Unions’ auditor’s “REAL State of the City” says Oxnard NOT “on the edge of insolvency,” as claimed

City management will respond at 9-2-15 "State of the City" meeting

`By George Miller

Donabedian

Jeff Donabedian, Oxnard Firefighters Association President, Presides over “Real State of the City” session, 8-26-15

The Oxnard Police and Fire Department unions held what they called the “REAL State of the City” meeting Wednesday 8-26-15 at the Oxnard Performing Arts Center (about 140 attended) to present their case that the financial crisis has been overstated by city management.  They are still reeling from the impact of major budget cuts slashing positions and overtime in already, what many consider, undermanned departments. Both organizations are concerned about the detrimental impact on public safety, workload, and compensation. They suspected that the city was overstating the degree of financial crisis. So, they hired professional auditor Peter Donahue to unearth the truth and provide more transparency. He made the main presentation and Q&A at the meeting.

DonahuePeter1

Independent forensic Auditor Peter Donahue. Photo: CitizensJournal.us

In summary, Donahue made the following major points:

– City has outperformed on budget vs actual and in fact has much more uncommitted funds than it claims.

– City told residents and employees it was in trouble, but bondholders that it is strong.

– City has dragged its feet on data requests and claimed that much is confidential/proprietary.

– City hasn’t substantiated that laws and procedures were violated in financial record keeping.

 

What Mr. Donahue reported:

Insolvency

One of many wall signs at Oxnard “Real State of the City” 8-26-15. Photo: CitizensJournal.us- Barbara Pinedo

The city actually substantially outperformed in terms of exceeding budgeted revenue projections and coming in under projections on spending for the  last decade. But the last year they were able to obtain complete records for was fiscal year 2013-14, ending 6/30/14. Donahue asserted that cities normally have an “unaudited trial balance (preliminary results) in August, but nothing has been forthcoming for fiscal year 2014-25, which eneded 6-30-15. He said that in fact the city has not been forthcoming with information, that no assumptions, models or  interim work products used by outside consultant Management partners have been produced, that the city and Management Partners cites proprietary confidentiality. So, if this was indeed the real state of the city presented, it was the state well over a year ago.  When we asked him later if he had any of the year-to-date statements, he said only the unaudited for the first three months, which he said weren’t representative for extrapolation for the entire year, since those are low revenue months. He said transparency is lacking.

Donahue said that the city told the public and employees that Oxnard was on the verge of insolvency, while simultaneously telling bondholders that it was very strong. This remarkable inconsistency has major implications, as both cannot be correct and the incorrect one would constitute misrepresentation. This has been remarked upon repeatedly by public speakers at City Council meetings.

He also said that the city has not substantiated its claims that procedures and laws weren’t adhered to in previous financial record-keeping.

The auditor’s calculations were presented on Powerpoint slides which we have included here:

GenFundOverBudget

 

GenFundExpUnderBudget

 

GenFundUnrestOverBudget

 

 

TotUnrestrGovFund70

 

 

AllEntUnrestNet41

 

TotUnrestrNet110

StarrMolina

Former Oxnard Finance Director Phil Molina and former City Council candidate and Haas Automation Controller Aaron Starr, CPA, confer at “Real State of the City” meeting, 8-26-15. Photo: CitizensJournal.us

Also present

Also at  the meeting was City Manager Gregg Nyhoff, who kept a low profile and didn’t speak publicly. He will have his opportunity at the official State of the City meeting on 9-2-15. We also saw and spoke with Aaon Starr, CPA, former City Council candidate and also the Controller at Haas Automation, the largest manufacturer still standing in Ventura County (about $1 billion annual sales). Phil Molina, former Oxnard Financial Director, who won a very large settlement for wrongful discharge and still frequently comments  on Oxnard affairs, was there. See his statement below. He and Starr seemed to disagree with Donahue on the characterization of the numbers presented. Starr noted that it should be calculated as assets-liabilities- fixed assets- committed funds. Starr and CitizensJournal.us both later talked to Donahue separately and asked him how numbers were complied (he said from the 2013-14 CAFR (Comperehensive Annual Finacial Report) and how those numbers were mapped to the ones he presented, which claim there are over 110 milllion in uncommittee funds. Donahue agreed to forward us that information, but it wasn’t made available by publication time.

transparency

One of many wall signs at Oxnard “Real State of the City” 8-26-15. Photo: CitizensJournal.us- Barbara Pinedo

The Oxnard Finance Department has been run by outside Consultant Management Partners and an Interim CFO they installed, Dave Millican. They are trying to rebuild a department they have said was run down, undermanned and undisciplined, in terms of policy adherence and on time performance.

 

The sponsors asked that the session NOT be recorded, which in itself seems to lack transparency.

With all of this and City Council returning on Tuesday, September 1, after a one month break, followed by The official” State of the City” meeting Wednesday, 9-2-15, things may get interesting.

 

Previous article: 2014 CAFR  https://citizensjournal.us/oxnard-council-annual-financial-report-cafr-citizen-advisors-cag-appointed/

Meeting announcement Event: Is Oxnard Really on the verge of Insolvency?

https://citizensjournal.us/event-is-oxnard-really-on-the-ve…/

 

Unions’ 8-26-15 “Real State of the City” Summary (received 8-27-15 12:19 am):

Meeting Summary

  1. If Management Partner’s is correct that Oxnard’s audited financial reports are wrong, when will the City restate its financial results for the years affected?
  2. Has the City yet informed its bondholders, underwriters, Standard & Poors and the State Controller’s Office, under its duty of due diligence, that the City’s Comprehensive Annual Financial Reports and Federal Single Audit are wrong?
  3. How does the City reconcile its claims of impending “insolvency” with the public statements by its bond Counsel, in response to Council questions, on October 21, 2014, that the City’s overall financial condition was strong?
  4. When will the City document and define its Management Partners-provided assertion that Oxnard’s financial practices were ‘inconsistent with the law’ and had neglected to follow proper financial & operational management practices?
  • 2013-2014 GENERAL FUND UNRESTRICTED FUND BALANCE 86% OVER BUDGET ($36.9 MILLION/$19.9 MILLION)
  • 2013-2014 TOTAL UNRESTRICTED NET ASSETS $110.66 MILLION (ON $308 MILLION OPERATING EXPENSES)
  • 2013-2014 GENERAL FUND DUE $9.6 MILLION FROM Oxnard Community Development Commission SUCCESSOR AGENCY PRIVATE PURPOSE TRUST FUND

__________________________

Statement from Phil Molina, former Oxnard Financial Director:

Friends,
 
Last night was a  bit confusing for most people in the audience. The speaker,Dr. Peter Donahue  spoke about “fund balances” “budgeted to actuals” and “accumulated budget differences”. Most of the audience sitting near me were confused, and lost interest by the time the last graph was displayed on the screen.
 
What did you bring away from this presentation, I asked a few people. I got the same answer from everyone I asked: “I don’t understand if the City is in a better or worse place than we had been told by the City”, and “I didn’t hear anything that I can get my hands around to  help me understand if there is  $70 million dollars available to be spent in the city’s “general fund” or not”. This might have been different if  we had been given handouts with details showing the numbers used to generate the graphs along with an explanation of the terms, but we were not even provided with copies of the graphs that were shown on the screen.
 
Mr. Starr asked what I thought was a valid question, but he never got an answer. Mr. Starr asked how can the presenter state that the “general fund” has $70 million available (as much as $101 million) when the city’s audits, which the speaker admitted were accurate, only show $8,226,0000.00 unrestricted money available in the general fund?
 
Dr. Peter Donahue of PBI Associates started his discussion by correctly stating audited financial statements are the result of “outside” auditors analysis. Those auditors review the financial worksheets, work-papers, contracts, and all other documents to make a determination about the quality of the financial statements prepared by the city. If those professional auditors, who must be state licensed   CPAs (Certified Public Accountants) should make a mistake they can and have lost their license and have been held legally liable for the cost to anyone who lost money based on the reliance of erroneous financial statements, which were audited. In short, CPAs will not last long if they allow faulty financial statements to be presented to the public as “audited financial reports”. So let us rely on Dr. Donahue’s acknowledgement that audited financial statements AND NOT THE BUDGET is the only way to tell the true financial condition of the city of Oxnard. In agreement on this matter I offer information that came directly from 2 pages of the most recent City’s audited financial reports.
 
According to the 2013-2014 audit (CAFR) the bottom line is the City’s general fund has $8,226,000 of unrestricted money not $70 or $101 million dollars.
 
NOW HERE IS THE DETAILS TO MR. STARR’S QUESTION: This too may get a bit confusing, but note that these pages come directly out of the city’s 2013-2014 audit report. I highlighted the 3 definitions important for this discussion.
 
     Statement of Net Position General government Fund balances

pg 21 fixed assets  $                      1,400,890,107.00
pg 21 debt   $                              3,707,764.00
pg 21 housing  $                              2,154,736.00
pg 21 safety retirement  $                              3,023,577.00
pg 21 develop  $                            15,797,398.00
pg 21 other ?  $                            21,117,920.00
pg 21 unrestricted  $                             8,226,160.00
     
     $                      1,454,917,662.00
 
page 51: M. Fund Equity:  (abbreviated version of note)
Nonspendable fund balance – this includes amounts that cannot be spent because they are either not spendable in form (such as prepaid items) or legally or contractually required to be maintained intact (such as endowments). 
Restricted fund balance – this includes amounts that can be spent only for specific purposes stipulated by constitution, external resource providers, or through enabling legislation. 
 
Restricted net position – This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.  

Unrestricted net position
– This resulting category presents the remaining City net position and this measure of equity is unrestricted, legally or otherwise. 

The accounting policies of the City consider restricted fund balance spent first when expenditure is incurred for purposes for which both restricted and unrestricted fund balance are available.
 
 
In closing I hope to learn more about how Dr. Donahue can show the existence of $70 million that the auditors failed to catch at the next meeting, and hopefully we can all come away with usable information.
 
Phil Molina
_____________________________

Oxnard TownHall: “The State of the City”

Oxnard TownHall: “The State of the City”Event Announcement This is the OFFICIAL Oxnard State of the City, not to be confused with the 8-26-15 Police/Fire Union one.       This one is on 9-2-15.

 

 

 

Some previous Oxnard budget articles (many more on our web site)

Event: Is Oxnard Really on the verge of Insolvency?

In order to better grasp the actual financial situation of the City of Oxnard, it is paramount that the true and correct information be shared with the public and city employees. When there is such a vast difference in financial and budget information…

CITIZENSJOURNAL.US 

In order to better grasp the actual financial situation of the City of Oxnard, it is paramount that the true and correct information be shared with the public and city employees. When there is such a vast difference in financial and budget information…
CITIZENSJOURNAL.US
 

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George Miller is Publisher of Citizensjournal.us and a “retired” operations management consultant, active in civic affairs, living in Oxnard.

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