OSCODA – In a 5-0 vote at their Jan. 9 meeting, members of the Oscoda-Wurtsmith Airport Authority (OWAA) accepted OWAA’s most recent financial audit, for the period through Sept. 30, 2019. Absent were Kevin Boyat and Dave Dailey.
Performed by Anderson, Tackman & Company, PLC, of Kincheloe, an audit summary was provided by representative Doug Welton.
“So if we look at cash, it’s down about 1.6 percent from the prior year; essentially the same,” he began, referring to OWAA’s cash and equivalents of $2,333,791 in 2019, compared to $2,370,688 in 2018.
Total assets in 2019 were reported to be $36,092,760, with deferred outflows of $58,927. These figures in the prior year were $37,196,395 and $20,738, respectively.
According to Welton, OWAA’s accounts receivable jumped from $3,047 in 2018 to $20,347 in the current year, with prepaid expenses also climbing, from $18,727 to $20,851.
He then pointed out that the net capital assets of $33,717,771 in 2019 are down about $1 million.
Welton said this is a component of fixed asset additions of about $826,000.
He also explained that the deletion of roughly $6.5 million was due to construction in progress for land improvements – that being the completion of the large runway improvement project.
As noted by auditors, depreciation expense was charged to OWAA’s business activity in the amount of $1,786,951.
Welton then went over a two-year comparison chart of the authority’s statement of net position liabilities, deferred inflows and net position.
Total liabilities of $1,565,043 in 2019 are down from the prior year’s total of $1,825,068.
Deferred inflows in 2018 were $10,637, while this figure for the current year is $0.
OWAA’s 2019 net position is $34,586,644, compared to $35,381,428 in 2018.
Deposits payable are down slightly, from $45,058 to $37,892. “And that’s all related to tenant deposits,” Welton explained.
He also said the 2019 unearned revenue-rental income of $1,359,180 is down approximately $238,000.
“That’s about what we would expect on a year-to-year basis, because the vast majority of our deferred revenue currently is improvements that Kalitta [Air] did to hangars; I want to say about seven years ago now,” Welton said. “So we took the amount of money they spent, and we amortized it over that period.”
Compensated absences went from $6,887 in 2018 to $12,922 in the current year, with Welton noting that there was a new employee last year, so there was a very low balance in relation to that. “This year, you’re seeing that balance build up a little bit. I would expect it to stay about the same, going into the future, with little fluctuations.”
The net pension liability short of doubled in 2019, going from $86,916 to $155,049.
“And, as you can see, our total pension liability went up about $51,000 and our fiduciary net position, which is all of our assets to pay that liability, went down about $16,000,” said Welton, adding that this is the primary driver for the increase in 2019 – the net investment income of negative $14,000.
The audit report also includes a chart depicting the year over year numbers for this, from the past five years, such as the net investment income.
Welton said the Municipal Employees’ Retirement System of Michigan (MERS) has presented in the prior year, so the Dec. 31, 2018 information is shown in the 2019 audit report. Next year, the details for 2019 will be shown.
As for the five-year comparison, the year end MERS figures for net investment income shows that OWAA made $17,428 in 2014, lost $4,415 in 2015, made $32,173 in 2016, made $41,603 in 2017 and lost $14,032 in 2018.
“So it’s a pretty big by-product of poor market conditions in the end of 2019, and I’m hoping next year we’ll see that swing of an increase; I believe we should,” Welton told OWAA members. “I haven’t actually seen the 2019 MERS numbers yet, but I’m under the assumption they’ll do better, just because the market did better.”
“The market did well this year,” agreed Oscoda-Wurtsmith Airport Manager Gary Kellan.
In terms of OWAA’s net investment in capital assets – which dropped from $33,206,096 to $32,358,591 –Welton said this is related mostly to current year depreciation expense and some additions and disposals.
“Unrestricted net assets went up about $53,000, so that’s always good,” he went on, speaking of the 2019 total of $2,228,053 in this category.
A two-year comparison of revenues was also shared by Welton, with 2018 total revenues reported to be $10,283,152, and 2019 total revenues amounting to $2,086,740.
Landing fees decreased about $3,700 in 2019, to $15,178; building rental dropped from $1,413,437 to $1,377,125; interest and investment earnings more than doubled, for a 2019 total of $15,467; other revenue went from $38,556 to $73,758; and local, state and federal capital contributions dropped significantly, from more than $8.8 million in 2018, to $605,212 in 2019.
“Now this is really dependent upon the grants that are out there,” Welton explained of the latter. “We had the very large runway resurfacing and lighting grant, which was essentially the entire $8 million in the prior period.
“And this year we had the finish-up of that event, as well as the beginning of a few other projects, which we’ll see kind of come in over the next year or two, I would imagine,” he continued.
“Overall, revenue went down quite a bit. But if we take out the state, local and federal capital contributions, our revenue actually went up about $3,000 in comparison to the prior period,” Welton pointed out.
A two-year comparison of expenditures was also provided, and a summary of the 2019 figures are listed as follows:
Salaries and wages, $349,067, up $7,926 from 2018; payroll taxes and employee benefits, $173,804, up $25,789; advertising, $3,459, down $2,265; building maintenance, $94,093, up $77,506; compliance and training, $6,039, up $3,846; depreciation, $1,786,951, up $20,811; dues and subscriptions, $2,007, down $2,729; field maintenance, $58,165, up $24,017; insurance and bonds, $60,686, down $3,869; operating supplies, $5,174, up $1,057; postage, $1,147, down $79; professional fees and services, $102,908, up $18,184; radio equipment maintenance, $6,604, up $2,905; rubbish collection, $2,970, up $433; scholarships, $6,148, up $4,029; travel, $9,107, up $5,574; utilities, $66,181, up $7,826; vehicle maintenance, $82,819, up $18,661; and other expenses, $14,269, down $11,469 from 2018.
Therefore, OWAA’s 2018 total expenditures amounted to $2,633,445, while 2019 appropriations came in at $2,831,598.
Welton said some of the bigger hits on the expenses include the current year adjustment related to pension costs.
“Building maintenance was up a bit, and a lot of this was a few painting projects that we don’t capitalize, because painting’s considered standard maintenance,” he said. “So we saw a couple hangars and buildings get painted this year, so that’s where we’re seeing the large increase in that expenditure.”
As for the field maintenance hike, Welton said this is related to current year projects which were carried out by OWAA.
He also noted that the more than $18,000 jump in professional fees and services was related to some engineering costs in the current year.
Welton said the vehicle maintenance cost increase was the result of a few different repairs done in the current year, as well as some small equipment that was below the threshold but still an expense in 2019.
“Overall, expenditures went up $195,000 in the current period,” he said.
A five-year comparison of OWAA’s net position – or all assets minus all liabilities – was also presented by Welton.
“And year over year, if we make money in that year we’ll see net position rise. If we lose money in that year, we’ll see net position decrease,” he described.
The net position figures for OWAA from the past five years are $30,828,083 in 2015, $29,566,899 in 2016, $28,404,199 in 2017, $35,381,428 in 2018 and $34,586,644 in 2019.
The $794,784 drop from 2018 to the current year, according to Welton, is primarily related to OWAA’s very large depreciation expense in 2019.
“We did see an increase in unrestricted net position, which is good,” he went on.
Another positive, he said, is that the five-year average fund balance is about $26 million, which OWAA is above, so that’s showing a trending upward position.
“The net position is 213 percent of our year-to-date expenses, if we take out depreciation. And it’s 79 percent of the year-to-date expenditures, if we leave depreciation in there,” Welton then explained.
He said he likes to talk about both, because depreciation is not a cash expense.
As for the audit opinion, there are three different forms and OWAA received the highest form of audit opinion this year, that being an unmodified opinion.
“It means that we feel that, in all material respects, the financial statements are true and accurate,” said Welton.