Budget and Finance Committee Recommendations

R1

Negotiate formal written agreements for all Non-General Fund entities utilizing city owned facilities. These agreements will delineate the formula for calculating the “rent” including fair market value for the space, any recovery of City Council costs and any money set aside for maintenance, all indexed by the Consumer Price Index (CPI). Fair market value is obtained from an outside real estate knowledgeable advisor. (F1)

R2

The City Council needs to remember that 82% of the voters said via measure “J” that roads and streets are a priority. They should be constantly aware of the citizen’s desire and do all they can to improve the roads and streets. (F2)

R3

In order to do their part to meet the financial constraints placed on the city and to demonstrate their leadership to the employees who are continuing to take the brunt of the cost reductions and workload increases, the elected officials take an equivalent reduced benefit or pay. Even though they are allowed the benefits by state code, we recommend the elected officials show solidarity with the employees and voluntarily take a significant amount of reduction. (F2, F3)

R3

In order to do their part to meet the financial constraints placed on the city and to demonstrate their leadership to the employees who are continuing to take the brunt of the cost reductions and workload increases, the elected officials take an equivalent reduced benefit or pay. Even though they are allowed the benefits by state code, we recommend the elected officials show solidarity with the employees and voluntarily take a significant amount of reduction. (F2, F3)

R4

The Finance Director establish a separate Fund / Department for Animal Control to include ALL related costs. (F4)

R5

The City Council establish a policy that when decisions are made affecting the City budget, the City Council be provided backup financial detail prepared by the Finance Director and that the detail be available and kept with the budget for future measurement purposes. (F4)

R6

The City Council renegotiate with the County to have them continue to provide the Animal Control services. This is based on the City Manager now forecasting only a $25k annual savings and the fact that no detail has been provided for any of the savings and it is likely to actually cost more with the current approach. In addition, a cost benefit analysis which includes documented estimates of all costs as compared to savings covering the next 5 years be prepared and provided to the City Council. (F4)

R7

The City Manager complete the preparation and compilation of City policies and procedures and present to the Council for approval. (F5) Agency/Department(s) Required to Respond: • City of Clearlake (90 Days) (R1, R2, R3, R4, R5, R6, R7) Budget and Finance Committee Budget and Finance Committee City of Lakeport Oversight Summary: The Budget and Finance Committee noted that the City of Lakeport’s interpretation of the use of Measure “I” and “J” funds in the General Fund is correct; that the lack of having specific rental agreements in place and at fair market value is a failure of proper process; that it would be advantageous for the City to set up a “Standby” Letter of Credit with a financial institution at the best rate available while the rates are low; and that the use of a rubber signature stamp by any other person than the person’s whose name is on the stamp is inviting the possibility of fraud. Background: The Lake County Civil Grand Jury conducted an annual oversight of all incorporated cities within the County. Methodology / Procedure: The Budget and Finance Committee met with the City of Lakeport City Manager and Finance Director; reviewed and analyzed budgeted and actual expenditures for fiscal years 2003/2004 through mid year 2009/2010; evaluated audit reports for fiscal years 2006/2007 and 2008/2009; and reviewed other pertinent reports, documents, and statistics. The committee also examined petty cash logs and receipts; credit card bills, and supporting documents and observed a cash count of petty cash. Budget and Finance Committee Facts: • Lakeport officially became an incorporated town on April 30, 1888 and continued to operate as an incorporated town until March 17, 1952 when an ordinance was passed declaring the area a city. • It has a City Council/City Manager form of government. There are five elected City Council Members who serve overlapping terms and who annually select a Mayor from their ranks. • It is a city of 5,1354 souls, of which approximately 12 percent are under the poverty line5 and struggles in the current economic times to provide vital services to its citizens. It is in a rural county with a limited tax base with which to produce revenue. • The city covers 2.68 square miles, provides water and sewer services to approximately 2,500 customers, is responsible for maintaining 29 miles of roads of which, 85.9 percent (24.9 miles) are rated poor to very poor,6 and has a median household income of $32,226, compared to the county median of $29,627 and the state median of $47,4932 • It has approximately 55 city employees (including council members) of which less than 30 percent are employed by the police department • The City Council members are paid $300 per month and are allowed to receive full health, dental, vision and counseling insurance. In 2008/2009, the City budgeted over $50,000 for Council member insurance. In 2009/2010 the City only budgeted $41,000 since one Council Member declined benefits upon being elected, and then another decided to discontinue receiving benefits. Currently, three Council Members receive medical insurance and, as of September 2009, have a co-pay just like the employees. • The current Acting City Manager has been performing the City Manager duties along with conducting his Chief of Police duties. The former City Manager was absent for the last year and a half because of being called to Iraq and was unable to return to his former position upon his return. The City Council is currently interviewing candidates for a permanent City Manager. Subsequently a new City Manager was hired. • The City Manager and the Finance Director appear to have a significant amount of formal training and experience than is required to perform their 4 Source: U.S. Census Bureau, 2007 Estimate 5 Source: U.S. Census Bureau, 2000 Census 6 Source: City Engineer, City of Lakeport Budget and Finance Committee jobs. Both the City Manager and the Finance Director are backed up by designees who can assume their positions with the same authority. • The current City Manager forecasted the decline in revenues based on business closures and openings and adapted this years budgeting sessions to be able to provide the vital services expected, particularly water and sewer. It is currently within 3% of his predictions at mid year. • The City owns Carnegie Library and the building where City Hall and the Water Department are located. Last year there was concern by the 2008/2009 Grand Jury that the rents were not being handled properly. The Redevelopment Agency and the Water Department did not pay rent for three years due to the turnover of City Managers and the absence of the current Finance Director. The entities concerned were not billed for the rent and consequently did not pay it. That and other confusing errors were not noticed until the 2008/2009 Grand Jury discovered them. The ultimate decision was to forgive the rent for that period. There are currently no rental agreements in place. • The City in past years, put a new tax on the ballot that was specific to fixing roads and was defeated as a specific tax required a 2/3rd majority vote to pass. In 2004 Measure “I” and Measure “J” were put on the ballot as a general fund item that only required a simple 51 % majority to become law. • Employees maintain their own time sheets to reflect their daily total time and do not punch time cards. Department Heads and Supervisors approve the time sheets prior to submission to the payroll department. The Police Department is on a positive time keeping system of an 8 hr or 10 hr shift with overtime compensated with cash or time off at 1 1/2 times. Overtime is approved in advance. • The following are authorized to sign checks: Mayor, Mayor Pro Tem, City Clerk and Deputy City Clerk. The Council Members rotate Mayor and Mayor Pro Tem each year in December. Only the Mayor and Mayor Pro Tem are authorized signers at any time. Every December a new signature card is filed at the Bank. Invoices are approved by Department Heads and entered into software that prints the checks. The check stub contains the check number, amount and a brief description of the expenditure. Receipts are attached and filed. The checks are not sent until the information attached to the stubs is approved by the City Council. As a control over misappropriation of funds, the City required that every check be signed by two authorized individuals: This is normally the City Clerk (or the clerk’s deputy) and the Mayor. Instead Budget and Finance Committee of signing checks, the Mayor’s signature is on a rubber stamp that is maintained and applied by the Accountant 1 (the Assistant to the Finance Director). • Concerning credit card bills, packets of invoices are reviewed and approved by Department Heads prior to payment. Credit cards are held by Department Heads, City Manager, City Attorney, Council Members and the Finance Director. The City Council has final approval of payment on all expenditures. Monthly bills are provided to the card holder, who reviews the bill, signs the bill, attaches support documentation to the packet, and returns it to Finance for payment. The Budget and Finance Committee reviewed several packets and found that all was in order. • The City maintains one petty cash and two change funds. The Petty Cash Fund is attended to by the Finance Director and the Clerk’s Deputy. The value of the fund is $300. There are no written procedures for usage of the fund but receipts are kept in the box and cash and receipts must always equal $300. The fund is reconciled once a month and unannounced reviews are conducted occasionally. The Change Fund is set at $100 and is kept in two boxes, one at each window. There are no written procedures for the fund but it is balanced and deposited daily. • Payments are received at the City Hall building for Sewer, Trash, Business Licenses, Encroachment Permits and Building Permits. Payment can be made by check or credit card at the windows provided. Deposits are made daily and twice daily at the end of the month. • All grant projects are tracked through the Redevelopment Agency. Findings:

R8

Appoint an independent organization or committee to review and evaluate salaries and benefits paid to Council members. (This recommendation from last year’s Grand Jury report was ignored. It is recommended again. Even though the $ have been reduced due to the desires of specific Council members, a separate evaluation would eliminate any potential for criticism.) (F5) Agency/Department(s) Required to Respond: • City of Lakeport (90 Days) (R1, R2, R3, R4, R5, R6, R7, R8) Budget and Finance Committee