Santa Paula Council Presented with Fund Dump

By Sheryl Hamlin

Mid-Year Report FY 2016-2017 General Fund Only

At the March 6, 2017 Santa Paula City Council meeting, Finance Director Easley told the council that there was a projected deficit in the General Fund. This meeting is reviewed here.

Because there was nothing in the March 6, 2017 report about the Enterprise Funds, the Director was asked to return with details about these two funds: water and sewer. The report presented on the April 3, 2017 meeting was a result of that request.

The Enterprise funds are unique in that they have Profit and Loss Statements (P&L) like businesses. Additionally, these enterprises can spend monies raised through bond sales for projects. Revenues from citizen utility payments are liquid collateral for the interest on the bond debt.

Fund Accounting Commingles Assets Types: No Operating P&L Shown

It is important to understand that municipal Fund Accounting is a means to group together disparate assets related to one function. In the case of sewer and water, assets include cash, receivables, bond capital, equipment (minus depreciation) and property (minus depreciation).

The report presented council showed the Sewer Fund decreasing by $5,344,810 versus the budget and the Water Fund balance by $14,519,636 with respect to the budget. With multiple asset classes in one fund, which one caused the decrease? There was no explanation in the written or oral presentation. This could simply be a matter of more capital expenditure than planned, but without explanation, the chart is problematic.

Projections Versus Actuals

According to the report in the April 3, 2017 packet, as of February 2017, the Sewer Fund is positive (revenues-expenses) by $680,539 while the Water Fund is negative by $3,385,101. But, again there is no explanation for this negative. Curiously, the forecast for the year-end (6/30/2017) shows the Sewer Fund negative by $1,782,600 while the Water Fund positive by $1,306,712, essentially reversing.

Because there are multiple disparate assets in the funds, the notion of “positive” and “negative” takes on a different meaning. However, these funds should be audited. The council has not confirmed if the auditing firm is charged with verifying the cash balance, the depreciation schedules and the bond schedules.

Presentation Fail: No Synthesis of the Data

Showing a Fund Dump on an overhead in columnar form which is unreadable by anyone at the dais coupled with a report without explanations generated noticeable frustrations. Vice Mayor Gherardi said that she had repeatedly asked for operating financials of the Enterprise Funds without success. She moved to receive and file the report without accepting the Enterprise Funds asking the Finance Director to return with an operating report of the Enterprises. She also moved to delay budgeting until details about the County Fire are confirmed by operating on a continuing resolution, but this motion failed.

Council Member Hernandez Opposes Transparency

Council Member Hernandez said that the new rate study would flush out this information and such a report is not necessary. After more discussion, the council voted 3-1 (Procter absent) to ask the Finance Director to return with operational P&L details of the Enterprise funds.

Obfuscation of Enterprise Funds: Standard Operating Procedure (SOP)

An analysis of a prior year’s obfuscation of the Enterprise Funds is here.

A more recent critique of this policy can be read here.

To download the documents and watch the video of the meeting, click here.

Previous reports of the April 3, 2017 council meeting are here and here.

For more information about the author, click SherylHamlin dot com.

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