By Harry Gatjens
Much has been bandied about during the last few months regarding the City’s accounting and reporting systems. Statements are now coming out about how the City’s financial reporting practices led to an inability to produce understandable and or accurate pictures of the City’s financial state. It has been suggested that the City has now found an additional $2 million that can be used to offset upcoming deficits. What is going on here?
First, let’s discuss the three different methods for determining the City’s financial condition.
The first is cash basis accounting, which shows only cash as the City’s net position — just as a person might determine their cash position by looking at their bank account. Money owed (accounts payable) or money due (accounts receivable) are not included in the computation of your cash position. Several on the City Council keep referring to the city’s cash balance as being the appropriate way of analyzing our current financial condition. The problem with using this method is that it is way too easy to manipulate. If you want to make the city look poor, you just pay off a bunch of bills. You are still in the exact same financial state (you have less cash, but you also owe less money) although your statements say you are poor as you have less cash.
The next method is accrual accounting. Here your balance (working capital) is figured by taking current assets (cash plus accounts receivable, or what you are due) minus your current liabilities (accounts payable, or what you owe) and then the net is your working capital balance. This is standard practice in the business world and gives a good indication of the ability to maintain short-term operations. If you pay off some bills, your working capital does not change as the reduction in cash is offset by a reduction in accounts payable. If you collect on receivables, your balance does not change, since the amount of cash you collect is offset by the fact that you are now owed less money.
The last method, and the one that has been used by the City of Edmonds, is called modified accrual accounting. This is used primarily by government organizations as an attempt to present as conservative an approach to financial condition as is possible. What this does is take the city’s cash minus its current liabilities (what it owes), with the difference being the working capital balance. The thought here is that cash is 100-percent solid and what an organization owes is 100-percent solid, but accounts receivable is less than 100-percent guaranteed because it depends on whether you collect it. In summary, this method takes into consideration all the money you owe, but does not include money owed to you until it is collected. This is the method Edmonds has used for a number of years. Here is a link to a description of this method. Modified Accrual Accounting
This chart shows how the three different systems would reflect the City’s balances differently if you took $500,000 and paid off some bills. The cash-based system would show a reduction in the City’s financial condition, while both of the accrual systems would show that nothing is changed. The difference between the two accrual systems is only that the balance would be stated more conservatively in the modified accrual system.
The cash basis is not a good system as it is too easy to manipulate by paying or not paying bills at the end of a period to gain the desired picture of the financial condition. As to which is best between the two accrual methods, that is just a question of how conservative you want to be. In all three cases, the City’s actual financial condition is the same — just the numbers on the report are different.
So, no, there have been no new reserves found as a result of all this digging into the City’s financial reporting. In fact, even interim Finance Director Jim Tarte has said that he found little differences in the final numbers he gave for year end when compared to what his predecessor, Lorenzo Hines, had produced. He also stated that there is not sufficient staff to produce the reports that the City Council expects of the department. He has been more cooperative with the council, however, and that goes a long way in making councilmembers feel comfortable with the numbers.
Whatever method the city uses for computing its financial condition, the key is to be consistent from year to year so you can see trends. If the council wants to change from modified to standard accrual accounting, so be it. Once that’s decided, however, it’s important to not change it from year to year — otherwise, we won’t be able to detect the trend of our financial state.
This was verified in a discussion with representatives of the State Auditors Office two weeks ago. Consistency is the key when looking at financial statements.
There has been no magic found in the City’s Finance Department in the last few months. The numbers are the same, the problems are the same. The main difference is that the Finance Director has been much better at communicating the numbers to the City Council. There still insufficient staff to produce the kind of reporting council wants. The magic that has been found is this: The existing information is being presented in a far less adversarial manner.
Edmonds resident “Citizen Harry” Gatjens provides regular reports to My Edmonds News on the workings of the Edmonds city government, including the Citizens Levy Committee and the Citizens Technology Advisory Committee. Gatjens, an accountant, also offers insight into the workings of the city budget.
Harry, thank you for the excellent report. Hopefully those few citizens who have been supporting the accounting witch hunt by Council Members Buckshnis and Petso will now realize that much staff time has been wasted in the past couple of years.
Harry – nice accounting 101 lesson.
Thank you Harry. So the problem now is how do we hire the necessary staff to produce the reports?
Harry, that was a great report, but I’m still a little confused. It seems to me that modified accrual accounting has the same problem as cash based accounting. If I want to make the city look broke (say in order to pass a levy) I just need to forget to send out reminder notices to those who owe the city money just before a quarterly report. The income is delayed until after the report.
Secondly,what is the modified working capital approach and how does it fit in here?
I’m pretty ignorant about accounting, so I’d sure appreciate insights.
Harry, thanks. I have wondered why the State has in essence given Edmonds a passing grade each year for its financial management. An occassional small fix here and there, but no egregious findings. As with all endeavors involving humans, a lot of ‘problems’ boil down to whether communication and expectations are clear and folks can respectfully get along. In my view, some of our fiscal troubles were simply a case of people behaving badly.
Joe:
What the council looked at to determine if a levy is needed is the Executive Summary – Current Forecast. This document in the business world would be called an income statement. It summarizes revenue and expenses; the balance between the two is Ending Balance (profit in the business world). The balance is carried forward from year to year. So if it was $1,000 entering 2011 and in 2011 revenue exceeded expenses by $1,000, the starting balance for 2012 would be $2,000. When the balance is projected to be below the equivalent of 1 month’s expenses, council starts thinking about the need for a levy to make up the shortfall.Financial Forecast as of July 26, 2011
The balance projected for 2013 is more than $1M below one months expenses; hence the levy.
Harry, did you run this by Jim Tarte or Deb Sharp?. While you terminolgy is correct, what you have identified is not totally accurate.
The city uses a modified working capital approach that does not include accounts receivable and this one number created at year end is then used throughout the year for very important forecasting.
We are attempting to move everything on balance sheet so we don’t have funds such as the council contingency fund not appearing on any fund balance which is part of this calculation. All monies should appear in a fund balance.
For the first time the city used a modified accural approach at year end as that is how the CAFR is reported.
I would suggest you meet with Lora, Deb Sharp and Jim Tarte and me if you wish as basically the City for years has not used a sanctioned approach and Mr Tarte agrees that we need to move towards modified accrual and get away from the modofied working capital approach which NO other city that I have researched uses.
You might want to run this item by Mike Bailey from Redmond who teaches GFOA standards.
While I appreciate your simplification and yes another CPA should have been hired rather than a support staff to Mr Hines, the seriousness of what we are attempting to do is not something that can easily be explained away that it’s OK for Edmonds to create their own accounting standard.
Modified Working Capital is just a misnomer. It is working capital computed using modified accrual aaccounting.
As for this being subject to the same manipulation as cash accounting, yes that is possible. The point of this method is just that it is the most conservative method.
Harry, I’m curious why you call Modified Working Capital a misnomer. Isn’t it just a shorthand expression? Calling it a misnomer implies there’s something misleading about the name.
Ii call it a misnomer just because there is no such term in accounting jargon. It is still just a working capital report, based upon modified accrual accounting. it is not a big deal but if someone wants to question my analysis it would be good if they at least knew the correct terminology.
While the reporting may change the numbers haven’t changed since I originally saw them when I was on the levy committee a year ago.
The point of the whole article is that while the reporting may not fit the desires of certain people, in actuality the numbers have remained the same. They just were not presented in a clear manner in the past. Jim Tarte has taken the time to explain the presentation to Council more effectively, but even he says the numbers haven’t changed.
As I said, Council can ask for the numbers in any format they want but the numbers have always been there if you knew what you were looking for.
Joe, you are correct, misnomer was abad choice of word. I didn’t mean ton suggest that modified working capital was untrue, just that it was not an standard term.
My mistake
Harry, you will need to come and talk to Lora and I as yes, Mr. Hines invented the “modified working capital term”. You are incorrect in stating that we are using a working capital approach as the number created is not truly working capital as the accounts receivables are left out and the City includes the ECA payment and receivable which we all know are not current.
So, I appreciate your attempt to simply this but to say that Mr. Tarte was able to explain it more completely to us is totally WRONG. I have had this issue in discussion for more than two year as we should not be making up some sort of spread sheet that includes payables and not receivables and a include a few off-fund accounts such as the City Council Contingency Fund that two years ago was at $95K and is now down to $68K and does not appear anywhere in any fund.
So, let’s not get into a back and forth as to what you think is a correct format or that we are being painstakingly tenacious on this issue as our city’s approach is not sanctioned by GFOA and it is not an accurate reflection of our financial condition for any quarter past FYE. Futher, that ONE number CREATED is used on every report that we see (i.e. ammendments, forecasting, etc).
So, I would suggest before you continue to spread this information according to how you see it, that you come and visit with Lora, Jim, Deb and I.
You have seen the modified working capital calculation and you are correct, it is a made number and will not reconcile with the ending general fund balance. We have spent hours talking about the modified accrual accounting and why the city does not use it or why they have not included accounts receivable in the mix in the pass and how this “calculation” came into being as it was not the same accounting standards that Ms. Petso was familiar with back when she was on council back when.
So, you are incorrect in staying that the presentation are correct and clear. In your own personal budget accounting would not include your montlhy salary in your mix as you pay your bills?
The numbers have and will change if we were to move towards a modified accural quarterly reporting, we would see an increase of about 2.2 million as a result of the receivables. So, rather than a $2.6MM modified working capital balance in the projections, you would see a $4.8MM beginning fund balance.
Further, the auditors don’t care as all they look at is FYE and CAFR which is already reported according to modified accrual standards.
Again, thanks for trying to explain this very detailed issue and highlighting why Lora and I have been working hard on getting that law and resolution implemented and yes, we are certainly moving in the right direction.
Thanks, Harry, for writing a clear explanation – and reinforcing repeatedly the main point: it doesn’t matter what format the numbers are reported in, the story is the same.
Harry, I would like to thank you for your explanation so the average person can understand. It to me boils down to the money is there the state has not asked the city to change its accounting systems and by looking at the number of hits to the finacial tab at the cities web site very few if any citizens of Edmonds are concerned about it. How much has this cost the city to find out no matter how we add it up the finiacial records are accuriate and no money is missing. Lets move on to spending the cities money for more important things and lets get the cities finicial reporting out of politics
Diane, I have no intention of getting into a fight with you over this. I stand by my analysis.
If you want me to meet with you guys on this I am happy to. You seem to think I am saying that your efforts have been misdirected. I am not saying that. I was asked to write an article to make it simpler for people to understand and that is what I did.
I am 100% confident that what I wrote is correct. Outside of not knowing the true definition of the word misnomer.
The fact of the matter is that the numbers have not changed since I looked at them a year ago. I have offered my input and analysis to council members and others, but everyone seems to have their own agenda and are not really interested in the facts.
I still try and lend my perspective on issues to council members who are open to listening. If I disagree with them I tell them to their face, ask Lora, Strom or DJ about that. I also know that my opinion is not always the same as other peoples’ and don’t always expect to get my way.
I offered my help to the council during the budget process and while you, Lora and Mr Plunkett all wanted to take me up on it, the council ultimately rejected my proposal.
I have no agenda on these issues but just try explain things as see them.
My goal is the same as yours. To have the City of Edmonds serve the citizens as best possible.
Harry – What is your definition of a Shell Game? I define it as hiding the pea under the cup.
Please look at the minutes from October 6, 2009 and City Council discussion of the proposed 2009 Budget Amendment. https://www.ci.edmonds.wa.us/CityCouncil/CouncilArchives/2009/091006_ApprovedCityCouncilMinutes.pdf
Then look at the actual Budget Amendment.
https://agenda.ci.edmonds.wa.us/docs/2009/CCOUNCIL/20091006_340/2521_2521_2009%20Amending%20Ordinance%20with%20Council%20Contingency%20Cut%20%E2%80%A6.pdf
Show me the beginning Cash Balance, the Expenditures and Ending Cashing Balance of the City Council Contingency Fund in either version of the 2009 Budget Amendment.
Remember the March 13, 2009 press release “Mayor makes buget service cuts”. Police Dare Program cut. Fire and Police Night out cut. Yost Pool closed. South County Senior Center funding cut. Economic Development promotion cut.
Did any of the Councilmembers know there was $93,000 hidden in a Council Contingency Fund? Was the $93,000 in the Budget?
Let me answer the questions. No, the money was hidden.
Finis:
If you read #6 above you’ll learn that what the balances are in the different funds is not what the council or mayor use to determine if a levy is needed, or if expenses must be cut. Revenues lagging expenses is the determining factor. Fund balances are assessed when reviewing cash flow.
Hi Harry,
Thank you and yes, I am only trying to inform the public as to what the city is actually reporting and the correct terminology. The “modified working capital approach” which is not specified in our reports is not sanctioned by the Government Financial Officers Association (GFOA) and this approach is not even listed in any publications such as Government Financial Accounting Board rulings (GASB).
You cannot take the word modified and make it sound like the City is using modified accrual accounting standards throughout the year. They are not. Modified accrual standards which are sanctioned by GFOA and utlized throughout all the cities I have researched allow for the General Fund Balance to include a 60 day accounts receivable. That 60 day accounts receivable is NOT included in our “modified working capital approach”.
This “created number” modified working capital (that you have seen the calculation for) is just NOT a clear and transparent way of disclosing our finances as that one number (currently $2.7MM) is used throughout the year for all our forecasting and ammendments.
You can stand by your analyses, I just wish you would have met with Mr. Tarte before hand as we all know the former finance director could not comprehend what I was attempting to try and change as we have wonderful drama in the minutes to prove his allegations that he told me three times and that I still didn’t get it…well, I get it…and it is WRONG in my opinion. I have looked at over 50 city websites and have yet to find a modified working capital approach utilized for General Fund Balance disclosures.
By the way, your drama term of “fighting” is also inaccurate. I am attempting to provide a clear and traceable description of what Ms. Petso and I have been working on for over two years now. We both “get it” and hopefully with the support of Mayor Cooper we will be moving to more citizen-friendly reports so the citizens can see exactly what is in our General Fund Balance which is more like $4,8MM and yes, I agree with Mr. Walmbolt, that does not change the fact that our revenues are not supporting our expenses…however, it does push the “doom and gloom” forecasting out as we have yet to discuss the $1.3MM in public safety reserve and the $1.927 in emergency reserve and the $2.2 in General Fund Reserve.
Diane and Harry, Both of you talk about the various methods, the questions I have go something like this. I will use the council contingency fund to illustrate. Here are some basic facts. In 2008 the fund had a starting balance of $92k. That same year the budget had a $25k amount for an item called council contingency. That same year about $14k was charged to that budget thus making the under run for the year about $11k. So here are the questions.
1. Where was the $92k at the beginning of the year? Was it in the GF?
2. Was the $14k taken out of the GF to pay those charges?
3. Where is the remainder ($92k-14k=$78k) at the end of the 2008 and where was it at the beginning of 2009.
At the beginning of 2009 the Council Contingency fund was budgeted for $25 and again in 2009 the full amount was not used so the same questions exist for 2010.
4. If the $92k is not in the GF at the beginning of the year does it get added during the year to allow for the charges during the year?
This all is very confusing and can lead to distortions of the GF. Depending on how the money flows it could show an expense of $14k to the GF with not corresponding entry. If the Budget was $25k and $14k was spend then the under run should be $11k. What should look like a good thing of $11k under run could show up as a $14k expense and create a distortion of $25k??
Can Diane or Harry explain how the transactions are posted using the various methods discussed?
Darrol:
Well, I was hoping that Diane would answer this one as I am not going to run my answer across Jim Tarte or her first. Here goes.
I am not sure how the City of Edmonds handles the Council Contingency Fund, but if it does ;like any other organization it works like this.
There is no money set aside in a bank account or something like that. It is just a line item in the budget like there would be for rent or pencils or most any other budgeted item. The difference is that there is no specific item that is known that the money will be spent on.
This allows the Council to spend money on something that wasn’t anticipated at budget time without re-opening the whole budget process. For example, last year several members wanted to hire a 2011 budget consultant. This hadn’t been anticipated when the 2010 budget was approved. If the council had gone ahead with that project they would have needed to fund it. As there was no money for it in the budget, they would either need to do a budget amendment to add it, or they could have used some of their Council Contingency Fund to pay for it.
The beginning balance is set each year as part of the budget process. Whether or not you had needs come up one year that used up the budgeted amount has no relation to the starting point the next year. Any money unspent at year end is just absorbed back into the general fund just as if you didn’t spend all the money budgeted for office supplies.
Hence, the beginning balance for each year in the Council Contingency Fund has no relation to spent or unspent funds from the previous year. There is no balance that carries forward. A new amount is set each year as part of the budget process.
Thanks Harry for the explanation. So if there is no real location for the Original $92k why do we keep track of it in the accounting system? In 2008 the fund started $92k in 2008, $25k was budgeted for 2008 and $14k was charged to the fund, reducing it to $78k. Over time the fund will go to $0 or below. From what you say, there is no need to keep track of the original $92k if we just keep track of the $25k budgeted and the corresponding charges in any given year??? Does it matter what type of system we use, accrual, modified accrual, or cash? Is your explanation the same??
Now how about the other Funds mentioned like Public Safety Reserve Fund $1.3m, Emergency Fund $1.9m and the GF reserve of $4m. Do they have a real fund location, are they part of the GF, or are they the same as the Council Contingency Fund? I would guess the GF reserve is in the GF, but where are the others? Are they real funds, in the GF or somewhere else? While the Council Contingency Fund is relatively small by comparison the other Funds are big enough to pay for any near term short fall in the GF budget. Should these funds be shown in a way that the public can see and understand them? Does any of this reserve stuff have anything to do with the modified accrual, accrual, or cash methods of accounting?
Ms. Buckshnis came up with the term Council Contingency Fund, stating in #12 that a few years ago the fund had $95,000 in it. I never before have heard of any such fund. All that I’m aware of is the line item in the council’s expense budget that’s designated as Council Contingency Miscellaneous. Typically, $25,000 is budgeted for that line item each year – like all of the other expense line items, there is no balance carried forward to the following year.
I’ve now had time to check out the history of the Council Contingency Fund; I learned that this fund, Fund 119, was closed at the end of 2003. Ms. Buckshnis needs to explain what she is talking about – saying that it contained $95,000 two years ago.
Ron, I have those documents in my possession and yes, this fund was closed by Dan Clements and the money was moved over to the “modified working capital” calculation. Harry should also have last years calculation which was around $76.0. You may find the details it in the city minutes both this year when Mr. Hines tried to support this approach when Mr. Plunkett brought up the inability to reconcile the ending general fund balance with the beginning general fund balance (as the city uses this modified working capital approach which doesn’t include accounts receivable). The $93K was the City Council Contingency it up and then again last year when Haakenson and Hines did the dog and pony show about this calculation. We are attempting to put this Council Contingency Fund BACK into a fund balance and it is now down below $76K. I tried to copy and paste it, but will send it to you via city email as I have the original calculation.
I’ve uploaded the document in question here:
https://myedmondsnews.com/wp-content/uploads/2011/08/Council-contingency-fund-balance.pdf
Ron and Diane, While you two continue to discuss the Council Contingency Fund. Does it exist or not?? Was it closed and put into the GF or not?? Frankly, it is disappointing that the data for such an easy question should be readily available for all to see and understand.
As a part of the Levy Committee’s work last fall I did some research on a few funds and upon request, Lorenzo Hines produced a report that showed the following details:
Report: Account Information
Dated 9/22/2010 for Fiscal Year 2009
Account No. B 011.000.000.282.900.119.00 Title: Reserve for Council Contingencies
The report shows a starting Balance of $92,024.59 and Ending Balance of$ 78,778.72
So some account bearing the name: “Reserve for Council Contingencies” shows charges for all of 2009.
So what is this account if it is not the Reserve for Council Contingencies???
Ron you say it was closed in 2003 and you blame Diane of making it up and ask her to explain what she is talking about. It appears to exist based on the information shown above. What am I missing?
I go back to my original question. It appears to exist, where is it? Was the money moved to the GF?
It is little wonder the public is confused. Ron and Diane have a hard time explaining it. Harry has not yet answered the latest questions. When the Levy Committee made recommendations to Council in Feb, the suggestion was to dedicate some resources to creating more visibility to the account data. No action. When the Mayor formed a group to discuss reports, the suggestion was to dedicate some resources to creating better reports for the public. No action. When sample reports using Edmonds data were produced and given to Council and the Mayor along with an estimate of what resources would be necessary to do the work. No action. When council was considering levy issues a couple of months ago an estimate was provided to develop some better reports for the voters. No action.
This dialog about just one fund tells it all. No one can explain it in a way the public can understand. It is easy to understand why the voters may be confused. It is difficult for to see why council is willing to spend money on the Old Mill Town Park and they will not spend just half that same amount to create some better reports. It almost appears Council just does not want the public to be fully informed.
If you read the council meeting minutes of May 18, 2004 you will learn about the demise of the Council Contingency Fund. Probably that decision was made because it never was a “fund”; it was simply a budgeted line item of expense. The council budgets for 2004 thru 2011 show a line item for Council Contingency, typically budgeted at $25,000. I have no idea what the Lorenzo report is based on, or the report supplied by Diane in #26. Probably only Mr. Tarte can clarify this issue.
The Lorenzo report is for the account number mentioned above. it is a City account with the title and number, and balances shown.
Yes; it looks like fund 119, the fund that was closed at the end of 2003.
As I said earlier, there should be no Council Contingency Fund as that terminology was abolished in 2003. As I also said, it never was a “Fund” so there should be no balance. Since there does seem to be a balance, then Finance needs to go back to 2003 and check the subsequent years to learn why it exists. Council Contingency should only be a line item of the council’s expense budget – usually $25,000 – anything unspent at the end of each year just remains in the General Fund; there should be nothing to “grow and grow”.
The General Fund balance has been complicated by terminology changes made by Lorenzo Hines and Ms. Buckshnis. Prior to their entering the scene it was correctly labeled Ending Fund Balance. It is not Ending Working Capital Balance, as it is now labeled.
Ron W. This is last time I will provide my point!
I brought clarity to this area as I have been working on financial transparency for our General Fund for almost two years now.
Under your watch as Finance Director they may have used the term “fund balance” but since I called Mr. Hines on it and proved him wrong – he had to change the term to reflect what that number represents which is a calculation – a MODIFIED Working Capital calculation.
Last night, I sent you the 2009 calculation that highlighted the 93K in Council Contingency Fund. Harry should have a copy of the 2010 calculation which was about 76K. Jana called me today and fund should be about 56K…so those monies do exist and are part of the general fund but we can’t determine where?
NOW, back ot Lora and my mission to bring financial transparency and to get rid of that modified working capital calculation which is used for our projections and amendments…if and when the City implement modified accrual standards (which it did for FYE 2010), the 2.2MM in “good” accounts receivables will and should be included. This number represent 60 day which is a standard for municipalities.
So rather than have that 2.7MM calculation – we will have more like 4.8 to show as our General Fund Balance.
Further, I think I have explained this more times than I care and it is obvious you don’t get it or you don’t want to get it.
Soon you will see that we will be taking care of the illusive Council Contingency Fund as well as moving towards reporting the General Fund in its entirety.
So, I am so over arguing with you on this as like Harry, you haven’t taken the time to sit down with Mr Tarte, Deb Sharp, Lora or I to clarify these issues as we have spent hours working through this black hole.
I am not responding any longer to this post but I can assure you I will continue to work towards financial transparency and accountability and open government so that our citizens can easily see the movement of money and if we are spending it wisely.
Cheers.
The report that I have specifically shows the information below. So as of 9/22/2010 there was an account with the title “Reserve for Council Contingencies” If the council took action in 2003 as Ron W says then why does this account still appear with all the information shown below????
Report: Account Information
Dated 9/22/2010 for Fiscal Year 2009
Account No. B 011.000.000.282.900.119.00 Title: Reserve for Council Contingencies
The report shows a starting Balance of $92,024.59 and Ending Balance of$ 78,778.72
So some account bearing the name: “Reserve for Council Contingencies” shows charges for all of 2009.
This is not anywhere near transparent. How can the public feel confortable about the numbers when there is so much disagreement on such a simple thing like this.
Then when we get around to talking about the really big stuff like, the public safety reserve $1.3m , the emergency reserve $1.97m and a GF reserve of $4m. The same questions will come up of where it shown on the books, how can the citizens see, the data, and are the funds growing, shrinking or what?? I an elected or appointed official has been asked the question about these funds and does not or will not provide clear, accurate, and up to date information then are they doing their job??? My personal view based on my real experience is that some elected official simply do not want to understand the issues, are incapable of understanding the issues, or if they understand they do not want the public to know the full details. I know that is an opinion but it is based on my work on the levy committee, and my work on the Mayors team to improve reports.
The council did not take the advice of the levy committee to put some resources on the project of cleaning up the reports and without this kind of clarity then the public will always question what our leaders, past and present say.
As we move forward to November, it will be interesting to see what the candidates and the council members who are not running say about these issues. It is time to ask some serious questions of our leaders. Thankfully the Strategic Planning process is about to launch and it will be one of the most important activities this town has ever undertaken. See todays front page article about the Strategic Planning process that will be launched in Mid Sept.
Darrol:
Did you read the council minutes of May 18, 2004? That’s where I learned the disposition of the mis-labeled council contingency fund.
I don’t know of any cloud around the public safety reserve or the emergency reserve.
I don’t know how you came up with $4 million for the general fund reserve. It’s either the $2.7 million on the executive summary, or if you include accounts receivable its apparently nearer to $5 million. If the city chooses to use the $5 million methodology, then I contend that a reserve of two months, about $5.5 million, should be used. The Gov’t Finance Officers Association recommends a reserve equal to two months revenues or expenses.
Amen Darrol..you and I see eye to eye….
Part of the confusion here appears to be rooted in the fact that poorly-informed people, that used to be in key positions within the City, cannot effectively articulate the real problems holding us back. In their repeated attempts to cast their form of light upon the issue, they actually move the collective understanding backwards and compound the problem.
I am grateful we have Diane digging into this issue and taking us in the right direction, though I am not entirely confident we will arrive where we need to be as long as there is a general lack of expertise nipping at the Council’s progress from the sidelines.
You’re absolutely right, Mark.
I recall a council meeting, in which budgets were being discussed, when Councilmember D.J. Wilson proclaimed (paraphrasing)… “I never would have supported closing Yost Pool had I known there was $90,000 in the council contingency fund!” If councilmembers charged with making budget decisions based on their understanding of financial reports can’t do it. How is the general public able to appropriately consider budget priorities or revenue needs?
Councilmember Buckshnis and interim Finance Director Tarte should be commended for their progress regarding more transparent financial reporting. And encouraged to continue, NOT criticized for their efforts. As Benjamin Franklin said, “Any fool can criticize, condemn and complain and most fools do.”
The Buckshnis/Haug mantra: Hire more people to count fewer and fewer beans. But we’ll know even more precisely how little we have!
And by the way, Ms. Buckshnis, I have never been the city’s Finance Director as you have stated in #35.
Ron W. Please be careful with your comments to be sure you are correct. I cannot and do not Speak for Diane. I am speaking from my volunteer experiences with the Economic Development Commission, and the Levy Committee and as a citizen who was invited to the Mayors internal review team looking at ways to provide better information to the people. I have provided a plan that will not add any people to the city staff to provide better reports. There has been no action on that plan by either the council or Mayor. Seems to me that a plan that does not hire any added people and provides the citizens and council with better data would be helpful. I know you have always said that the reports were always good enough for your use but yet what you have said about the council contingency fund is full of questionable statements and data.I will be providing a more complete post later about the inconsistant statements you have made. But for now I would appreciate it if you did not make mistatements about what I have said or suggest that any of my statements are linked with any council member. If you want to ask if I am linked to any council member that is fine, but to imply it with your statements is just not correct in my view.
Darrol:
I based my statement on your comment about adding more resources and not challenging Ms. Buckshnis #38 comment.
I look forward to learning what questionable statements I made about the council contingency fund.
Ron, my comment adding resources did not say anything about hiring people. Others have talked about people. I have shown council and the mayor how to improve the reports withount hiring people.
I recall Mr. Tarte’s statement about what it would take to comply with what the council passed last year about financial reporting and his statement has suggested he would need added people to fully comply. I do not recall who said it but I recall statements made that we should have added a CPA to finance but instead hired lesser skilled people. Not sure who said that. So there is a lot out there talking about the need for better reports and data and how to get there. Rather that tossing barbs, I have been trying to find out the facts on things like the Council Contingency Account and it has not been easy.
I was surprised to see Dianes comments in 38 but have not had time to respond. The last time my name was used by two council members implying support for an issue, I wrote to both council members and the whole council suggesting that using a private citizens statements out of context was not the best ethical practice. I have yet to decide when, if, and how to repond to the comments in 38. I do not see eye to eye with Diane on all issues but I need to assess what good it will do for public dialog to create a blow by blow discussion about individual issues. What I would like to see is informed discussion about facts and issues without all the political overtones.
So to your points in 43, I want to clear up that my view about adding resources to get better reports. Yes we need better reports and data and there are ways to improve the reporting with out adding people, even though others have suggest that we need to add people or that we added the wrong type of people to finance in the past.
As for not challenging Diane on her statements that discussion my never see this blog.
So hopefully I have answered you statement completely and fully in 43 on a point by point basis, but if not just ask again or email me, you have my address.
As for the work I am doing about your statements on the couccil contingency fund I hope you will be so kind as to answer my question on a point by point basis so we can get to the full and complete facts.
My hope is that this blog can serve the people with as much real information as possible and try to keep the political stuff in backgrond. Only a hope but I still wake up in the morning thinking other would like to know the facts and make their own decision and not be lead to a decision by political statements.
Just as an aside, the current forecast for 2012 has enough resources already forecasted to add people to the current staff. We could add police, CPA’s, a director, and others if we want. We could even do that right now if we want. So if the council is serious about getting better reporting started, they can do so with a vote right now. If any council member wants better reports all they have to do is get 3 others to agree and take a vote. Maybe that would be a good discussion for council to have.
Darrol:
Thanks for the explanations. I apologize for making the leap from more resources to more people, since you say you aren’t proposing additional staff to achieve better financial reporting.
Mr. Tarte said publicly, at a Finance Committee meeting (I think), that 3 additional staff members would be needed in order to comply with Ms.Buckshnis’s Ordinance 3789. It’s a pity that council did not assess the need for more resources before passing the ordinance.
The last forecast that I have is dated 26 July 2011. It predicts an ending balance of about $2.7 million; the targeted balance is about the same. So how is it that you see that the city has the ability to add more staff right now?
Darrol, I also heard Mr. Tarte say that there needed to be 3 additional staff members but I believe it was in ansewer to a question at a council meeting. If we have the money to hire new employees is it sustainable or just temporary and the next question would be why a general fund levy. Just some questions from a none finiacil citizen. Great to follow you and Ron. Finiace has become as polical as building heights what a shame .
RW@41…the rule of thumb…to play hide and seek accounting…remove accountants…we all know that started once Dan Clements left.
Also, sorry, I was giving blood when I sent my last missive and you were the Finance Chair or in charge of the Finance Committee when you could have changed or questioned the “General Fund (GF) Balance” and why it was not agreeing to the CAFR or basic GF revenue minus GF expenditures.
Further, Darrol and I have many disagreements as well as agreements. I was merely stated that we agree to his statement. Sorry, you don’t get it…but both of us are working towards citizen friendly reporting. I believe Darrol has spent more time than you or Harry trying to figure all of this out and I commend him for his volunteering efforts. So, please, stop creating drama that is not there.
In regards to the additional three CPAs that Mr. Tarte suggested publically months ago, that opinon has changed to two and has not been clearly defined in a public forum as it was at a Finance Meeting. One of those CPAs would be specifically devoted to Public Works and you can ask Phil Williams about this issue. The other CPA both Lora and I agree would help Deb Sharp and easily move this City towards citizen friendly reporting. By the way, Mr. Hines indicated to me, he did not need additional staffing so maybe it was because he wanted to play the hide and seek accounting.
Diane, thanks for you clafication that you and I have agreements and disagreement. That is a very accurate statement.
Don and Ron, I will answer your questions about the budget and adding staff in the next few days. I do not want to put in writing now the facts that I know for fear that they will be used by the Pro and Con committees for the respective levies. I would like to see what these Pro and Con teams have said about each levy as the do their work for the voters pamplet. Maybe Teresa could contact each of the Pro and Con Teams and get their statements and rebuttals and post them all so we can get going on a good public dialog now based on what the teams have said. The voters pamphlet will simply be too late for the public to get their arms around these financial issues. We need to start now discussing first the facts (that is alway exciting to get agreement on the facts around here) and then we need to discuss the alternatives and consequeses of the alternatives, and then of course we can toss in all the political stuff too. I just hope we get the facts and alternatives out first then have all the mud slingling come later but that may be just a dream on my part. I can only hope and try to do my part on facts and alternatives first.
So I am not dodging Ron and Don about staffing. I have real data, and real numbers that will support my statement about adding staff, if we want to do that. Just do not want the Pro and Con teams to mis use the information until their work is complete.
From Council Member D.J. Wilson’s website. dated Aug 30th.
Why you should oppose the Edmonds General Fund levy
Harry Gatjens and I were appointed to serve on the “No” committee for the upcoming general fund levy in Edmonds. Here is the voters’ guide statement we prepared and submitted to the auditor today.
———————————————-
This levy is bad policy. It doesn’t solve the short-term financial problems at the City. Nor does it address long-term structural problems. Moreover, if this passes, the City Council will still be forced to consider layoffs as early as 2012.
Here are the facts.
1.This doesn’t solve the short-term problem. Current projections show we need $1.75 million in revenue per year just to maintain basic city services over the next 5 years. This levy is only $1 million over three years. That means layoffs will still be needed in the years ahead.
2.This doesn’t solve the long-term problem. The City’s economic forecast shows revenues growing at an average rate of 1.3% over the next four years. It shows expenditures growing between 2.3 and 3.2% annually over the same period. This is a broken model. As long as your expenditures grow at a larger percentage than your revenues, the shortfall will continue to grow over time.
3.As worded, this levy does nothing to shore up public safety funding. In the last 3 years alone, the City has cut 2 uniformed police officers, the crime prevention unit, the school resource officer, and the DARE program. If this levy passes, none of those cuts are restored. In fact, more will be on the horizon.
Councilmembers Wilson, Plunkett, and Petso all oppose this levy – a diverse base of opposition that demonstrates the depth of concern on the matter.
Please oppose this levy. Tell the City Council they must do better.
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Thanks Ron, Do you have access to the Pro Statements and both the Pro and Con Rebuttals?
I have posted all that I have seen.
Darrol:
Your material cannot be used for the voters pamphlet because the arguments had to be turned in by yesterday.
I think Darrol Haug’s statement that we need to have all the levy facts out to the citizens is a good one. I am hoping the newspapers and My Edmonds News will help. I also will be interested in finding out what is meant by structural changes. Since there are three proposed levies the financial picture will not be clear until the votes are in. For instance, the street overlay levy could free up some money that could be used for other needs. Perhaps the candidates’ night will be a chance to hear from the council candidates on what their plans are for dealing with the concerns.
Perhaps passage of the levy for city services, as well as the levy for building maintenance and parks improvements will free up some money; but I don’t expect that to happen. For certain passage of the levy for street overlays will not free up any funds, because there has been no city funds budgeted for overlays for several years.
It’s true that recently the city has paid no money on street overlays, but the $1,000,000 stimulus money paid for the Dayton St. overlays. There will be more work on overlays on Dayton near the train station. What funds are used for that?
It will be interesting to find out which streets are most in need of overlays in the future or perhaps there is a list.