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Ellsworth audit reveals finance questions

The Ellsworth Village Board held a special meeting Monday, April 30 to address questions raised during a 2017 audit of village finances concerning the balances in the capital equipment and repair and the general funds.

Rob Ganschow, partner at Wipfli LLP, was at the meeting to give information about the audit. He said fieldwork for the audit was done in late January 2018. He said in 2012 the capital equipment and repair fund was started "for the village to maximize state funding."

In 2012, $221,000 was transferred from the village's general fund into the capital equipment and repair fund. Then in 2013 the budgeted revenue for the capital fund was $260,600 and the actual revenue was $247,318. The budget expenditures were listed at $481,600, but actual expenditures for the year were $131,070. Also in 2013, another $27,000 was transferred to the capital fund from the general fund. This made the budget surplus for the year $364,248 and the actual yearly surplus on the capital fund $143,248.

"The Village budgeted based on the budget surplus rather than the actual surplus," Ganschow said. "Normally this wouldn't be an issue. However, since much of the funding that was anticipated to be used for the projects was fund balance applied, it created the issue."

Ganschow said part of the problem was that there was more budgeted revenue than what the actual revenue was and fund balances were being applied to cover the additional expenditures. However, the amount of fund balances were incorrect and showed larger amounts than what was actually available.

The village was looking to combine the capital equipment and repair fund into the general fund because of state regulations when the issue was found.

"The state has changed how it computes amounts related to the expenditure restraint program so it no longer makes sense to have the two funds," Ganschow said. "Therefore, the capital expenditure activity of the village has been moved back to the general fund."

During this process it was found that less money was available than originally thought.

"The issue came up this year because of the change in the state's computation of amounts related to the expenditure restraint program as well as combining moving the capital expenditure activity of the village back into the general fund," Ganschow said. "In the past, the budgets were done separately and only the amount of surplus to be applied to the next year's budget in the General Fund was looked at when examining the balance of the unreserved-undesignated fund balance. This year, when the amount of surplus to be applied to the 2018 budget was calculated and segregated, it showed that the unreserved-undesignated fund balance was below the limit set by the board."

The board approved resolution number 2018-03 to amend the 2017 budget for the Village of Ellsworth by increasing the fund balance applied in the general fund by $963,591 and increasing the transfer to other funds by the same amount. In addition they increased the transfers in in the capital equipment and repair fund by the same $963,591 and decreased fund balanced applied by this same amount.

"The thought was that if the Village amended the 2017 budget, they would be able to use those amended figures in the 2018 expenditure restraint calculation and therefore qualify for the payment to be received in 2019," Ganschow said.

However, at the state level the 2017 budget amendment was not accepted because it would mean the village would not be able to get the 2017 expenditure restraint payment.

"For Expenditure Restraint (ERP) worksheet purposes, the department can only accept budget amendments if those budget amendments do not disqualify a municipality from qualifying for a payment based on the prior year ERP worksheet," said Andrea Newman Wilfong, revenue auditor for the Wisconsin Department of Revenue Local Government Services Bureau. "Since the 2017 amended budget for the Village of Ellsworth would disqualify the village from qualifying for a payment based on the 2017 ERP worksheet (which is the payment the village will receive this July), the 2017 amended budget cannot be accepted."

Ellsworth Village Clerk Peggy Nelson said that going forward the board decided they would not be able to amend the 2018 budget to get money back from the Expenditure Restraint Program in 2019. The village board voted on this at the May 7 Ellsworth village board meeting.

"They [the board] elected not to amend the [2018] budget as they could not come up with $882,690 to cut, so the Village will not qualify for a 2019 Budget Expenditure Restraint payment which would have been $20,000 plus," Nelson said.