Town of Farmville statute violation & two negative Performance Indicators in audit

On Monday night, February 7, 2022 at the Farmville Board of Commissioners meeting, Jay Parris presented the audit report for the fiscal year 2020-2021. After listening in person and then to the recording three times, I offer these carefully-taken notes. Please listen to the recording yourself, when it becomes available.

CPA Jay Parris of Barrow, Parris and Davenport, spoke as he showed various charts and graphs in a Power Point presentation. He often referred to the Town of Farmville as “you.” When he said “we,”  “us,” or “our,” he meant his accounting firm.

Here is the summary of pertinent portions of Parris’ audit report presentation.


There are new Performance Indicator statutes which say that we have to highlight these things to you in your audit presentation.

The fiscal year 2020/2021 audit shows one statute violation related to transfers. The “fund balance” is the amount of money in reserve that is available for a rainy day. This is called the “undesignated fund balance.” Last year you had $2.1 M in this fund balance. This year you had $1.4M.

There were three “Performance Indicators.” One has to do with the fund balance. The second has to do with the cash flow in the Electric Fund. The third is because the audit was not submitted by December 1. This was our fault. Amy had all of the information ready and to us in time.

The Town of Farmville fund balance has gone down. You spent about $1.2M on improvements to the town. Capital items included paving a parking lot, bio security, a new fire truck, plans for a new fire station, a splash pad, and police radios.

Your fund balance was 46% last audit and was 23% this audit. The Local Government Commission (LGC) previously wanted at least a 24% fund balance. Now they want 34%. They now want a municipality to have enough money to last for four months. That is the new target.

Your fund balance was at 46%. Now I have you at 23%. The LGC sees it as 33%. They see it differently. They want you to get to 34%. They have you at 33%.

This next chart shows revenues over expenditures. Your General Fund historically has operated at a deficit. You make annual transfers over from your enterprise funds (water, sewer and electric) to help with your General Fund. Money customarily is moved. This year in this $1M deficit you spent $1.2M on capital outlay. Capital Outlay in the General Fund is counted as expenditures. After the transfers you have a $400K deficit in the General Fund. Even after reimbursement, you have a $400K deficit in the General Fund.

The last two years you operated at a surplus. This year you operated at a deficit, even after reimbursements.

One of the Performance Indicators is that your Electric Fund has operated at a deficit for three years. The Local Government Commission wants you to have two months of cash flow in the bank account for the Electric Fund. With the losses you have had for the last three years, the Town of Farmville does not meet their required or suggested level.

You will have to look at possible rate changes. The numbers indicate that you need to look at your electric rates. You may need to look at the study of how much you reimburse for the General Fund for general administrative-type expenses. Within 60 days you will need to address this… the electric rates or whatever you can do about this deficit.

The Water Fund is operating at about a $150K deficit this year. (Someone interjects to ask about the close-out from a water project from 3 or 4 years ago.) Yes, I think there was some money from a one-time close-out. The money never had been moved. It might be that, taking this into consideration, there is a small surplus in the Water Fund.

You have about $65M in lines, tanks, transformers, wells, etc. out there in service. Ideally, as these wear out you build cash to replace them. Any major replacements likely will get grants. You do not need to get 100% of that coverage. The Performance Indicator wants you to build cash, like they want you to do for the Electric Fund. You probably need to look at increasing your electric rates.

You have one deficiency, and it is a budget transfer. Because you are a part of the Municipal Power Agency, a state statute limits how much you can transfer from the Electric Fund to the General Fund. For the computation, you take 3% of your fixed assets to come up with the number. You can’t transfer more than that amount.

Amy computed the amount. Then you all came back on top of that and budgeted $82.5K for economic development. That put you $54K over. Prior to that you were within statutory limits. It turns out, you have been doing this for a number of years. The Local Government Commission had not really picked up on it and we had not really picked up on it. This is a statutory violation and it turns out you have had this violation for a few years. The Electric Fund had been in good shape. We became aware of it. You’ve got to pay attention to transfers. You’ve got to be careful what you transfer.

Mayor John Moore ended by asking Parris how he would rate the Town of Farmville’s finances or audit on a scale of 1 to 10. Parris said a 7 or 8. John Moore said he would take the 8.

(Parris closed with giving Amy a glowing report for how great she is at her job. She is one of the best people they deal with, documenting town finances accurately and having all records completed in a timely manner, he explained.)


Parris noted at the beginning of the audit presentation that a parking lot was part of the $1.2 M capital outlay for the town. He repeatedly mentioned that the $1.2M had to be considered as intentional investment in the town’s capital. The former train depot parking lot, for which the commissioners allotted $340K, is not owned by the town. An improvement for property owned by a private individual can’t be counted as a capital improvement for the town. Over one quarter of that $1.2M has no relevance to capital outlay. Also, Parris said that by his calculations the Town of Farmville’s fund balance went from 46% to 23%. Why is there a 10% discrepancy between his calculation and that of the Local Government Commission? Finally, according to the Municipal Power Agency, every municipality has to conform to the requirement of not exceeding 3% of assets to determine the amount of transfers. It has nothing to do with belonging to the Municipal Power Agency. It simply is a state statute for every municipality, regardless of where they buy power.

Undoubtedly, this audit will be presented in different ways by various people. Please take time to look at the figures for yourself. You can go to Town Hall to request documentation.

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