06/05/2006 Council Packet - Laserfiche WebLink

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DEBT SERVICE FUNDS (Continued) While in total the City has a surplus of total resources available over remaining scheduled debt service based on the calculation above, certain individual funds are operating at a deficit. These deficits will need to be funded by future adopted assessment rolls, special assessment levies, investment earnings, transfers from other funds, property taxes or other available means. Factors to consider when analyzing debt service funds: • Are all the anticipated assessment rolls being adopted as soon as appropriate? • Have all the planned financing sources been identified, such as pledged amounts from the area and unit fund or future MSA funds? • Are there significant "prepayments" received from property owners? In the current investment environment, will the earnings the City will receive on these prepayments be lower than the interest rate that was being charged on the adopted assessment roll? We recommend that all Debt Service Funds of the City be reviewed at least annually by applying the above criteria. The Area & Unit Fund is committed to the debt service of some special assessment bonds as well as toward the water revenue bonds. We recommend that the City determine the full commitment of the Area and Unit Fund whenever this fund is used to pledge toward future bond issues and construction projects. Budget Appropriations Each year the City adopts an annual budget for the general fund. Each department receives an appropriation based upon detailed budget estimates for individual expenditure accounts. Department heads have the ability to transfer appropriations within a department. This can be helpful and improves flexibility in meeting department needs as they change during the year. However, such a policy can lead to unnecessary or unauthorized expenditures. For example, equipment purchases. We suggest the City review this policy and consider adding controls on the amounts that can be transferred within a department without bringing it to the City Council for approval. These controls could include dollar limits, restrictions on the types of purchases or getting the approval of someone in administration. Developer Escrow Accounts The City maintains an Agency Fund to account for the activity related to developer escrows. It is our understanding that developers deposit an escrow prior to a project beginning and that certain costs may be applied against this escrow. We noted that there are several escrow accounts that carry a "negative" balance, which represents an additional receivable balance from the developer. We recommend that the City monitor these escrow balances and if they go negative that the developer be contacted so that an additional deposit can be made. Conclusion We welcome the opportunity to discuss the points mentioned in this letter or any other accounting and procedural issues in order to coordinate our efforts with you, the mutual objective being the development of more effective accounting procedures for the City. We understand that some of the aforementioned points are in the process of implementation or may already have been implemented; however, these points are noted so that effective follow -up can be accomplished. (10)