Sunday Notes February 8 2015

Powers&Sull

Most of this week’s Council Agenda and Packet is filled with Financial Information from the Sullivan and Powers Audit, to the Auditor’s and CFO’s state of the city.

The entire report is attached.

Most of it requires some understanding of Financial terms but luckily I have some blog followers who are in banking, CPA’s or Municipal people that can translate some of the items that interested me and explain them in terms a simple guy like me can understand. So here’s a couple of things that I asked about.

Q: In layman’s terms (so a guy like me can understand) what does this mean:

The City’s assets and deferred outflows of resources exceeded its liabilities at the close of 2014 by $217.5 million.
• Governmental net position decreased by $26.6 million. The decrease is attributable to a $12.1 million increase in the other postemployment benefits (OPEB) liability; the use of $4.0 million of fund balance to fund the general fund operation budget, depreciation on capital assets exceeding principal payments on long-term debt by $2.6 million, and the decrease in internal service funds of $8.6 million which was primarily the result of funding the OPEB Trust and the mitigation stabilization fund.

• Business-type activities experienced a combined $3.3 million increase in net position.

Ans)The City’s assets and deferred outflows of resources exceeded its liabilities at the close of 2014 by $217.5 million.

Sort of like the net worth of the City.

• Governmental net position decreased by $26.6 million. The decrease is attributable to a $12.1 million increase in the other postemployment benefits (OPEB) liability; the use of $4.0 million of fund balance to fund the general fund operation budget, depreciation on capital assets exceeding principal payments on long-term debt by $2.6 million, and the decrease in internal service funds of $8.6 million which was primarily the result of funding the OPEB Trust and the mitigation stabilization fund.

ANS)

View this like a loss of $26.6 million in a profit and loss statement. The increase in OPEB is not quite a current problem because these costs are not due until well into the future, but they bear watching. Likewise the other items EXCEPT the use of $4.0 million to fund the operation budget. This is the use of cash reserves to fund ongoing expenses. This is what got the City in trouble in the past, and if left unchecked, will do so in the future.

• Business-type activities experienced a combined $3.3 million increase in net position.

Ans)

Those are the enterprise funds. This indicates that rates are more than covering expenses. Still you need to look at each one, since a big gain in one, may be masking a loss in the others.

Near the end of the reports are some recommendations, one that stood out was this:

ACCOUNTS NOT MAINTAINED BY TREASURER AND ACCOUNT SIGNORS

Prior Year Comment

In previous years through a confirmation letter process with local banks, it came to our attention that there were various unauthorized bank accounts existing under the City’s tax identification number. In addition, there were several accounts that had the previous treasurer as an authorized signer.

Current Status
During the current year we noted several accounts that were not maintained by the City as well as various accounts that listed a previous treasurer as an authorized signer. Also, now that the City has a new Treasurer, all accounts should be reviewed to determine if the banks have the most up to date information regarding allowable signors.

Continuing Recommendation
We continue to recommend that the City investigate these unauthorized accounts and have them either closed or brought under the Treasurer’s control. Furthermore, all accounts that are under the City’s control should have the current Treasurer as the authorized signer.

Again I asked what type of accounts these might be and wasn’t surprised with the explanation!

This is an ongoing problem for many communities, not just Lowell. MA general laws only allow the Treasurer to open, maintain, sign on and close bank accounts. Folks associated with schools (mostly) often go out and open bank accounts. These people usually do not intend to do anything bad. They are often parents offering to run the chess club finances, the sports boosters or a yearbook fund. They get a hold of the City’s ID and open a bank account to handle the funds. This can lead to trouble because folks can skim money. The City can’t monitor this because they don’t know the accounts exist and the accounts are not on the City’s books. The banks let the do-gooders (or do-badders) open the accounts because the banks don’t know the laws.

A good treasurer periodically writes letters to local banks and tells them that such accounts are illegal and asks them to identify and close such accounts. If this is not done, the outside auditors will find the accounts, but it is still up to the treasurer to close them.

Of course those same parents (or others) could open accounts using their own social security number, and that is perfectly legal in most cases, but there is no implied City scrutiny over those accounts.

I do know from my own experience with the PTO that the School Dept. is working hard to have more control over these type of accounts and I’m sure like the past Auditor, this Auditor will work with the school dept. tp close some of these accounts or at the very least, get her listed so she can review them.

In the CFO report by Connor Baldwin, he states that revenues are good but running behind forecasted numbers and that approx. 45% of revenue has come in. Local receipts are running approx. 7% behind forecast but usually the 3rd and 4th quarters are strong. Building permit revenue is up.

Wasterwater Enterprise Fund revenue is ahead of the past year. Parking Enterprise Funds are in great shape at about 48% of forecasted numbers and 3% higher than this time in past years. Water Enterprise Funds are running about 5% Below projections so far.

Overall expenses are lower than forecasted but given the weather (not counting this week’s “Event”) the city will over-spend this account and the employee buy-back option approved in June was used more than forecasted and is running approx.$500 -$600% over budget.

Also unless the Council makes choices to cut service or programs the city which is trying to not raise the tax Levy by more than 1% for Fiscal 2016 will be facing an approx. $7 Million shortfall, so either services or personal will get cut or the city will have to again approve a higher tax rate to meet the expenses.

You can always go to the City’s website and see the entire City Council Packet.

Interesting week when it comes to finger pointing and placing blame for the lack of Economic Development here in the City. Chris Scott and the SUN tried to blame Chancellor Meehan for NOT agreeing to support a private developer for the Lowell Five building across from the High School, while Councilor Belanger and the Manager again point fingers at Trinity Financial. The Sun picks up on that in today’s paper with a story titled A Mill City revival, stalled while yesterday they ran a story about the empty businesses in the downtown and quoting one business owner saying “Right now, there’s just no unity between residents, City Hall, and the business owners,” while another owner stated “There is no reason downtown for anybody to come here,” said John Bertos, who owns the 134 Merrimack St. building.

Finally if you watched the Lowell School Committee meeting, you could tell that most of the committee members even though they voted for the Mayor’s motion to “Request that the School Committee vote to delegate full authority to City Manager, Superintendent of Schools and Labor Attorney, to negotiate collective bargaining agreements School Department employee unions, for ratification by School Committee.” their hearts were not in it. From asking if this was even legal to stating how do we know we will support what this group agrees to, they were looking for excuses and reasons to keep the gang of 6 in charge.

It also showed the LACK OF DIRECTION AND PREPARATION BY THIS COMMITTEE! The contract expired 6 month ago, yet they seemed to indicate that this committee doesn’t have a solid framework and goals set in place.

This sub-committee should be a very simple thing, the ENTIRE School Committee meets in Executive session and AGREE on the 3-4 basic items they want to change, improve whatever and what items they think the Union might want that they will NOT agree to, then let this sub-committee meet and do their job with the committee meddling.

If this sub-committee can’t agree to something has simple has a change in wording – has an example ( calling a teachers’ aide a para-professional) than they are useless and the committee wants the Union to file a mediation request so they find the excuse they want to get back involved and like they have done the past few times, DRAG and DRAG this contract on and on so they again are an embarrassment.

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One thought on “Sunday Notes February 8 2015

  1. Joe Smith

    I believe the $4M to fund continuing operations may not be as severe as indicated at first blush, as some $3M of that was anticipated and put aside by Tom Moses to fund the bump in pension payments due this year. However, I suspect part of the $7M upcoming problem is due to the same increase in pension fund payments required in next year’s budger, without that $3M set-aside to help pay for it.

    Reply

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