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District's FY 2001 Comprehensive Annual Financial Report Released

Monday, January 28, 2002

District's FY 2001 Comprehensive Annual Financial Report Released

(Washington, DC) Chief Financial Officer Natwar M. Gandhi announced today that the District of Columbia received an unqualified or "clean opinion" from the city's independent auditors on its Comprehensive Annual Financial Report (CAFR). The financial statements also reveal that the District ended Fiscal Year 2001 with a general fund operating surplus of $77.6 million. This audit is a milestone for the District because it is the first clean bill of health the city has received outside the congressionally-mandated control period. A clean opinion indicates that the city's financial books are in order. It also means that the CAFR fairly presents the District's financials and the results of its Fiscal Year 2001 operations in accordance with generally accepted accounting principles.

"This reasserts the fact that the city's elected leaders are responsibly taking care of the District and its finances without the need of a control board to oversee our financial operations," said Dr. Gandhi, who was joined by Mayor Anthony A. Williams, Council Chairman Linda W. Cropp, and Council member Jack Evans. "As chief financial officer, it is my responsibility to be the guardian of the District's financial viability. I will continue to keep the lines of communication open with every key stakeholder and citizen, and alert them early and often of the District's financial posture."

Mayor Williams said, "I am proud of the District's financial recovery. With the help of the Control Board, the Council and the CFO, we have moved from financial crisis to financial stability. And we did it in just five years' time. For citizens, this means that the District is able to invest in strong schools, safe streets, clean communities, affordable housing, reliable transportation, and health care. And we have been able to attract new investment to our city in direct response to strong fiscal management."

Despite the successful end of Fiscal Year 2001, Dr. Gandhi foresees fiscal challenges ahead as the District continues to respond to the economic impact of the September 11 attacks, works to close spending pressures for Fiscal Year 2002, and finds remedies to the District's structural imbalance issue.

"There is a structural imbalance inherent in the city's budget, which, if not addressed, may eventually precipitate spending in excess of revenues or serious cuts in city services," Dr. Gandhi explained. The city is prohibited from taxing federal real property, which comprises 42 percent of the District's property value, while other non-municipal tax-exempt property, such as universities, comprise an additional 11 percent. Further constraining the District's tax base are restrictions on taxing income at source, which means that the District can tax just 34 percent of the income earned within its borders. The District also provides state-like functions such as human services, mental health, and higher education estimated at $500 million annually.

KPMG Peat Marwick, LLP conducted this year's independent audit under the auspices of the District's Inspector General.