Sean C. Morgan
As the Sweet Home Fire and Ambulance District prepares to enter its budget sessions, board members have taken action to head off a negative beginning fund balance, the result of apparent past budgeting mistakes that have left the organization about $117,000 in the hole to start this year.
In November, district officials became aware of the negative ending fund balance in the district’s general fund, said Fire Chief Dave Barringer.
Based on advice from its auditors, Accuity, LLC, the board voted during its regular meeting on March 17 to close its equipment reserve fund, moving $334,000 to the general fund to cover an anticipated ending fund deficit of $117,000 for this year, leaving almost $217,000 to carry over as a beginning fund balance in the budget beginning on July 1.
The district spent about $60,000 from the equipment reserve fund previously to pay for a four-wheel drive ambulance. An anonymous donor had given $100,000 to help pay for the ambulance.
In recent years in the general fund, the district spent more than $100,000 than it received in revenues each year, reducing its ending fund balance and cash carryover to the beginning balance for the following year. That annual reduction in funds actually available at the beginning of the budget year, July 1, dipped below zero this year by about $117,000.
The budgeted beginning fund balance, unspent funds that carry over from the previous year, masked the shortfall.
For the 2014-15 budget, the district predicted a beginning fund balance of $6,182. The audited actual figure for the ending fund balance in 2013-14 was actually in the red by about $117,000. The ending fund balance for 2013-14 became the beginning fund balance for 2014-15. The 2014-15 budget should have showed a deficit of $117,000 as a beginning fund balance instead of $6,182.
Beginning fund balance projections were more than $100,000 above actual beginning fund balances going back at least to the 2011-12 budget, when the district budgeted $356,000. An audit showed the actual beginning fund balance was $236,000 that year.
For 2012-13, the district budgeted $236,000, what turned out to be the actual beginning fund balance from the previous year. An audit showed the actual beginning fund balance for 2012-13 was $124,000.
The district used that figure, $124,000, as its budget for the beginning fund balance for the 2013-14 fiscal year. The audit for 2013-14 put the actual beginning fund balance at $6,182, the figure it used to set its budget for the current budget year, 2014-15, which runs from July 1 to June 30.
In reality, Barringer said, that beginning fund balance should have shown the general fund short by $117,000.
When budget officers prepare their budgets, which serve as financial plans for the coming year and are based on estimates and projections, they don’t know what the actual ending fund balance will be yet. They prepare their budgets in the spring. Right now, they’re preparing budgets for 2015-16, and their boards will review them in the next few months.
They will not receive actual audited figures until the fall, at the earliest. The agencies will already be in the next fiscal year and budget.
To plan the beginning fund balance, said city Finance Director Pat Gray, she starts with the audited actual ending fund balance from the previous year. Preparing for 2015-16, she’ll start with the ending fund balance from 2013-14, which is the actual beginning fund balance for the current year, 2014-15, and calculate where it should be based on city transactions throughout the year and projected transactions through the end of the year on June 30.
As an example, if it were to continue what it has been doing, the Fire and Ambulance District would plug in the audited actual ending fund balance from 2013-14 as the beginning fund balance for 2015-16, essentially bypassing the effects of 2014-15.
“Sometimes, when people pick up the beginning fund balance, they don’t pick up the right beginning fund balance,” said Gray, who is contracted to handle payroll and some accounting functions for the Fire and Ambulance District. “Sometimes I would find things that were wrong and fix them.”
She assisted Barringer in sorting out what happened in the district’s budget.
“I never saw their budget till they brought these sheets over,” Gray said.
She noted that she made a similar type of mistake in a water fund last year for the city, although the error has since been corrected.
The budgets were prepared by retired Fire Chief Mike Beaver, reviewed and approved by a 10-member budget committee and adopted by a five-member board of directors.
Beaver, who has been retired since June, said that he wasn’t aware of the budget issue.
“No one has approached me about the budget,” he said. “It’s hard for me to comment about something I’m not aware of. I know we were short of money. We had ambulances that were in terrible shape that we were trying to keep in shape.”
Tax revenues were starting to creep up a little bit, he said, but the auditors never had any concerns about the district running out of money.
Barringer said he noticed something was wrong with the budget when he looked at the history of revenue line items. The budget document reported actual numbers preceding years as round figures, such as $4,000; and they continued unchanged in consecutive years. Typically, those figures would not be round numbers, and they would not be the same year after the year. Public agencies normally record the actual numbers in the budget history based on an annual audit.
“The budget wasn’t increasing as much as expenses were,” Barringer said. The district has been dealing with falling ambulance billing and reimbursement levels. That’s changed this year as Julie Mayfield, the district’s new administrative assistant, has been pursuing ambulance billing revenue. That revenue source will end up more than $100,000 higher than budgeted this year.
But that is more than offset by an overestimate of what property tax revenue would be this year, about $1.3 million, Barringer said. It appears from notes Beaver left behind that it inadvertently included bond levy revenue, which is handled and tracked in another part of the budget.
The bottom line is the beginning fund balance was dwindling, and the district doesn’t have enough cash to operate the first four months of the fiscal year, between July and November, when the district starts receiving property tax revenue.
The district has already been using a line of credit to cover operations in the first part of the year, Barringer said. It borrowed less this year than last, but it’s going to have to use the line of credit again next fiscal year to make ends meet through November.
Ideally, he wants to get the department off the debt, he said, but going forward will continue to be hard when property values increase by only 2.5 percent and the cost for retirement benefits increases by 7 percent and medical insurance increases by 6.5 percent.
Barringer said he implemented a spending freeze immediately, and the department is making do with what it has. A battalion chief changed the oil in an ambulance, and personnel, paid and volunteer, are replacing deteriorating siding on the Fire Hall.
Cutting spending is not something he can do, he said. “The only option would be to cut paramedics. That is absolutely not possible. We could have one more on each shift and still be short. It has me concerned. We’re talking about people’s lives.”
The battalion chiefs already complete a variety of other duties in addition to leading one of three ambulance shifts.
Barringer told the board that the district might need to consider a local option levy to help fund additional medics. In the meantime, paramedic Josh Bondesen has taken the lead in applying for a SAFER (Staffing Adequately for Fire and Emergency Response) grant through the Federal Emergency Management Agency to pay for a new paramedic for each shift.
The financial situation is not an emergency yet, Barringer told the district board during its regular meeting on March 17, but it’s something he wanted the board to talk about.