Radford Council Hears Audit Results
By DAVID QUESENBERRY
Patriot Publishing
At its August meeting, the Radford City Council received the Fiscal Year 2024-2025 audit of the city’s finances. The audit seemed to indicate that at that time there was still much to be done in resolving issues with the City’s finances.
Before the audit presentation, Mayor David Horton explained that audits were usually presented in January of the calendar year. Due to significant changes in the City’s Finance Department and the workload in getting information in place for the audit, the presentation of the FY 2024-2025 audit was delayed. Horton emphasized that this audit was not for the budget that the City just finished nor was it a forensic audit, but was the audit for the fiscal year ending June 30, 2025. Horton described the audit as a “snapshot” of the city’s finance a little more than a year ago.
Corbin Stone of Robinson, Farmer, Cox Associates reviewed the audit for City Council. He told City Council to keep in mind that these numbers were over a year old. The audit had received an “unqualified opinion” which means that it is believed the statements are materially correct. With respect to the Government auditing standards (GASB) two findings were made. First, material adjustments were made to the audit. Stone explained that the auditors found some things that needed to be adjusted. The second one was a long standing issue with multiple financial systems which at that time hampered communications and financial reconciliation between the Treasurer’s Office and the Finance Department. This miscommunication contributed to the need for the adjustments. Stone noted that the City was currently addressing the data systems issue and that computer system security had become very important with the use of sophisticated cyber-attacks using Artificial Intelligence to steal data.
General Fund-Fund Balances
In his review of the audit for the General Fund, Stone said the City’s General Fund Balance had improved some $2 million from ($1.9 million) to $664,510. The increase did not come from additional tax revenue but primarily from the transfer of $8 million from other sources such as the Electric Fund. The City’s total Governmental Fund Balance had improved from $707,266 in 2024 to $5.18 million in 2025. Most of the growth occurred in the Highway Maintenance Fund whose funds are restricted as to how they can be used. The unrestricted/unassigned general fund balance was a ($2.11 million) for 2025, an improvement from ($4.56) million in 2024, again due primarily to transfers. Long term liabilities of the city for 2025 totaled $58.5 million up slightly from $56.3 million in 2024.
Factors Affecting the City’s Challenges
Stone said there were three factors that were driving Radford’s challenges. First was that Radford University owned approximately 36 percent of the City and that its drop in enrollment had increased costs for utilities and most everything else for the remaining residents. Second was the moratorium on city annexations passed by the General Assembly in 1979. This effectively forced cities to switch from development of vacant land to redevelopment of existing areas. Stone said, this increased the fiscal stress on Virginia’s cities such that of the top 25 localities under financial stress, 21 were cities as compared to 4 counties. The third factor was inflation, which raises the cost of everything through currency devaluation.
Enterprise Funds-Net Position
Stone next reviewed the net position of the City’s Enterprise Funds that included the: Water/Sewer Fund; Electric Fund and Solid Waste Fund. He said that the net position represented all assets of each fund minus the fund’s liabilities and did not represent cash that could be spent.
The Electric Fund showed a negative net position of ($433,371) in 2024 and also in 2025 of ($2,594,051). Stone said this was driven by outstanding AEP bills at the end of the year which shows up as a liability in accounts payable and an expense in the City’s books. The net position of the Water/Sewer Fund declined slightly by $285,428 while the net position of the Solid Waste Fund declined by $92,307. Overall the net position of all the Enterprise Funds decreased about $2.5 million between 2024 and 2025. One positive aspect of the Enterprise Funds was that the City’s did not have a huge long term debt burden for a city of its size. The 2025 Enterprise Fund Debt was $3.8 million was less than the state average.
Recommendations
In light of the audit, several recommendations were made to Council concerning measures that should be taken. Stone noted that $819,883 had been carried over from the previous year as unused fire program funds. He felt the monies had been spent but not applied against the fund. The recommendation was to review the filings and determine if the costs were occurred but were unreported to the state. The capital asset listing, especially for land owned by the City, lacked detail making it hard to locate parcels. It was proposed that the city perform a reconciliation of property as reported in the capital asset listing.
Another recommendation on the budgeting process was to expand it so to check that budgeted amounts considered their proper budgetary relationship and develop forecasting models based on historical trends. This was noted when State Comprehensive Services revenues were shown to exceed expenditures and federal and state grants had revenues in excess of expenditures, which should not be the case. The audit also advised that grant fund and capital fund budgets be reviewed and updated as needed. A process was proposed to ensure that Council appropriations from the minutes and the budget both agree with each other.
The audit called for large numbers of accounts receivable to be written off since they reflected amounts owed by persons now deceased and businesses no longer in operation. Also recommended was that the Public Works superintendent review and certify all hours charged to the Urban Maintenance Program. It was further advocated that a reconciliation of revenues and expenses should be performed on all Community Development Block Grants to make sure that reimbursements were received and that reimbursements are not received in advance or are received twice. The City was also advised to monitor and track public service corporation billings against collections during the year.
Following the audit presentation, former interim City Manager Craig Meadows briefed the Council, at the request of Mayor Horton, on the City’s financial state a year ago as compared to now. Meadows noted that one of the challenges he faced in January 2025 was an outstanding Revenue Anticipation Note (RAN) for $4 million on which no payments had been made. Coupled with this were outstanding AEP bills which highlighted obvious cash flow concerns. In response positions were frozen and measures taken to “shore up” the City’s cash position.
Meadows said the two major challenges he face during his six month tenure was to start the budget process for FY 2025-2026 which proved difficult since a lot of information was not readily available and the method of determining previous revenue estimates were unclear. The second challenge was to pay off the $4 million RAN by June 30, 2025. The City was able to secure some financing by borrowing against some previous capital purchases to provide cash and to pay off the RAN so the City did not have to issue a third note. This borrowing caused the General Fund to increase at the end of the year aiding the City in getting to a more “cash positive” position at the start of FY 2025-2026.
From the budget standpoint, Meadows said work on several projects was stopped. Issues with the Electric Fund had to be dealt with due to a time lag in collecting payments under new rates and the gap in revenue estimates in the General Fund which ended up causing the Electric Fund to decline.
Meadows said, “As I told you guys last year as we were looking at the budget, this wasn’t going to be a one year fix. It’s a multi-year fix.” He complemented Council on the measures they took and continue to take to address the city’s finances and recognized current City Manager Todd Meredith’s effort to strengthen the Finance Department and continue efforts to address the City’s finances.
Council was also informed by the City Treasurer, Commissioner of Revenue and the Information Technology director, that the consolidation of the City’s computer systems was ready. The new system scheduled to be placed in service September 16th-18th which would correct a long standing problem with using two financial reporting systems. In a final comment to Council, Stone said that the upcoming audit for FY 2025-2026 would show the amount of progress made and provide a lot of information about the City’s finances.