SALISBURY — The Salisbury City Council received its annual financial report on Tuesday, which showed that the city had no financial deficiencies and only one indicator of concern.

As part of the audit process, Martin Starnes and Associates, who performed the audit, published a compliance report that states whether there are any deficiencies or questionable costs. Deficiencies generally exist when there is a chance that city management or employees would be unable to prevent, detect or correct misstatements on a timely basis, according to the report. Questioned costs could be possible violations of state laws or grant regulations, not supported by documentation or may simply appear unreasonable.

Elsa Swenson, the auditor for Martin Starnes who presented the report during the city council meeting, said that the company found no deficiencies or questioned costs.

“Every year I’ve been on the city council, the financial reports always had some deficiencies in the very back (of the physical report), I always go look at them first. There are none this year. That’s the first time in my 10 years on council that there have been zero deficiencies there. Usually, they’ve been related to the Fibrant situation, but it’s nice to see that debt being gradually ground down,” said Council Member David Post.

Swenson also gave reports on the notable financial numbers for the city.

The city’s general fund revenues were approximately $54.2 million, up from approximately $50 million the previous year. The city’s general fund expenditures were approximately $47.3 million, up from approximately $43.4 million.

The fund balance grew by approximately $3.2 million during the past fiscal year, which raised the available fund balance from 61.05 percent to 62.7 percent of the city’s annual expenditures, meaning if the city suddenly received no revenues it could cover its costs for 62.7 percent of a fiscal year.

Swenson said that Salisbury’s only performance indicator of concern was the condition and remaining useful life of assets for the city’s water and sewer systems, or Salisbury-Rowan Utilities. That is the same sole indicator of concern that the city had in the 2023 report, and Assistant Finance Manager Mark Drye said that the city is addressing it through several upcoming and ongoing infrastructure projects.

“With that, we have several projects upcoming. The new pump station is the big one. Basically, what (the indicator) means is that we need to be spending more in capital improvements than we have in depreciation (of assets.) Right now, our depreciation runs right at just a little less than $6 million,” said Drye.

Currently, the city sits “just barely below” the state requirement at a 0.48 ratio, said City Manager Jim Greene Jr. The state requirement is 0.5, so Drye said that the completion of the capital projects for SRU would be the city “well above” the state requirement.

Post related the state’s requirement to the city’s water fees, which he said he regularly receives comments and complaints on when they go up.

“If you don’t (raise the rates), your system is going to officially fail. We also have to deal with inflation, so if you just replace your depreciation you’re going to fall behind. You can’t replace yesterday’s construction that cost $200 million with $200 million today. Today it’s going to cost you a whole lot more,” said Post.

All local government entities are required by the N.C. Department of the Treasurer’s Local Government Commission to have audits performed annually by independent contractors. The city is required to address any indicators of concern in letters to the LGC outlining the plan to address the concern.