Revised Crestwood fiscal '04 budget projects $112,010 general fund deficit
By MIKE ANTHONY
Preparation of an end-of-the-year budget adjustment ordinance designed to close out Crestwood's fiscal 2003 books has led to a revised fiscal 2004 general fund budget that projects a shortfall of $112,010.
During the preparation of the budget adjustment ordinance, which has yet to be presented to the board, city officials discovered that fiscal 2003 general fund expenses were slightly more than anticipated, while revenues, particularly those from merchant licenses, were far less than projected.
City Administrator Don Greer first reported these "anomalies'' to the city's Ways and Means Committee during a July 7 special meeting.
The meeting included a closed session in which committee members — Greer, Mayor Jim Robertson, Ward 2 Alderman Tim Trueblood, Ward 3 Alderman Don Maddox, Director of Finance Diana Madrid and Matt Conley, assistant to the city administrator for planning and economic development — met with City Attorney Rob Golterman to discuss legal and personnel matters.
The panel took no action during the closed session other than to decide information presented to the Ways and Means Committee during the closed session needed to be presented to the Board of Aldermen during a closed session, according to Greer. The Board of Aldermen met the following night — July 8 — in closed session after its regular open meeting to discuss legal and personnel matters. No action was taken during the closed session, Greer said.
Greer said, "The net, in fact, is that our expenses are higher than what we had anticipated and our revenues less than what we had anticipated. And, consequently, because we, in essence, trusted the projections for the merchant li-censes for '03 largely based on numbers for '02, the '04 budget has to be adjusted on the revenue side and we've done that ...''
However, some anomalies exist in postings for fiscal year 2002 that do not have supporting documentation, Greer said. Furthermore, he believes the city most likely will have to borrow money to meet operating expenses this fall.
Under the fiscal 2004 general fund budget adopted by the board June 24, total expenditures of $9,765,192 were projected with revenue totaling $9,866,535, including $1,206,240 in transfers from other funds and a beginning fund balance of $72,328. Based on a projected undesignated fund balance of $72,328 on June 30 of this year, the fiscal 2004 general fund budget had anticipated an undesignated fund balance of $101,343 on June 30, 2004.
Though the undesignated general fund balance projected on June 30 of this year increased under the revised budget, city officials now project a general fund deficit of $112,010 on June 30, 2004.
Based on more accurate numbers as fiscal year 2003 drew to a close, an undesignated general fund balance of $350,971 is projected on June 30 of this year. However, while projected general fund expenditures remain unchanged at $9,765,192, the revised fiscal 2004 budget anticipates nearly $492,000 less in total revenue — $9,653,182 — for a deficit of $112,010.
Fiscal 2004 revenue projections originally estimated merchant licenses would generate $1,381,817; that figure now is projected at $799,817 — a decrease of $582,000.
Revenue projections in several other categories have increased slightly so that total general fund revenue is $492,000 less than originally projected.
"... It's been my intention for the board to adopt an ordinance at the close of each fiscal year, which, in essence, corrects the budget for all of the changes and things that have occurred during the fiscal year,'' Greer told the Call. "A budget is typically done eight months in advance and throughout the course of the operation of the year, things change ... It's appropriate at the end of the year to balance all of the effects and changes that have occurred. We estimate our revenues. By the end of June, we have a really good handle on what those revenues should be. Again, they're not exact, but they're what's been posted through the year. So it's just good fiscal practice to close the books.''
In preparing the ordinance, some anomalies surfaced, Greer said.
"The first thing we noticed was that the expenses in the operating departments were significantly higher than what had been entered into the general ledger for the budget for that year,'' he said, noting Madrid had prepared a 30-plus page analysis of the city's expense position.
In reviewing that information, the numbers for the Police Department caught his attention.
"... The posted to the actual costs associated with the full-time wages were well in excess, over $200,000, of what would have actually been set up in the general ledger for the budget. Well, that's not possible. It can't happen. That would mean that we would have had to have hired four or five more people. In fact, we're working with less. We're not working with more,'' he explained, noting similar discrepancies were discovered in other departments.
"Well, it didn't make sense. It just didn't make sense. So I reconciled that against the worksheet that I had prepared back in — the final one was done in October — when the board adopted the new pay plan and I had worked up the costs for the complete fiscal year and the board had, I think by motion, identified that that would all be retroactive to July 1 (2002), so we needed to account for the money for the entire fiscal year, whatever the adjustment would be. And I worked to reconcile that spreadsheet that I had submitted when the board approved the pay plan to what had actually been physically entered into the general ledger for the budget ...,'' he said.
Though Greer had provided documentation to former City Administrator Kent Leichliter and former Finance Officer Robert Wuebbels detailing the costs of the new pay plan, the budget had not been adjusted and the budget was more than what was recorded in the city's general ledger.
"... The net result is that we've identified the expenses and they were all things that were approved by the board and we're comfortable with where we're at and I'm preparing a report now that asks the board to make the necessary adjustments on the expense side to set what the final expense position for the city is,'' he said. "But since that number is higher than the number we've been operating on, essentially been operating under, it was necessary to look at the revenues.''
For fiscal 2003, merchant license revenue had been projected at $1.38 million, while actual collections totaled roughly $795,000.
"... Our receivable for fiscal year '03, which ended June 30, was closer to about $800,000. That's a significant difference. That's not the kind of error that occurs by happenstance,'' Greer said.
He then inquired about how much revenue in merchant licenses was still outstanding. Merchant license payments are due in June and about $68,000 still has not been paid, but that doesn't account for the significant difference, he said.
Greer explained how revenue projections are formulated, saying, "... The numbers are essentially based on a historical perspective of revenues and then things that go through the audit and have been blessed by the auditors, by an outside agency, as to what those revenue projections are.''
For fiscal 2002, the city reported audited merchant license revenue of $1,030,035.
"So the increase of that revenue to $1,380,000, in hindsight, it should have been a red flag and I didn't catch it. But we had seen a pretty substantial increase from '01 to '02, those fiscal years. Well, the next thing we did, Diana (Madrid) went and ran a detail on the postings for fiscal year '02 that had been audited and that's where the closed session starts,'' Greer said. "There are some anomalies that I don't have explanations for today. We've begun a process internally to review some journal entries ... The supporting documentation is insufficient to clearly identify what occurred.''
Mayor Jim Robertson noted city officials are researching the matter and trying to "identify the reason for the variance.''
Greer said, "... There's not enough documentation to clearly identify what it is and while it may be appropriate, I don't have the documentation.''
While Greer believes the city will have to borrow money this fall to meet operating expenses, revenue projections for fiscal 2004 do not include any revenue from the Kohl's Department Store scheduled to open this fall nor any revenue from a quarter-cent sales tax designed to offset some of the costs of providing fire protection that voters will consider Aug. 5.
"There is nothing in there that we're not certain about now,'' Robertson said.
"I do not spend money I don't have ...,'' Greer said. "I feel confident that we have been conservative in our revenue projections up to and including the most recent revision and feel comfortable with where we are on our expense side. It's a very tight, very close expense budget this year and barring anything unforeseen, we should have more than $112,000 in revenue (above the amount of the projected deficit).''
Robertson said, "I think it's significant from my perspective that the budget for the '03 year, by charter, had to be to the Board of Aldermen on the 15th of May (2002) ... I didn't even take office until the 23rd of April (2002). So there really wasn't much that the current administration, especially with the new administrator in December and a new director of finance in March, could have done about the original '03 budget.
"That's different now. I think I've said before that with three months or four months to try to get a handle on this that's much different than having a full year and I'm extremely confident as we go forward that they do have a good grasp of all this at this point. They've done a lot of work in a very short period of time in trying to deal with some surprises and that's reality,'' the mayor added.