News and Opinion from Sisters, Oregon
News and Opinion from Sisters, Oregon
The report for the year ending June 30, 1996, was presented at the Thursday, November 21, city council meeting. It indicated that the city's budgeting practices conform to legal requirements and that the city is financially solvent.
"You have a $300,000 cushion," noted auditor Kristen Stauffer. "From our perspective you're doing fine."
That "cushion" is an ending fund balance of $299,605, a kind of "savings account" the city carries from one year to the next to fund operations until tax revenues come in the fall.
But city officials are worried that the city is not, in fact, doing fine. The auditor's report, presented by Gregor Professional Corporation of Eugene, showed that the city spent $49,859 more than it took in last year. If the city spends according to its budget this year, expenses will exceed revenues by about $80,000.
City councilor Gary Miller expressed concerns that the audit report doesn't make it clear enough that the city is spending down its "savings account."
"To get a rosy budget report that says everything is being done by procedure, well that's fine," Miller said. But, he believes, the report should provide a red flag for budgeters so that they can readily see a pattern of decline.
Auditor John Gregor noted that the format of the report is restricted by state guidelines, but that a decline would be noted in the firm's management letter to the city if it was of real concern to the firm.
"We've sounded the alarm in many cases," Gregor said. "We're not sounding it in this case because you are living within your budget."
The city has already sounded the alarm on its own. City administrator Barbara Warren reconvened the city's budget committee in September -- just three months after the budget went into effect -- and the committee is at work devising budget cuts and revenue increases to cope with the $80,000 shortfall.
"I don't think it (the report) changes anything," Warren said. "What we still have to deal with is that we're spending more than we're taking in and that cushion's going to continue to shrink unless we solve that."
Police administrative assistant Pat Davis acknowledged that the city is presently living on its savings account, but she thinks a $300,000 cushion ought to be enough to stave off budget cuts. Davis has said that the cuts contemplated by the budget committee would make greater efficiency at city hall impossible and verged on cutting into current services.
In a later interview Davis asked, "Why are we talking about budget cuts if we have a $300,000 cushion?" She believes the city should focus its efforts on increasing revenue to balance the budget.
The way the city designs its budget may change in the wake of the summer's budget turmoil.
The budget currently overstates the amount of funds available in each department budget, with the expectation that unspent funds are to be turned back to the general fund to be used as cash carry forward for the next year's budget. Those funds make up the city's "cushion."
Under that system, department heads do not know for sure how much they actually have to spend and how much is really for the "cushion."
The auditors said that this practice is legal and quite common in cities because it allows for fiscal flexibility in an emergency. A city can tap that extra money without taking any extraordinary steps.
The auditors declined to make any recommendation about how the city should construct its budget.
But, they noted, another way to build a budget would be to place the "cushion" in a contingency fund that the city can use 10 percent of without council action. The city can use the whole fund in an emergency if the council passes a supplemental budget and holds a public hearing.
Warren told The Nugget she plans to recommend something like that procedure for next year's budget.
"I still won't recommend an unappropriated ending fund balance because I don't think we're in a financial position to do that," Warren said. "But I will recommend having more contingency funds and tightening down the budget areas, the line items."
That, she believes, will reduce confusion over what a department's budget really is.
"The advantage to that is that the department head can look at his budget and know what he has to spend," Warren said.
The trick, Warren indicated, will be in properly anticipating the needs of each department.
"You try to budget where you think you might need something," Warren said.
For example, the city has budgeted for two years to replace the roof on the city-owned house next to the Sisters Firehall. According to Warren, they haven't spent those funds yet, which makes the budget appear inflated, but at some point that roof will have to be replaced and the money for it needs to be in the budget.
The city has also budgeted for items ranging from new office equipment to an administrative assistant's salary, but because the city was waiting to move into a new city hall, those funds were never used.
Jim Cornelius is editor in chief of The Nugget and author of “Warriors of the Wildlands: True Tales of the Frontier Partisans.” A history buff, he explores frontier history across three centuries and several continents on his podcast, The Frontier Partisans. For more information visit www.frontierpartisans.com.
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