Bowie County Financial Advisory Update #3 July 1, 2014 Commissioners , Court Bowie County , TX Follow-up on Budgeting Concerns Dear Judge Lacy and Commissioners : It has been over a week since the last Commissioners Court meeting , and it will be almost two weeks until the next regularly scheduled meeting. The Financial Advisory Committee wants to reinforce our advice that this spending and budget crisis is an all hands on deck matter and County Officials need to focus on this highest priority and not on distractions. Items need to be placed on the upcoming July 14, 2014 agenda (or even better, before then in a special called meeting) to discuss and take appropriate action in the following areas: 1.At the June 23, 2014 Commissioners Court meeting, the Financial Advisory Committee pointed out a significant budgeting mistake , and the Commissioners subsequently amended the revenue budget to remove $1,293,000 for grader sales that had already occurred in the prior year. In addition, it was pointed out the actual expenditures for the two replacement graders in the current year exceeded budgeted amounts by $473,349. The combination of these two related issues mathematically lowers the anticipated budgeted profit of the original approved budget to a projected loss of ($1,485,226). Such an amount equates to an expected loss of $4,069 per day for the entire 365 day year. To put this in perspective , for the remaining 90 days of the current fiscal year, the county may need to reduce spending by$16,502 per day to mitigate the projected loss as calculated above. Suggest: Implement immediate spending cuts! Stop the bleeding! 2.The current year budget likely needs to be amended to authorize the $473,349 already spent on replacement graders. Possibly this amount can be reallocated among other line items by a budget amendment , or perhaps an emergency expenditure can be authorized if appropriate. Suggest: Determine which other budget line items may be reallocated (reduced) to cover the $473,339 expenditure and make the budget amendment. Suggest: Obtain permission from the offsetting budget areas for the transfer of budget. These areas are effectively agreeing to substantially reduced spending. 3.The Financial Reserve Policy that was approved September 10, 2012 requires the Commissioners Court to develop a plan to re-establish the reserve when it falls below the minimum level required . The Court has not done so. The county has not been in compliance with this policy since it has passed , and is significantly below the minimum reserve level. •Policy-required reserves: $26.9 million / 12 months x 2.5 = reserves of $5.6 million •Beginning of the year reserve : only $474,650 (likely to be even less at year-end) •Beginning shortfall: $5.6 million-474 ,650 = $5.1 million! Ending shortfall: more! •Restoration using a 5 year plan: at least $1,020,000 per year, or $2,794 per day! Suggest: Follow the policy, or amend the policy. Put on agenda for next meeting. Suggest: Acknowledge the need to re-establish the reserve, and adopt a plan! Suggest: Reduce expenditures or find revenues of the required amount to restore the reserve. Note that these reductions are in addition to other measures required to bring the current overspending under control. Suggest: If necessary, start with smaller steps like $200,000 of budget cuts first meeting, $400,000 the next meeting, etc. to begin the process. 4.A member of the Financial Advisory Committee attended the budget hearings on Wednesday , June 25. His committee update (attached) indicated the following observations: •no appreciable sense of urgency was communicated to department heads. •more downward adjustments were made to revenue projections than to expense budgets , indicating the county will be even worse off financially. •minor reductions in budgets of $10,000 or less will not come close to getting the job done when reductions of $5,000 or more per day are required. Suggest: Convey sense of urgency to all county officials and departments. Each must take responsibility for their own budgets, even at reduced spending levels. Suggest : Set and communicate an appropriate target for overall budget reductions: $3 million, $2 million , etc. (whatever is necessary to correct overspending and begin the restoration of financial reserves.) Suggest: Set very conservative revenue projections, and limit expenses to 90% of those amounts (providing additional surplus at the end of the fiscal year.) 5.Our Committee has worked with the Treasurers office and County Auditor to establish procedures to review and account for spending of the $5 million loan proceeds in a transparent manner. Suggest: Control spending of all cash from every source, including loan proceeds. 6.The past two years the county has overspent its budgeted expenditures by more than $1 million. Regardless of any other action, such overspending should be limited this year. Suggest: Commissioners Court develop procedures now regarding how to address expenditures in July, August and September that exceed budgeted amounts.
Posted on: Wed, 02 Jul 2014 22:23:56 +0000
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