Tuesday, September 3, 2013

Belle Isle Financial Trends - Part II

by Sue Nielsen

The 2012 Comprehensive Annual Financial Report (CAFR), compiled by our City's new finance manager, reflects a major change in the way our City accounts for its available funds and outstanding debt. In the 2012 CAFR, many items were adjusted and figures were restated, meaning that the 2012 CAFR cannot be compared to prior CAFRs to determine changes in the way our City spends and saves.

Despite the fact that our City has used the same CAFR structure for at least the last ten years, the accounting firm employed by the City did not find fault with this sudden change in the 2012 CAFR. At this point, it may be relevant to note that this review work performed by the accounting firm is not a substitute for an internal audit; as clearly stated by the accounting firm in its reports.

If a public entity like Belle Isle plans to completely revamp its method of accounting for the flow of public funds, a comprehensive internal audit should be performed by an independent CPA firm to ensure that the new reporting method is accurate and reasonable. In Florida, public entities are allowed request a state audit, which can be substituted for the lesser review usually done by the local accounting firm.

A state audit would presumably be a thorough investigation of all the money trails in our City's finances, providing an open and forthcoming assessment of Belle Isle's financial management through the years. As such, it would certainly inspire more public confidence in our City's accounting and reporting methods than the sudden and unexplained changes in the 2012 CAFR made by a new finance manager with unknown credentials.

Regardless, it is clear that information from the 2012 CAFR cannot be compared to the CAFRs from prior years. For example, the term "unrestricted reserve" from prior years is not used in the 2012 CAFR. Instead, the amount reported as "reserve" includes capital assets, which we all know cannot be spent in case of emergencies or other City needs. So when Mayor Brooks speaks of Belle Isle's "million dollar reserve," it is important to remember that the term "reserve" is being defined differently than it was in 2011 and earlier years. Not to mention the fact that Belle Isle's unrestricted reserves were over $3 million just before the beginning of Mayor Brooks tenure, as discussed in part 1 of this article.

Another noteworthy change in the new CAFR is a completely revamped method of reporting our City's total revenues and expenditures. The 2011 CAFR revenue and expenditure amounts were retroactively modified to match the new 2012 reporting system. The following table is an attempt to present this modification visually:

Year                         Total Revenues      Total Expenditures

2011  (per 2011 CAFR)        4,890,835                4,926,956
2011  (per 2012 CAFR)      11,506,878              11,281,079   
2012  (per 2012 CAFR)      11,328,676              10,772,768

Note that under the new system of reporting, our City's 2011 expenditures are made to appear as though they were less than the total revenues for that year, in stark contrast to the prior 2011 CAFR which accurately reflected the fact that our City is spent more than it took in.
Now try to compare the above figures to the revenue summary on page 2-2 of the 2012-13 Annual Budget. In the Annual Budget, our City's "total revenues" for 2012-13 are $5,656,406. I have no explanation for how $11,328,676 in total City revenues (from the CAFR for fiscal year ending September 30, 2012) became $5,656,406 in the Annual Budget for the fiscal year beginning October 1, 2012. By any logical standard, these figures should be identical, not $5-6 million dollars apart!

Finally, there is the matter of the Cornerstone Charter School bond issue in October 2012, which added $9,625,000 to our City's outstanding debt. Residents have been repeatedly reassured by Mayor Brooks and the City Manager that this debt will be paid entirely out of rent paid by the school to the City over the next 30 years. However, this debt belongs solely to our City, and City Hall has admitted that it has no contingency plan if the school should close or become unprofitable.

Considering that our City's financial condition has steadily worsened over the past decade, it is troubling to see City Hall adopting new financial reporting methods designed obscure the important figures and make our City's financial condition appear better than it really is. Is this change in reporting methods an attempt to make residents feel financial secure while the Mayor and City Manager continue Belle Isle's recent spending spree?

If you have questions or want to learn more, please attend the upcoming budget hearings. The first is scheduled to take place at tonight's Council meeting on Tuesday, September 3 at 5:30 p.m. (agenda linked here). The second budget hearing is scheduled for Friday, September 20 at 5:30 p.m. Hope to see you all there!

4 comments:

  1. Sue,
    Great job of reporting. The mayor and cm are trying to cover something up. Thank you for keeping the residents in the loop as best you can. Brooks needs to go. He is in this for himself and does not care about the residents that put him there.

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  2. Has anyone out there written to your commissioner AND received a reply? Has anyone written to your commissioner, as I have (message sent twice,) and NOT received a reply? Why are we not hearing anything from them?

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  3. I could have sworn, Wednesday morning, Sept 4 I opened my IPad and there was an article of the meeting last night. Very informative. Now it is gone. Thank you and Sue for all you have done. It is my opinion that the mayor doesn't understand who is paying for his outrageous whims. He needs to go as the individual above stated. We need someone who includes the citizens. Having been a citizen of Belle Isle since early 70s it hurts to she home much the citizens have been stepped on. Let's let Brooks and his cohorts disappear, we can manage.

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  4. Change "she home" to "see how" on the above message.

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