|
|
||
|
|
Combing Through Saginaw's Budget
For Solutions to the Problems
By Robert E. Martin
As a member of the Saginaw Charter Commission, recently I received a copy of the long awaited audit report on the City of Saginaw's financial reporting that was prepared by the CPA firm of Rehmann Robson.
In that report, several material
weaknesses were cited in which the operation of one or more of the
internal control components of the City resulted in either misstatements
caused by error or fraud.
One problem cited in the report is that
the City does not reconcile their general ledger accounts, such as cash,
income tax revenue and receivables to support documentation during the
year, which requires many significant adjustments in order to properly
state the accounts at year-end.
In plain English, the City has problems
balancing its books. And while Rehmann Robson found many factors
responsible for this situation, the main reason was that the
Controller's office did not have sufficient, competent personnel to
perform these duties.
Other 'material weaknesses' varied from
the city not maintaining printing receipts for all transactions, to the
Treasurer's office not having appropriate procedures in operation that
identify inadequate documentation, and therefore, do not take
appropriate action to correct the situation.
While this recent assessment seems to
underscore former City Manager Deborah Kimble's concern with the
state of the Fiscal Services Division under recently terminated
head Karen Lawrence-Webster, it does little to assure to the hard
working and committed individuals that have built their homes and
businesses in Saginaw what measures can be taken immediately
to reverse the financial drain going on at City Hall.
Throwing more money at the problem is not
the answer; however, having somebody that citizens trust to manage their
money that goes into City Hall (as opposed to somebody's pocket) is
certainly one objective that could turn public confidence around in a
heartbeat.
Without doubt, the most significant thing
that City Council (or the Charter Commission) could do to
improve the situation is create a Department of Ombudsman with a
Director elected for a 2-year term, with a limit of being able to serve
no more than two consecutive terms in office. In this manner, nobody
could become 'too familiar' with the workings of City government to
perpetrate theft or fraud upon taxpayers.
Perhaps the most important thing this
office would do is create respect & confidence in the financial
management of the City. Requirements for the position would include
being a resident of the City of Saginaw and also being a Michigan
certified public accountant, licensed attorney, or have an MBA degree
from a recognized University with not less than five years experience in
the field.
It would create standards & structure to
the way Saginaw manages its finances. For starters, the Department
office would be located away from City Hall. The Director and his
department employees would be totally independent from the City of
Saginaw for benefits, taxes, or other employment related benefits
because they would be financed by a one-half of one mill levy each year
on the real & personal property tax from the citizens of Saginaw.
Let's face it. Financial integrity stems
from fiscal independence away from the inducements that have led so many
city officials over the years the latitude and luxury of lining their
own pockets.
Because of this enforced neutrality, the
Ombudsman would have the authority to provide a fully itemized budget
from each department of city government, including all direct and
indirect costs for the ensuing fiscal year. Failure to provide such a
budget would mandate the Director to replace each department failing to
comply with that of a non-government organization (NGO) that is
able to provide the service.
Most important, however, the Director
would have the authority to obtain sealed bids from qualified
non-government organizations for any department of the City for a
five-year period with a five-year renewal option.
If the NGO were able to beat the budget
of any city department by a minimum of ten percent, then the
Ombudsman would have the ability to contract that particular city
service out to the lowest bidder, provided that the NGO offer current
qualified city employees an opportunity to fill whatever number of jobs
the contractor is willing or able to hire under the terms of the
contract.
Additionally, the city department facing
elimination would be entitled to submit a lower bid within 15 days from
the acceptance of the NGO bid.
Can you imagine how many out-of-control
departments in City government would quickly step in line if such a tool
were in place, especially if it was mandated that the NGO could not
allow any reduction of city service provided by that
department?
Saginaw would indeed be a much different
& better place to live, work and invest in - perhaps one of the few
communities in the country that could guarantee to its citizens that
they were getting full services at the best value for their
money.
Rather than having people moving away
from the City, I suspect you would see them lining up to move back in
droves. Why?
Because it would be the one of the few to demand fiscal responsibility from its government. A Matter of Greed . . . Frankly, I'm a bit tired of all the 'professional bureaucrats' that have made a small fortune over the years working for the City of Saginaw, only to file lawsuits and malign the government institutions that do much more than butter their bread and put food on their table.
Saginaw's problems on all levels could be
ameliorated if former and current employees of the City were not so
greedy. So perhaps its time to infuse the element of public shame into
the mix.
Of far greater concern than faulty
accounting practices (which can be corrected in many ways over a fairly
short period of time) a much larger concern is the amount of Unfunded
Liabilities that the City of Saginaw faces.
In terms of 'self insurance' the Unfunded
Liability amounts to $674,194, while PTO Liability amounts to
$4,196,066. Without doubt, however, the biggest threat to the
city's fiscal future consists of Public Employee Healthcare, which amounts to
$115,003,150.
According to City Manager Cecil
Collins, health care costs for city employees and retirees are
facing a 12 percent increase per year, meaning that it will take
$10 million per year just for the City to catch up with its unfunded
liabilities. Moreover, the City of Saginaw is facing a $1-2 million
drop in income each year.
Recently Collins sent letters out to the
800 city retirees currently cashing in on the pension & health care
system requesting that they move to a newly negotiated Community Blue
Cross plan that is considerably more affordable to the city than the
plan negotiated when they retired. Many retirees plans negotiated years
ago offer former employees a $2.00 to $3.00 co-pay - something
that is basically unheard of nowadays in the tough economy that
businesses and government faces.
Out of 800 letters sent out to
city retirees, only eight were returned by former employees
willing to up their co-pay and move to the more affordable plan covering
current city employees.
When police cuts are threatening safety
levels on the streets, is anything more outrageous or unsavory than a
former government employee unwilling to sacrifice his precious $3.00
co-pay?
Recently the City received a $500,000
bill from MIRS, the retirement fund for City employees that then
City Manager Reed Phillips was able to lobby and make retroactive
for employees 3 years ago in order to provide for 'early retirement'
(including his own). Moreover, from 1999 to the present retired
city employees are entitled to a 2.3 percent cost of living increase from the language of
this 'defined contribution clause'.
What this basically translates into is
the fact that unless some serious changes are made, the City of Saginaw
has basically five years to go until insolvency.
Not that insolvency would be such a bad
thing. If nothing else it would serve a significant option to taxpayers
unwilling to sacrifice public services simply because former employees
were not willing to compromise on their lush retirements in Shangri-la.
But my hope and goal is to see that
things never get that bad. The people of Saginaw will either come
together to address the true problems, or allow perhaps more unsavory
options to surface - either way, the issue will be resolved.
In writing a New Charter for the City of
Saginaw, there is nothing that stops us from mandating that all current
& former retirees and employees accept the same equitable and uniform
benefit plan that Collins is pushing, yet only received eight letters of
reply upon.
Options always exist.
And now is the time to start exercising
them.
|
|
|
|
||
