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The audit was presented to the city council last week. The city is in good financial shape, despite recent losses in state aid, said city administrator Steve Helget.

According to Helget, the city's fund balance, at the end of 2003, includes an LGA payment of $237,300 that was received in December but will be used for operational expenses in 2004.

Funds for capital improvements include: $377,800 for street and sidewalk improvements; $366,800 for water and sewer improvements; $209,000 for general improvements; $107,250 for park improvements; $67,200 for airport improvements; $58,400 for liquor store improvements; $56,000 for police purchases; and $24,350 for emergency services improvements.

According to Helget, these funds were reduced somewhat in 2003 due to the loss of aid from the state, but the balances are still healthy.

Debt service funds, used to repay bond issues, had a balance of over $1.5 million. Currently the city has 10 outstanding bonds.

Most of the city's enterprise funds are doing quite well, including the liquor fund that operates in the black, which is unusual among municipalities, said Helget.

The sewer fund, however, was unable to keep up with equipment depreciation, according to the audit. The audit did not take into consideration the sewer's debt service or the sewer capital improvement fund, which are normally used to replace equipment. It is unlikely that the city would raise sewer rates to make up for depreciation, said Helget.

During the state-mandated audit, auditors looked at spending practices as well as accounting practices. Auditors did find some reportable violations of state statutes.

Auditors reported the city to the state for keeping administrative fines for traffic violations. State statute requires that the state receive any fines for violations of state offenses like speeding or not wearing seat belts.

However, the city will not stop its administrative fine program until the Minnesota Legislature rules it illegal, said Helget.

Other offenses reported to the state were: using public funds to pay for city employee birthday parties - which council member Dave Peschong said improves employee moral -Êand giving donations to the Koronis Hills Snowmobile Club, an organization that was not eligible by for public donations (by state statute). This has already been corrected by making the donation a payment for services received, the maintenance of snowmobile trails in the area, said Helget.