ITEM # IX 3
STAFF REPORT
MEETING DATE: February 27, 2024
PREPARED BY: Joseph Arch, Interim Finance Director
AGENDA TITLE: Transaction Reports and Mid-year Review
RECOMMENDATION
Staff recommends that the City Council accept and file the monthly transaction reports for November, December and January and approve the mid-year review budget adjustments.
BACKGROUND
The City’s financial status has been discussed throughout the current and previous fiscal years. Further deterioration of cash flow continues throughout the current fiscal year with limited personnel supporting the City’s operations. Under the current model, the City’s financial position is unsustainable. A separate report will be prepared for the March Council meeting with the City’s external auditor in attendance to provide insight into the City’s operations and financial status from an audit perspective.
ANALYSIS
In preparing the City’s transactions reports, I would like to point out a few alarming trends. The City’s budgeted expenditures are projected to exceed its revenue by $165,197 (shown in the January 2024 budget to actual report). The current City cash balances are $122,722, which would cause a deficit of $42,475. The City has a structural budget deficit (budgeted expenditures exceed budgeted revenues) in the General Fund that tends to be ignored as spending patterns have exceeded revenues on an annual basis by 12% projected in 2023-24 and 42% in the prior fiscal year. For a budget of $1,500,000, the City is overspending without Council approval. The mid-year review corrects the deficit, but as long as City actual spending is not controlled further deterioration of the City’s cash position is inevitable. The two factors contributing to the actual expenditure excesses are the ability for one position to control the City spending without oversight or budgetary control (City Manager) and the lack of a City project plan or CIP plan to manage or prevent the excessive charges by consultants and provide project financing before City resources are committed. No expenditure should be made unless it is clear that the expenditure is funded by general or specific resources. Departments should be brought into the budget process with position control to establish amounts that reflect current operations and personnel needs based upon affordable operations. Capital needs should be identified and planned according to the City’s ability to finance the projects for the year and provide completed results that benefit the entire community or address a public need for improvement given safety or infrastructure concerns. These items will be addressed with samples and further discussion and findings provided to Council in my March report.
FISCAL IMPACT
There is no fiscal impact for this item.
Respectfully Submitted,
______________________________
Joseph Arch, CPA
Interim Finance Director