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Former DFS Finance Director’s exit report calls city’s financial future into question

Dec 6th, 2012 | 0

By REID TUCKER

The exit report prepared by former DeFuniak Springs Finance Director John McCue elucidates how, according to McCue, the city is on “an unsustainable financial course.”

The 37-page document, tendered upon McCue’s resignation on Nov. 16, goes into detail describing issues and concerns the former finance director encountered during his five months with the city. The report highlights the problems in most of the city’s financial operations, ranging from the annual budget to banking practices. McCue said his goal in writing the report, the kind of which he felt sure the Council has never seen before, was to provide “a bird’s eye view” of the city’s financial situation.

“I have prepared this report simply to bring attention to the issues and form the basis for discussions about the financial future of DeFuniak Springs,” McCue wrote in conclusion. “I think the thing to keep in mind is that the city is not on an irreversible course. Measures can be taken to improve the issues I have addressed and I am confident that the City Council and the next finance director will begin to address them in a timely manner.”

Primary among McCue’s concern for the budget regards the disparity between budgeted revenues and spending. He attached 28 pages of addenda to the written report, showing, among other things, that the city’s budgeted revenue increased from $16,378,701 in Fiscal Year 2010/2011 to $24,249,546 the following year, though McCue could find no new revenue source to support such an increase. Furthermore, he wrote that budgeted revenues of the preceding few years had decreased in keeping with the economic downturn of 2008, leading him to the conclusion that the city spent $2,332,777 more than it actually took in during FY2010 and $1,346,742 more in FY2011.

Though McCue pointed out how transfers from reserves managed to balance previous budgets, he said the use of these funding sources was unreliable in the long run and hampered the city’s financial situation.

Additionally, the report details McCue’s issue with the city’s banking practices, which he called “the city’s biggest hurdle.” Both the workload (and consequently the number of data-entry errors) of the finance office and cost of banking fees could be reduced, he wrote, by decreasing the number of bank accounts the city currently holds from 23 accounts to around 10 accounts, a number consistent with municipalities with similarly sized budgets. Reduction of the number of bank accounts would also help lower the cost of the annual audit, which most recently cost the city $64,700 compared to the $23,000 nearby Crestview paid for having its budget of $22.8 million audited.

The report also listed McCue’s problems within the finance office itself, which he said needs to have updated job descriptions, new financial software technology (the office operates using DOS, meaning, in short, that all systems have to be navigated using numbered menus and arrow keys as the system does not support the use of a mouse), and to formally adopt a comprehensive set of policies and procedures for the office. This combination of attributes contributes to what McCue called a “silo mentality” wherein employee morale drops, customer service levels fall and productivity of individuals and the office as a whole is hampered.

While McCue’s stated aim was to lay the groundwork for discussion between city staff and the City Council members, Councilman Mac Work in particular took issue with the report, saying the criticisms contained therein amounted to little more than McCue’s excuses for not being able to do his job.

“I just glanced at [the report],” Work said. “Anything more than a little bit at a time raised my blood pressure. [McCue] didn’t do his homework is what it is. He didn’t know what he was doing. I don’t like reading things written by incompetent people. I have an aversion to that for some reason.”

Work said the city, contrary to McCue’s report, was and is not broke and that the actions taken by the Council had actually managed to at last rein in some of the “bleeding” caused by, among other things, unfilled or redundant city positions and excessive spending. Work also pointed out that initiatives like the push for compressed natural gas fueling stations were a step toward increasing revenues and new businesses opening around town added 82 new jobs since the last Council seat elections in May of 2011. In summation, Work said the city is “financially all right.”

City Manager Sara Bowers, herself the city’s finance director for 21 years, said the report, which she also had not read in entirety, is the result of McCue not fully looking into what was really going on in the city’s finances. For instance, lower revenues in recent years owed to a variety of factors, the state of the national economy among them, but that this was offset by the “silver lining” of actions like tap and impact fees approved by the City Council. Though waiving tap fees to customers had hurt the bottom line lately, Bowers said the moratorium brought 300 new water customers on-line, all of which could be counted on as guaranteed revenue sources now that the tap fee waiver is no longer in effect.

As to McCue’s qualms about the city’s banking practices, Bowers said many of the things McCue’s report identified as negative had been in place since before she began at her former position. She said the city’s numerous bank accounts actually made more sense than having fewer accounts, as it was simpler from a bookkeeping perspective to separate revenue streams from grants, utilities, taxes and other sources rather than to put them in one pot only to have to separate each source when it came time to balance the books. In that regard, Bowers said McCue’s difficulty and sometimes inability with reconciling statements meant that she had to continue going over the books for the entirety of McCue’s five-month tenure with the city.

“Things are not all as simple as [McCue] made it out to be,” Bowers said. “You can’t make these kinds of statements until you understand what is going on and he just didn’t bother to look into everything. Entities as big as [the city] aren’t so simple.”

The full exit report is matter of public record and is available from the city upon request.

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