As Budget Year Ends, What’s Going On?

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.