Cleveland audit shows funds surplus
By Sarah Campbell
CLEVELAND ó Maintaining a fund balance of more than $2.7 million throughout the past five years, the town leads other municipalities in the county in the ratio of fund balance money that makes up general fund expenditures.
During the annual audit presentation, Eddie Carrick, a certified public accountant with Lexington-based Allred and Carrick CPAs, said the town has a current fund balance of approximately $3 million, 316 percent of general fund expenditures.
ěBasically, that means if everything just stopped you could still continue to provide services for the town for about three years,î he said. ěThat gives you some stability by having that in place.î
Clevelandís fund balance has remained steady throughout the past five years, dropping to its lowest in 2007 at $2.7 million or 202 percent.
Although the townís fund balance ratio eclipses the state average of about 65 percent, the town continues to boast the lowest property tax rate in the county at 21 cents per $100 assessed value.
Carrick said property tax rates for municipalities the size of Cleveland are usually between 33 and 35 cents.
East Spencer has a population of more than double that of Cleveland at 1,700 residents, and the highest property tax rate in the county at 63 cents per $100 assessed value, yet its fund balance made up only about 25 percent of general fund expenditures last year.
ěThe Local Government Commission of the State Treasurer’s office requires at least 8 percent and gets worried if it is less than 30 percent,î Carrick said in an e-mail to the Post.
East Spencer isnít the only town in Rowan that dipped below the 30 percent standard last year Landisí and Salisburyís fund balances were 0.3 and 14 percent of general fund expenditures, respectively.
Carrick said from a fund balance standpoint Cleveland is ěat the top of the chart,î but economically unstable of its heavy dependence on revenue from Freightliner.
ě To be financially stable, a town such as Cleveland who relies heavily on one tax payer needs to have a much higher percentage than a town whose tax/ utility use base is spread out among hundreds of businesses,î he said.
Karl Knapp, director of research and policy analysis for the N.C. League of Municipalities, said itís not uncommon for small towns to build up large fund balances.
ěDepending on the situation theyíre in, they may be potentially facing a very large expense in the event of any kind of emergency due to a natural disaster or if they have some services where the potential loss of a piece of equipment would have a significant replacement cost,î he said. ěItís prudent for them to keep a fund balance that would allow them to replace that right away.î
Although towns have the option to take out loans for emergencies, padding funds over time eliminates the financial burden.
ěThe advantage to accumulating capital is that you donít have the required ongoing commitment that you would with bonds,î he said. ěThere is also cost related to bond financing.î
Contact reporter Sarah Campbell at 704-797-7683.