Comptroller Jennifer Basham presented the Cuba Board of Aldermen with the completed Fiscal Year 2025 audit and discussed areas to focus on.

Basham started by introducing the aldermen to the term “net position.”

Net position represents an entity’s financial standing and is the difference between what it owns and what it owes. It can be calculated by subtracting liabilities and deferred inflows of resources from assets and deferred outflows. Net position includes three components: net investment in capital assets, restricted and unrestricted.

Cuba’s audit revealed a net position exceeding its liabilities and deferred inflows of resources by $27,133,606 at the end of the fiscal year. This net position comprised $20,982,951 in net investment in capital assets, $3,238,631 restricted for debt service and other purposes, $286,922 for unrestricted and available governmental activities, and $2,625,102 for unrestricted and available for Cuba’s business-type activities.

The city experienced a $648,035 total net position decline. This decline was attributed to a decrease of $84,999 in governmental activities and a decrease of $563,036 in business-type activities.

Per the city’s policy of aiming to maintain a rolling beginning fund balance of at least 17 percent of the annual operating expenditures for the current fiscal year, the unassigned fund balance for the general fund should have been $877,541, not the reported $220,379, which represents 6.3 percent of total General Fund expenditures.

Basham also noted that transfers increased by $142,453 between 2024 and 2025, which she said was substantial.

“That is a substantial increase, so we need to look at ways to limit those transfers,” Basham said.

Looking at the cash and investments included in the net position of the city’s proprietary funds, the city had $2,081,490 of spendable funds for the electric, water and natural gas funds, which isn’t enough.

Observing the change in balance for the three accounts, the city saw a total decrease of $563,036 in funds.

“What this tells me is, looking at the cash number and the changes in fund balance, it shows that the funds were in need of a rate increase. All three funds,” Basham said. “You got to have revenue. Where do you get revenue in your proprietary funds? Customer charges.”

She also drew attention to the net cash provided by operating activities line and mentioned that the total amount of $2,644,193 is insufficient to sustain the city in case of an emergency.

“Your net increase and decrease in cash and cash equivalents. Again, you decreased by $790,615. For a total of cash and cash equivalents for the year of $3.2 million,” Basham said. “You’re just spending your cash fast. You need to find a way to stop the bleeding.”

Basham explained that the allowance for uncollectible accounts essentially represents the city’s bad debts. They feel they are unable to collect $300,000 on the city’s utility bills. To address this issue, the city is currently developing a policy to limit bad debts.

Under Cuba’s pension plan, as of June 30, 2025, there were 40 active employees covered by benefit terms, 47 inactive employees or beneficiaries currently receiving benefits and 28 inactive employees that are entitled to but not yet receiving benefits.

Basham said total pension liability as of June 30, 2024, was $16,022,053 and increased June 30, 2025 to $16,966,870 in liability.

“An increase of (approximately) $944,000 is not sustainable year after year,” Basham said.

The audit contained a 10-year comparison for the city’s net pension liability. In 2016, the net pension liability was $461,408 compared to $1,484,587 in 2025. She also noted the 35.1 percent increase in the net pension liability of covered employee payroll. To combat the issue, she suggested addressing it during a salary committee meeting.

A loss in the city trust fund balance reported for 2025 of $58,575 was reported. According to Basham, if this rate of loss is maintained, the fund will be broke in about 11 years.

In a similar situation, $158,827 was lost from the capital improvement fund.

“Keeping this loss up, this fund will be broke in seven-and-a-half years,” Basham said.

She urged the board to address the issues in these funds soon.

Under the general fund budgetary highlights, it shows significant differences between the original and final budget due to various budget amendments.

The general government budgeted expenditures rose by $237,250 due to unforeseen expenses related to contract labor, salaries and benefits, and miscellaneous other costs. Additionally, the public safety budgeted expenditures increased by $110,999 because of unexpected salaries, benefits and capital expenditures. Furthermore, budgeted transfers showed a $315,414 increase in other financing sources.

A spending and hiring freeze was already put into effect to help possibly improve the city’s budget. Additional meetings will be held to find alternate solutions to boost the budget and hopefully combat the issues addressed in the audit.

A motion to accept the fiscal year 2025 audit report was approved by a 6-0 vote.