BALANCE SHEET BLOG – HOLLYWOOD, FL


REVENUE FORECASTING FAILURE
June 25, 2011, 4:01 PM
Filed under: Budget, City Staff

Before he resigned, former City Manager Cameron Benson retained the firm Munilytics to examine the City’s budget predictions and make recommendations for improvements.  The initial findings released on June 13 noted at least two “incorrect or poorly calculated” revenue estimates, “glaring errors” in the five-year budget forecast, use of “only very limited” forecasting techniques,  lack of any revenue forecasting policies, totally inadequate staff reporting, and more.

Because the precariousness of the City’s finances affects us all, we have  summarized and also quoted from the report at some length in this post. Excerpts from Munilytics Initial Findings on Revenue Forecasting follow:

BUDGET STATUS REPORTS

Munilytics notes that staff should be making a monthly status report to the Commission including which departments are over budget, which revenues are over or under estimates, and whether the City will finish in the black or red. In addition, the report should be presented at a Commission meeting, not just emailed to the elected officials.  Munilytics notes that it “is one thing to write a report and send it out. It is quite another to stand and deliver it and defend it.”

Hollywood’s practice until earlier this month has been to prepare a mid-year financial report and email it to the Commission. Critical of this practice, Munilytics states:

We think the Commission has a right to be piqued about the delay in notification of some of the budget problems that have developed.”

Had management been preparing proper reports, Munilytics points out that “the Fire Special Assessment shortfall, apparently an error in calculation, would have been known in mid-October.  Property tax shortfalls would have been seen as early as mid-January.  State share revenue shortfalls would have been worrisome as early as December.”  Instead, these problems were not discovered until mid-year report presented to the Commission in May

STAFF ORGANIZATION FAULTY

Munilytics criticizes the City’s staff organization, noting that until a few weeks ago:

“[T]he budget operations were separated from the finance operations.  The Office of Budget and Procurement Services was a special office under the City Manager’s department and had very little interaction with the Department of Financial Services.  Two distinct departments with two different directors were responsible for the City’s financial operation with the result that no one individual was ultimately responsible for the financial management of the City.”

Earlier this month, the Budget Department was folded under the Finance Director, a change Mujnilytics applauds.

In conclusion,  Munilytics states:

“The revenue forecasting concerns facing the City need to be addressed and they can be easily corrected, but they are but one part of what should be a financial plan that has policies and goals that are concrete, measurable, and reportable. A good financial plan will … help the City identify where the weaknesses lie and how specifically they can be changed. …[I]t will take continued determination to regain solid financial footing.”

EDITORS COMMENTS

Obviously, the budget-management deficiencies that caused the pot to boil over last month must be corrected, but the task cannot be accomplished overnight.  We expect that the Interim City Manager, the Finance Director, and other staff will be moving as swiftly and carefully as possible to put in place the necessary budget controls and planning that will eventually clean up the mess. Meanwhile, the financial squeeze will impact us all.

A final word about the Finance Director.  The Munilytics report pays tribute to Matt Lalla, the City’s Finance Director.  We do, also.  Mr. Lalla has been on the job less than a year and became immediately embroiled in a sea of water billing problems not of his making (caused by a complex new rate structure and the failed Wi-Fi project).  And now he must find a way to rectify a legacy of serious budget deficiencies that management has allowed to pile up for years.  Mr. Lalla deserves the gratitude of us all.


7 Comments

This quagmire did not happen over night, but is a result of decades of irresponsible Commissioners’ decisions. Mr. Benson is the scapegoat. The City Manager is only as strong as the Commissioners who have the backbones to support him. And I respectfully disagree with Munilytics; this will not be rectified easily.

Lawrence N. Legg, CPA

Comment by Lawrence Legg

As we’ve mentioned in past posts, no one person is responsible for the financial situation in Hollywood.

Certainly the economy has been a hinderance to our growth and well being, as with so many other cities. However, more than a few of them have been able to manage the current economy with proficiency. As taxpayers, we can expect the same of our city.

The Commission must be able to lean on the city manager for information and leadership in running the city and preparing the budget. But there is no question that some responsibility lies in their hands, especially in managing the city manager.

Since we are headed in a positive direction now, lets move on to support our elected officials in taking a hard look at the city’s economics, tackling the difficult decisions they know need to be made and finding a steady ground for our city’s future.

Comment by Laurie Schecter

Hi Tim,
By no means do we give the elected officials a free pass here. I think we’re all aware that next year is an election year. In thinking about the mess we’re in, though, it is important to understand how the City is structured — who’s responsible for what. Hollywood is a “commissioner-manager” city, as outlined in the City Charter. In the Charter you can compare the duties of the Commission (Article 2) with the duties of the Manager (Article 6) and you will see that responsibility for running the city lies with the Manager. Here is an excerpt from Article 6:

The powers and duties of the city manager shall be:

(1) To see that the laws and ordinances are enforced.

(2) To appoint and remove, except as otherwise provided, all subordinate officers and employees.

(3) To exercise control over all departments that may be created by the commission.

(4) To attend all meetings of the commission with the right to take part in the discussion but having no vote.

(5) To recommend to the commission for adoption such measures as he or she may deem necessary or expedient.

(6) To keep the commission fully advised as to the financial condition of the city, and to submit annually a budget.

(7) To perform such other duties as may be required of him or her by ordinance or resolution of the commission.

You can find the Charter on the City’s official website at this link: http://goo.gl/tvQcR

PS Thanks for mentioning that the full report link doesn’t work. Some aspects of this new blog format are a little problematic. We’ll try to fix it. Meanwhile, anyone who wants the full report can email us at balancesheetblog@gmail.com and we’ll send it to you.

Comment by Sara Case

I was not able to access the full report using the link provided but, from the excerpts presented, it seems that once again the city commissioners are absolved of any responsibility here. When the financial information necessary to perform the oversight they were elected to provide is not forthcoming, do they just sit back and act “piqued”? Are they powerless to request (demand?) this information? How can proper, meaningful financial oversight be accomplished when financial statements are only presented every six months? This is an abdication of responsibility and a failure of leadership.

Comment by Tim Curtin

It would appear from your very informative information that the City Commissioners are in confusion as what a City Commissioner is and is elected to do. I believe there is no one person to put the responsibility of irresponsibility upon but on everyone involved with the running of the city. Like a family the head of the household determines the interactions within the family itself. If anyone has had the experience of trying to get anything done with this particular city, one walks away realizing one department has no idea about another department and the unfortunate person is lost in conflicting requirements. Thus realizing this is not a city that works in harmony with its various departments as each department stands alone and separate. It would seems, taking from psychology, that Hollywood is run by a very dysfunctional family thus the mess it is in represents the symptomotology of that dysfunction. Sadly, the citizens of Hollywood are left holding the bag financially to make things better.Thank you for bringing so much of this to light.
Scott Simon Fehr

Comment by Scott Simon Fehr

It is axiomatic that a problem cannot be fixed until its existence is acknowledged. This report seems to have taken the bull by the horns. However, one wonders why none of the city commissioners ever felt that any problem existed until now. I suppose it’s because they only see problems when they are ab out to be run over by them. I think we should seriously ask our commissioners why they have been “out to lunch” for so long while the pot was boiling over.

Comment by Paul Klein

Well said, Editors. Now let’s concentrate on going forward and out of this fiscal morass.

Comment by Charlotte Greenbarg




Comments are closed.



%d bloggers like this: