BoCC ready to bank reserves

County staff and elected officials continue to closely monitor finances, and a January finance report indicates revenues and expenditures are falling in line with projections. With that in mind, the board appears poised to begin banking reserves for the future.

“What is an appropriate level of reserves for this organization? How much do we want to put aside?” Archuleta County Administrator Greg Schulte asked during a finance discussion with Archuleta County Finance Director Don Warn and commissioners Clifford Lucero and John Ranson.

Although staff and board members did not decide on dollar amounts or percentages, Schulte and Warn said, after reviewing 2008 year-end numbers, the organization appears fiscally ready to draft a reserve savings policy.

For example, and according to Warn, the county closed 2008 with $152,000 in cash and a grand total of about $400,000 in the General Fund. Given the county’s ability to exit 2008 with a $400,000 surplus, even with 2008’s budget challenges — including a $1 million line item error — Lucero, Ranson, Schulte and Warn agreed it was time to begin banking reserves.

As a precursor to drafting and adopting a reserve policy, the board, on Feb. 17, wiped the treasurer’s ledger clean of a series of obsolete invested reserve accounts and replaced them with four “designated” reserve accounts — one each for the General Fund, road and bridge, human services and solid waste.

According to county financial policies and procedures, a “designated” account requires formal board action for withdrawal and expenditure. In addition, the dollars must be paid back.

To date, the designated reserve accounts hold about $111,000 — $100,000 for the General Fund; $10,000 for road and bridge; $100 for human services and about $1,000 for solid waste.

Warn said a reserve policy could be drafted and adopted as early as March or April.

Schulte’s and the board’s willingness to explore a reserve policy marks a major shift from the financial practices of the last two years.

In the years leading up to 2007, poor accounting practices and internal controls, staffing troubles and an illegal intermingling and spending of county funds contributed to Archuleta County’s financial unraveling in April 2007. With books out of balance, negative or erroneous fund balances, the commissioners finance staff, elected officials and department heads spent the remainder of 2007 and part of 2008 locked in financial survival mode, grappling with meeting basic short term obligations such as payroll and day-to-day operating expenses.

Ultimately, the meltdown led to staff and program cuts, and questions whether the county could survive 2007 without going bankrupt. Fortunately, the county did survive.

And then 2008 arrived.

According to Schulte and Warn, 2008 brought more financial challenges, including a race to complete the 2007 government audit before the state froze the county’s property taxes, a $1 million budget line item error and a determination to eradicate past practices, including borrowing against TABOR emergency reserves or obtaining lines of credit in order to cover expenses during the first month of the year.

Despite surmounting the audit and line item error challenges, the board was still forced to obtain a line of credit in January 2009 to cover operating expenses until the first infusion of property tax revenues in February.

Warn described the circumstance as a timing issue, and a review of Warn’s January finance report confirms January revenues aren’t keeping pace with expenditures— but Warn didn’t expect them to.

“It’s timing, totally timing. It will be the complete opposite at the end of February,” Warn said.

And Schulte added, “Revenues will never match expenditures in January,” hence the need, he said, for adopting an appropriate reserve policy that will remedy the need to seek a line of credit to cover expenses at the beginning of the year.

While drafting an appropriate reserve policy should be easily accomplished in the coming weeks, the board continues to grapple with long-term challenges such as ledgers bogged down with $693,220 in accrued compensated absence liability.

Last week’s SUN generally referred to accrued compensated absences as “comp time,” and reported compensated absence dollars in the aggregate. However, Warn cautioned against the casual use of “comp time.”

“Comp time,” he explained, actually comprises one of three tiers of the accrued compensated absences equation. The tiers, Warn said, are: vacation liability, comp time liability and sick leave liability.

That said, and to clarify data reported in last week’s SUN, the sheriff’s office detention department has accumulated $15,354 in comp time liability. Add the comp time liability to $50,425 in vacation liability and $43,592 in sick leave liability, plus FICA and employer pension figures, and the detention department total, as reported, equals $122,112 in accrued compensated absences liability.

Road and bridge administration and maintenance comp time liabilities are $2,311 and $9,784 respectively.

Add the road and bridge administration comp time figure to $11,711 in vacation liability and $10,108 in sick leave liability plus FICA and employer pension figures, and road and bridge administration’s accrued absence liability totals $26,942.

When the road and bridge maintenance comp time liability is added to $22,545 in vacation liability and $24,779 in sick leave liability, plus FICA and employer pension figures, the total liability for accrued compensated absences in the maintenance department equals $63,762.

According to county data, the information systems/GIS department carries the largest liability in comp time alone, and remains in the top five when the accrued compensated absences figures are reported in the aggregate.

For example, comp time in the information/GIS department totals $27,306, with $8,035 in vacation liability and $5,226 in sick leave liability. Those figures, when added to FICA and employer pension figures provide a departmental total of $45,293, as reported last week. There are four employees in the information systems/GIS department.

County wide, vacation liability totals $280,975; comp time liability $113,243 and sick leave liability $226,667. Those figures, when added to FICA and employer pension figures bring the county-wide accrued compensated absence total to $693,220.

Although Warn said vacation liability is the most troubling of the three accrued compensated absences components, he added, “Overall, the whole thing is a problem.”

Auditors from Wall, Smith, Bateman & Associates noted the same.

Warn, Schulte, and the commissioners will meet with elected officials and department heads later in the month to find solutions to the challenge.