Tag: cafr

Snapshot of DeKalb’s pension trends through 2020

The chart below tracks the unfunded liabilities of DeKalb’s Illinois Municipal Retirement Fund (IMRF), police (PD), and fire (FD) pensions.

unfunded-pension-liabilities-thru-2020

We expect total pension liabilities will go up with raises, cost of living adjustments, etc. However, the unfunded portions of the liabilities should not. Actuarially determined annual pension contributions are supposed to ensure they don’t rise. Yet you can see by the chart that unfunded liabilities for police and fire climbed steadily for a generation. We’ve now accumulated some $126 million in liability debt. One of the consequences is this year’s contribution total of $9.7 million, which will gobble more than a quarter of the city’s operating budget.

However, the chart also indicates that someone began applying the brakes in 2018. It’s important to explain this so we can support policies that continue the trend to reduce unfunded liabilities.

Continue reading Snapshot of DeKalb’s pension trends through 2020

DeKalb’s annual audit turns up deficiencies in physical security

Amid habitual deficiencies in internal financial controls, DeKalb’s move to a new city hall has created physical security risks, according to the city’s auditor for budget year 2020.

During our observation of the City’s internal controls, we noted the initial entrance/front of the building has limited security and minimal restriction to the departments stationed in this area. Access from the back of the building is also available and requires no key card for entry. Cash and other City tangible assets/property should be reasonably safeguarded to protect the City from loss.

We recommend the City implement a more restrictive environment, where departmental employees work together to avoid instances where one employee is left being responsible for the department, running the cash registers, and overseeing the City safe. In order to help mitigate this risk, we recommend the City implement and enforce a more comprehensive control environment where appropriate/trained employees can support the department and the public. In addition, to improve physical access and ensure security amongst City employees and the general public, we recommend implementing a key card and electronic access system.

Auditor’s Communication to the city council and management, page 14 (page 256 of the PDF file).

Management response:

City Finance Staff have lock and vault procedures in place to protect on site [sic] assets. Presently, the building maintains two entry points to accommodate individuals with a physical disability. City Staff in FY2021 can investigate modifying the Lincoln Hwy entrance into an Americans with Disability Act (ADA) compliant entry thus eliminating the need for having an additional open door on the first floor.

City hall has been in this building a year. Blaming the ADA for not fixing the entry issue doesn’t cut it, and “lock and vault” procedures aren’t a substitute for having two staff on hand when the situation calls for it.

In all, it doesn’t sound like management intends to take the steps necessary to mitigate the risks, but that is par for DeKalb’s course. Deficiencies from the 2019 audit, such as failure to assign a second person to review transactions and to reconcile bank statements timely, were not corrected in 2020. One deficiency that was corrected in 2020, that of water rates billed that did not match the rates authorized by ordinance, was originally identified during the 2018 audit.

Management is careless with our money and the record shows it. City council is either clueless or doesn’t care.

Related: DeKalb’s Finance Division is a story of loss and low priority.

How red do the flags have to be?

The DeKalb city council recently received and filed its fiscal 2019 Comprehensive Annual Financial Report (CAFR) along with the auditor’s letters and communications to council and management. Although the audit was problematic, the council did not talk about the issues, so we will do it here. First, to summarize:

  • The auditor detected material misstatements in the financial statements.
  • The auditor found deficiencies in internal controls that are supposed to prevent and detect material misstatements.
  • The auditor reported that findings from fiscal 2018 were not corrected in 2019, including mismatches between fee rates charged and the actual rates authorized by ordinance.
  • For the second year in a row, the city has failed to review and properly adjust accounts at year’s end.
Continue reading How red do the flags have to be?

Why did DeKalb change its employee numbers going back 10 years?

I was looking up city budgets yesterday and thought that information on numbers of employees would help provide more context for what I was seeing.

My resource for this is the Comprehensive Annual Financial Report (CAFR), not the CAFR itself, but a report appended near the end of the document that’s called “Full-Time Equivalent Employees,” or as I call it, the FTE report.

The FTE report does not tell you how many people the city employed, but it does tell you how many FTEs it budgeted for in each city department during the fiscal year just closed, plus the FTEs budgeted each of nine additional years back.

Imagine my shock when I saw that the FTE report attached to the FY16 CAFR changed all the historical data. Continue reading Why did DeKalb change its employee numbers going back 10 years?

Pension Plan Membership as a Factor in Jump of Net Pension Liability

DeKalb’s latest Comprehensive Annual Financial Report (CAFR) is out. It covers Fiscal Year 2016, which ended June 30, 2016. The big news is the net pension liability.

Public safety expenses related to the operations of both the Police Department and Fire Department accounted for the largest share of expenses at $33,400,660 or 50.1% of the total. This represents a 50.1% increase from the FY15 total of $22,259,920. This increase was due primarily to the increase in the net pension liability for police and fire pension plans.

Yes, the city’s net financial position was reduced in one year by $12.4 million, and an increase in long-term liabilities accounts for about three quarters of the loss.

We can attribute a combination of factors in the increase in liabilities, not the least of which were investment returns coming in well under the actuarial assumption of 7.5%. However, today I’d like to focus on the growth of membership in the public safety pension plans, because it’s shocking to see them escalate like this while DeKalb itself is shrinking.

[easychart type=”vertbar” width=”420″ title=”Public Safety Pension Funds Membership” groupnames=”PD Members, FF Members” valuenames=”04, 05, 06, 07, 08, 09, 10, 11, 12, 13, 14, 15, 16″ group1values=”91, 93, 94, 97, 101, 100, 98, 99, 101, 107, 108, 111, 115″ group2values=”92, 97, 98, 105, 105, 105, 104, 102, 106, 107, 113, 116, 116″ minaxis=”90″] Continue reading Pension Plan Membership as a Factor in Jump of Net Pension Liability

Auditors Identified a “Significant Deficiency” in City of DeKalb’s Internal Accounting Controls

City of DeKalb’s Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30, 2016, contains a letter to management from the auditors that discusses a “significant deficiency” in DeKalb’s internal accounting controls.

The DeKalb city council is set to discuss the report during its Committee of the Whole meeting January 9 at 5 pm.

Here is how the auditor defines “significant deficiency” in the management letter (my emphasis):

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency or a combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Continue reading Auditors Identified a “Significant Deficiency” in City of DeKalb’s Internal Accounting Controls

DeKalb’s $10 Million Budget Hole

I’ve had a preliminary look at DeKalb’s FY17 budget.

The proposed operations (General Fund) budget, which begins in January, has $2.8 million in additional spending for personnel alone when compared to the FY16 budget that ended June 30. (I am ignoring the current six-month “FY16.5” budget at this time.) Biggest jumps:

$743,000 more in regular wages
$485,000 more for health insurance
$1,712,600 more for police and fire pensions

Total operations spending from the General Fund (GF) is projected to be up $3.3 million as compared to revenues, which are expected to increase by only $2.5 million.

How are they bridging the gap? I’ve spotted three ways so far: Continue reading DeKalb’s $10 Million Budget Hole

New Annual Financial Report is Out

City of DeKalb released its Comprehensive Annual Financial Report (CAFR) for fiscal year 2015, which ended June 30.

I’m sure city staff will also release the Popular Annual Financial Report (PAFR) as they did last year. It’s a dumbed-down version of the CAFR that nobody asked them to compile, but they get some sort of warm-fuzzy award for it, so it’s all good.

Let’s update some charts. First, the hiring news:

[easychart type=”line” width=”420″ title=”Full Time Equivalent Employees by Fiscal Year” groupnames=”FTEs” valuenames=”01, 02, 03, 04, 05, 06, 07, 08, 09, 10, 11, 12, 13, 14, 15″ group1values=”224, 231, 240, 237, 250, 254, 261, 262, 249, 241, 211, 209, 217, 225, 234″ minaxis=”208″]

The hiring spree is still on.

The General Fund budget for personnel expenses this year is $26.9 million, a rise of 2% over last year and a net increase of $500,000 in this budget category. There are a couple reasons why the increase was “only” 2%. The primary reason is that a chunk representing another 2% was sent over to the Water Fund for Water to pay. They’ve also succeeded in reducing health care costs (something I’d like to compliment them on sometime, if only they’d stop annoying me for a minute with the Bozo no-nos).

But wages and pension costs are both increasing well above inflationary levels. I anticipate they will have to come up with $500,000-$700,000 more for this budget category next year.

In other words, despite the rosy picture staff will paint next month in an effort to persuade the city council to hire a human resources director, the council should no way, no how approve any more hires and, in fact, should let attrition do its work for awhile. Continue reading New Annual Financial Report is Out

DeKalb’s Shortage of Magic Rabbits

As the city ponders a property tax hike of 37% as well as water rate and fee “adjustments,” you may wonder how DeKalb has got itself mired in financial straits.

It’s actually nothing new. DeKalb’s budget issues are — and have been since at least 2005 — the result of snatching nearly every penny of revenue growth and putting them into more staff and higher salaries, to the detriment of other areas such as street maintenance.

Worse yet, DeKalb has to come up with, at minimum, a half-million new dollars in revenue each budget cycle just to stay abreast of annual personnel cost increases. It’s rendered the financial gurus unable to look ahead more than 12 months at a time because they continually need to chase the next rabbit for the proverbial hat.

Want proof? The stated Number One strategic priority of the City of DeKalb is “Infrastructure,” yet capital improvements are precisely the area that’s been starved in the current budget. That’s pretty messed up.

And a proposed 37% hike in property taxes bespeaks the latest shortage of bunnies for the hat trick. Continue reading DeKalb’s Shortage of Magic Rabbits