THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Wednesday, January 29, 1997 TAG: 9701290467
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY MAC DANIEL, STAFF WRITER
DATELINE: CHESAPEAKE LENGTH: 51 lines
The city's books received a stellar fiscal review Tuesday after an annual independent audit found nothing wrong with the way the city balances its bucks.
However, two major concerns were raised by the auditor, one of which will have a widespread impact on Chesapeake's and other cities' future financing.
Nothing about Tuesday's report should affect current capital budget wrangling, where city officials are still predicting a $14 million shortfall. But when it comes to future city finances, the report raised some questions about long-term planning.
The auditors from KPMG Peat Marwick LLP issued Chesapeake an unqualified opinion - meaning they didn't need to put any qualifications on their approval, not that the city wasn't qualified.
It is ``the best opinion you can get,'' according to KPMG partner Elizabeth Foster.
But the audit did note deficits in the state Public Assistance Fund, which is financed by the city and state.
Chesapeake's fund had a $729,963 deficit on June 30, 1996, double the deficit in the same fund in 1995.
Auditors said the fund's shortfall is expected to increase because Chesapeake has continued to receive less state funding than anticipated. Vice Mayor John W. Butt suggested a letter-writing campaign to state officials. ``There comes a time,'' he said, ``where their actions begin to reflect back on our city.''
This is more of an accounting shortfall than a budget shortfall, said City Manager John L. Pazour.
The city received $6.6 million in Virginia Public Assistance funding last fiscal year and spent $10.9 million. Some of the gap was covered by using money from the city's general fund.
Pazour said he will study how to handle this shortfall and return to the council with recommendations.
In addition, auditors noted that two years from now, federal regulations will require that all cities report unfunded pension liabilities in their general long-term debt. This means that cities will be required to show future pension payments on their balance sheets, which could lead to huge paper deficits.
For Chesapeake, it could mean an accounting shortfall of $25.7 million.
``We wanted to let you know this was coming,'' said Foster.
This change should not affect the city's bond rating or its ability to borrow money. However, it is cause for concern for any city that is facing tight local budgets while struggling to meet the demands of new residents.
``We're simply flagging this as an issue,'' said Pazour.
KEYWORDS: AUDIT BUDGET CHESAPEAKE CITY COUNCIL