For a third year, Ohio’s top public accountant has placed Akron among a handful of local governments in “fiscal stress.”

The designation is among labels Ohio Auditor Dave Yost started handing out in 2015 to the state's 247 cities based on 17 financial indicators, from debt level to general revenue and expenses to cash on hand and the condition of assets. Akron slipped in the rating system due to a compliance issue and weak general revenue, which can be partly explained by end-of-year transactions that rolled into or out of 2017.

The auditor’s office is always behind. It takes months to comb through financial reports filed by local governments from the previous year. Akron's 2017 audit was released two weeks ago. After routinely receiving awards for excellent bookkeeping, it highlighted accounting errors.

Cash transactions were not compared to the city’s bank account balances at the end of each month. Instead, auditors found that the city was using the beginning balance for each month, then making adjustments.

“The City does not have a process in place to prepare a comprehensive summary that reconciles bank balances to the general ledger cash and investment balances each month,” auditors wrote. “In addition, unrealized gains and losses are not recorded throughout the year to periodically recognize changes in fair market value of investments. The City's outstanding check list also contained voided checks.”

“The city could fail to identify errors on a timely basis,” according to the audit, which found no monetary mistakes.

Annie McFadden, deputy chief of staff to Mayor Dan Horrigan, said the city reconciles bank balances monthly as all accounting issues have been rectified.

Auditor Yost also downgraded Akron in four areas for a low general revenue fund balance or its relation to revenues and expenses. In February, the city started collecting another 0.25 percent income tax passed by voters last fall. The money is not yet reflected in the state report.

“The 2017 report shows the strong need we had for an income tax increase, and we feel we are in a better financial position in 2018 because of it,” McFadden said.

McFadden explained that auditors decided to carry over an income tax shortfall from 2016 to 2017 and assigned a $7 million windfall from selling off cell tower space in December to the 2018 revenue totals.

Last year, Akron’s overall budget grew 4 percent to $650,948,769. In 2016 and again in 2017, total liabilities eclipsed $1 billion.

While Yost's office stated that many local governments are “reaping the benefits of a strong state economy,” there’s no mention in the report of the roughly $15 million annually diverted from Akron as state lawmakers and Gov. John Kasich cut income taxes or kept revenue from local governments to replenish the empty rainy day fund.

The auditor’s report, which converts figures into percentages that give the indicators a passing or failing grade, also does not explain Akron's unique position, borrowing heavily to repair infrastructure that’s been deteriorating for decades. Since the 2017 audit, the city has continued to pursue long-term, low-interest loans to afford a court-ordered $1.2 billion combined sewer overflow project.

Principal payments on all debt grew from $51 million in 2016 to $66.7 million in 2017 while interest and fees fell for a third year to $27.2 million.

Akron received positive marks for maintaining public assets, steady property tax revenues (which are less of an impact on the city’s budget than income tax revenues), not relying on federal and state support and not letting capital assets like buildings depreciate in value.

Akron joined Alliance, Canton, Fostoria, Norwood, Parma Heights and Powell in the auditor's fiscal stress category. Thirty-three percent more local governments were lumped this year in the broader category of troubled or on the way to financial hardship.

Tagline: Reach Doug Livingston at 330-996-3792 or dlivingston@thebeaconjournal.com. Follow him @ABJDoug on Twitter or www.facebook.com/doug.livingston.92 on Facebook.