FARMINGTON -- This city has an enviable problem: The most recent financial audit revealed it ended the 2010-11 fiscal year with too much money in a reserve fund.
State guidelines allow a municipality to have an unrestricted fund balance of up to 18 percent, and the city's $1.7 million surplus exceeded that mark for the fiscal year that ended June 30, 2011. The fund is in excess of 18 percent by approximately $572,982, according to the audit, which was released Dec. 20.
"Even though it's something we need to watch closely, it's a good thing," Mayor Scott Harbertson said of the excess in reserve.
Officials have talked about possibly shifting some of the revenue to a capital project fund, said Keith Johnson, finance director.
The audit also shows the city brought in $681,299 more in revenue than budgeted.
Auditor Michael Ulrich of Ulrich & Associations said approximately $277,000 of the surplus came from building permit fees while an additional surplus of $222,000 came from sales tax.
"The city is being conservative in its spending practices and it appears that growth is starting to come to the city. We are pleased that our testing and interviews did not find any significant errors or problems," Ulrich said.
Harbertson praised staff for being frugal with public funds and especially singled out Johnson for his care in managing city finances. Johnson said every single department came in under budget during the recent fiscal year.
The 121-page audit also shows other city funds are in good shape, including the water fund, which showed a deficit at the end of the 2009-10 fiscal year.
City officials approved a 40 percent water rate increase at the beginning of the 2010-11 fiscal year.
The operational fund went from a deficit of $76,106 to a surplus of $130,000.
The same fund showed a shortfall of $265,000 just two years ago.
Other findings in the audit include:
* The city's recreation fund showed a deficit of $256,000. Traditionally, the city has subsidized its recreation programs, including soccer and basketball, to make them affordable for participants, several officials said.
* The city's swimming pool showed a positive balance for the second straight year.