,054, while expenditures came in $694,681 less than had been budgeted.

Nossek’s presentation highlighted two key areas in which the city’s budget projections were significantly off.

The first, intergovernmental revenues, saw a roughly $1.2 million shortfall. Strom said that was “primarily due to state and federal grants that weren’t achieved on a revenue basis” as a result of the COVID-19 crisis.

The second area was the Fire Department, which saw its expenditures exceed what was budgeted by nearly $2.6 million. Strom said the overage resulted from injured on duty, or IOD, costs, along with severance and overtime.

The fire overage, Strom said, was the “biggest factor in us generating what I would consider a very small deficit.”

While Cranston Public Schools’ revenues also fell short of projections by roughly $2.2 million – largely due to lower-than-anticipated state aid payments – its expenditures were nearly $2.9 million less than expected, according to the auditor’s findings. That helped produce the positive bottom line, even as the district allotted $750,000 toward its capital reserve fund.

Nossek told council members that his firm found “no material weaknesses or significant deficiencies” during the course of its work, and no compliance issues were identified. He said some final work and technical review remained to be completed before the submission of a final report, although no figures were expected to change.

According to BlumShapiro’s figures, the city’s closed pension system for police and fire personnel was nearly 23 percent funded as of the end of the last fiscal year.

Former councilman Steve Stycos questioned the “very, very slow progress” made toward more fully funding that pension liability. Based on the auditor’s figures, the city has contributed between $21 million and $22 million to the fund in each of the last seven fiscal years. During that time, its funded percentage has remained between roughly 20 and 23 percent.

Strom said the contribution to the plan has remained constant to ensure the city can address other priorities in its budget. He estimated that at the current pace, the pension liability would be between 60 and 80 percent funded by the mid-2030s.

“We want to make sure we don’t contribute more than what the budget can handle,” he said, adding: “It’s something you can’t do overnight … It will improve as long as what we adhere to what we have to contribute and we invest properly.”

Nossek acknowledged the plan is “not well funded, clearly,” but added: “The contributions that are being made are equal to what the actuarial recommended contribution to the plan is. I don’t know what more you can do relative to that, unless you’re willing, and the public is willing to allow you to contribute in excess of what is recommended.”

He continued: “It’s a delicate political balance, I believe … The percentage that you’re at is not in any way unique among municipalities throughout New England, throughout the United States.”

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