With the city’s budget year ending June 30, fiscal watchdog John Marshall Lee in his latest commentary weighs in on the city’s financial reporting.
“FFFRGate”–Finch’s Funding & Financial Reporting
A Bridgeport “monthly” financial report, a Mayoral responsibility called for in the Bridgeport City Charter was delivered to the City Clerk office on June 14 and became available to the public on June 15. No “monthly” report had been presented for March, 2012 or for April 2012, so this became a “quarterly” update as practiced in 2011, and includes 11 of 12 months of the 2012 fiscal year.
Revenues of $493,354,077 are projected to fall short of the budget $493,398,760 by $44,682. More importantly projected expenditures are presented to be $2,646,025 in excess of budget. What the Finance Department is telling the community is that based on this report, they see a deficit of $2,690,707 on June 30, 2012.
However, since adjustments and changes at year end are routinely made, but never presented to the Bridgeport public, this may be the last we know about the 2012 fiscal year until an external audit seven months from now. Will we see a June, 2012 “monthly” report this year per Charter language? It is the only way the public will see what line items are overspent, where revenues were projected too liberally, and how many ghost positions and ghost expense lines were used to inflate the budget at adoption and are now used to cover excess and overspending. Does any other entity you know spend money and have a duty of accountability, yet eliminates or just plain ignores the final monthly financial report?
Bridgeport’s only remaining official “financial watchdogs” are the seven members of the City Council who serve on the Budget and Appropriations Committee. Timely reports, with consistent material, including full and accurate entries, with variances fully identified and correct mathematics and accounting symbols need to be the order of the day for these elected representatives to perform their fiscal duty. In that regard this report shows a significant change from those of recent years and by removing info, fail to assist the B&A or a citizen in communicating the real fiscal status of the City.
Scanning the report immediately indicated changes were present with no explanations.
• “Any revenue (expense) that is known to have significant variance by the end of the fiscal year has been indicated and explained below” is a statement common to former reports, both February, 2012 and May 2011 as examples. That statement and all of the variance reporting in narrative form is missing without explanation. In the February 2012 report there were 28 revenue variances noted as well as 12 expenditure narratives. Did they just disappear? Were they forgotten or ignored? How will the City Council (or the public) understand the numbers without the assistance of variance explanations?
• Department titles were formerly section ‘headings.’ They are now section ‘footings.’ Since no lines are skipped between sections, and old habits are difficult to overcome, you have to keep reminding yourself which department you are studying.
• Two former columns of scant use have been dropped, not a bad idea if you were making room for new entries including “last year revenue/expense item” columns to allow variances to be understood from that perspective. But only one column is added, an “organizational code” of no value to a public reader.
• Language used in column headings is troubling. One assumes that “2012 Budget” is the Approved (and Amended) number for each account. However, using the words “SPENT” and “BALANCE” in a revenue report can be misleading and confusing.
• The majority of the numbers in the entire revenue report are (bracketed). Why? Meaning? If this is not an error, does it mean that all past monthly reports were completed and distributed in error? Does it indicate a new preparer?
• And the mathematics of genuine variances is often misstated. Ex. Controller’s office Line Item 41290 Retail Sales Revenue- Budgeted at (366,000), Spent 0, Balance (30,500), Projected 0, Variance (over)/under (366,000). Meaning? And this is only the second line item on page 1 of the report.
• Past reports included occasional “governmental grouping” summaries helpful to understanding that are absent from this report.
• Education income sources show at the end of the REVENUE section and 20 line items account for about $175,000,000. When you look at education expenses, instead of 6 pages of line items as in recent reports, there are only three lines of expense information. Readers will go away unsatisfied by this accounting!
• The final summary numbers on the last page may add up through 60 report pages but somewhere the internal working of SPENT relative to BALANCE may be off by $6 Million.
• Someone had reviewed many of the “ghost positions” in the original budget because over $2.5 Million of positive expense variances showed up in May, 2012 budget to reduce $2.5 Million of overspending in other accounts. They did not adjust the healthcare and pension benefits at the same time so there are further savings at year end. However, the budgeting of positions that were never intended to be filled, so as to create funding that can be spent elsewhere (and remain secret because with no June report, the public does not see the line items) is a practice that should be eliminated. It is not accountable behavior, and if the B&A had fiscal training would not be sanctioned in the first place.
These observations are mostly surface contrasts and do not represent real “drilling down.” But with the number of questions raised, why bother to trust the results reported? This “monthly” report courtesy of Mayor Finch and his administration is an insult to the taxpayers. If half of the comments have merit, who bothered to review this report before releasing it? Does it indicate the Mayor has no realistic sense of what accountability means in the fiscal sphere? And yet it is “accountability” he claims when asking for Charter power over the education system. As school closes and final exams have been taken, not all grades are in at the high school level yet. In that respect I want to warn the Mayor his “Accountability 101” grade is failing at this time and he needs to put extra effort into the 20-year overdue “12th Month June report” in order to pull up his grades, serve the public, and obey the City Charter. Time will tell.
Thank you John Marshall Lee for your patience, diligence and fortitude. A projected $2.7 million deficit on a $493 million budget 15 days before the end of the fiscal year. Let’s see if the Administration produces a Month 12/year-end report by July 31st so we will all know what is going on. The complexity of City operations requires year-’round vigilance. Do I understand the elected/all volunteer members of the City Council have absolutely no staff or consulting resources to help them figure all this out?
There are things a watchdog might suggest in the face of projected deficits, but if the watchdogs get poorly prepared reports that are irregular in frequency and because your fellow ‘dogs’ are too trusting, attentive to other issues, or ignorant of their oversight responsibilities, you do nothing.
Last night Angel DePara raised the issue of “the standing agenda item” to the B&A members. There was no discussion. A suggestion was made that there be a special meeting with Tom Sherwood nodding his head. Had any of them looked at the report? No evidence of that. Was anyone enthusiastic enough (or responsible enough) to say let’s set a date? NO.
The reports were on the desks of the City Council when they gathered at 7:00 PM. If the B&A is not used to a fiscal review habit where they would alert fellow Council persons, how is the public represented? I used parts of this essay to address the CC last night in the public session. My five minutes were cut to 3 minutes 30 seconds by Tom McCarthy. Next time I will bring my own timepiece.
There has been no internal auditor for the City for more than five years. There has been no “financial board” providing expertise and memory to prepare fiscal issues for the CC, and while they have had one legislative assistant as well as one “ghost position,” the use of this experienced individual by the Council and its Committees has been very limited under President McCarthy. New Haven, by contrast, has a half-dozen such assistants for its committees. Neither the “stipends” nor the $90,000 allocated for “Legislative Other Expenses” for Bridgeport Council members show evidence of being used to create a better-trained, more aware and effective City “check and balance.” Time will tell.
Keep up the good work, JML.
Here’s what the Finch team needs.
·Chief accounting officer
·Chief administrative officer
·Chief analytics officer
·Chief audit executive
·Chief brand officer
·Chief business officer
·Chief channel officer
·Chief commercial officer
·Chief communications officer
·Chief compliance officer
·Chief creative officer
·Chief data officer
·Chief executive officer
·Chief financial officer
·Chief human resources officer
·Chief information officer
·Chief information security officer
·Chief innovation officer
·Chief knowledge officer
·Chief learning officer
·Chief legal officer
·Chief marketing officer
·Chief merchandising officer
·Chief networking officer
·Chief operating officer
·Chief procurement officer
·Chief product officer
·Chief risk officer
·Chief science officer
·Chief stores officer
·Chief strategy officer
·Chief technology officer
·Chief visionary officer
What the Finch administration needs is more people in the pool. Finch has his AAA (Adam, Alana and Andy) plus Sherwood Forest and that is enough for him. Take a look at the CT Post article on Steel Point this morning and 50% of the City team are AAA! They are keeping our eyes on the potential “anchor tenant” that excites them. I suggest we look at the financial illustrations (best case and less better cases, as well) showing what happens to the cash flow from the project and for how long assuming the various bonds are floated, the capital improvements are made, and the projected revenues prove inadequate. If the “anchor” fails or bails, who is responsible for supporting the bonds? Adam Wood?
Most of us are looking for economic development and expect that this will help the property tax burden born by the residential property owner. In light of the serious delays we have all suffered for years, it would be reasonable and responsible for the numbers behind the bond presentations to be thoroughly understood, all questions raised thoroughly answered and all parties satisfied with answers provided. What say you? Time will tell.
Thank you, thank you, thank you JML. I am so grateful to you for your efforts at exposing this corrupt ugly monster.
As the Charter Review Commission is facing the City Council currently, it is well to see Charter language as important to fiscal City management and review. The CRC has focused on giving Mayor Finch control of education appointments on the basis of his claim of accountability. What is the evidence for Mayor Finch being an accountable leader? If it is his strict attention to monthly reporting 12 months per year, he has failed. And what does the CRC understand about that? Little or nothing, it appears. Get out to the hearings and express your concern. Raise your voices and let this hand-picked group of fellow Bridgeporters understand your frustrations and concerns. By the way, the CRC is an example of the “power of appointment” provided to the Mayor. When you handpick the players, your sole goal is in their mind, and nothing else of importance, apparently. So a BOE does not have a single deliverable. How will a low-accountability Mayor handpick the members (after his handpicked community committee provides some candidates)? Look it up. Study it. Think about it. Time will tell.
We’ve had bigger crooks and hot messes but we have never had a mayor this incompetent and this dishonest. Thanks John for your hard work and efforts.
*** Which way is up is a better question that you might get an answer to, no? ***