(Washington, DC) Chief Financial Officer Natwar M. Gandhi today released the District of Columbia government’s fiscal year 2004 Comprehensive Annual Financial Report (CAFR). The financial statements, which received an unqualified, “clean” audit opinion from independent auditors, show that the District ended FY 2004 with a local fund surplus of $230.5 million. The CAFR also reflects that the District ended the year with a cumulative general fund balance of $1.2 billion, exceeding the billion dollar mark for the first time ever.
“The District of Columbia is in the strongest financial shape it has ever been,” said Dr. Gandhi. “The mayor and the council continue to make sound financial management a top priority, and these results reflect that effort.”
The District’s general fund balance consists primarily of bond escrow and other reserved and restricted use funds. It also includes $285.4 million in congressionally mandated cash reserves. This cash reserve requirement, which totals 7 percent of the operating budget, is among the highest for government jurisdictions nationwide.
Mayor Anthony A. Williams said, “As a result of the District’s fiscal strength, we can continue to focus on the goals that are most important to our citizens – strong schools, safe streets, affordable housing, and improved health care; and, we can continue to spread the District’s financial success to all of our neighborhoods.”
Council Chairman Linda W. Cropp said, “Those of us in Washington should be proud of our fiscal progress – the latest evidence of which is the strong results of FY04. It is important to remember that our progress has been accomplished within the constraints of a structural deficit.”
Councilmember Jack Evans, chair of the Council’s Committee on Finance and Revenue, added, “The fiscal year 2004 CAFR highlights the turnaround the District has made going from junk bond status and a Financial Control Board to reestablishing fiscal responsibility and a bond rating that is the envy of most cities and states. Through the exercise of responsible government, the District of Columbia has once again become a good place to do business. The challenge that we continue to face is ensuring that the prosperity reaches all people, in all communities of our city. I am committed to meeting that challenge.”
Even though the District was able to close fiscal year 2004 successfully and has a five-year balanced budget plan, Dr. Gandhi foresees fiscal challenges in the long-term. The District must find remedies to its inherent structural imbalance, which prevents it from addressing pressing infrastructure needs and requires it to maintain higher than average tax rates.
In May 2003, the US General Accounting Office confirmed that the District of Columbia government has a structural imbalance estimated at between $470 million and $1.1 billion. This large, long-term imbalance is caused by the District’s large percentage of tax-exempt real property, its inability to tax non-resident income generated within its borders, and the state-like functions that it must support.
KPMG LLP, under the auspices of the District’s Inspector General, served as the independent auditor for this year’s CAFR.