Coral Gables Finance Department Audit–Symptoms of Mismanagement and Indifference

The Finance Department of the city of Coral Gables was treated in an article in the Coral Gables Gazette on September.

Also, in a letter to the CGGazette, a former candidate for commissioner calls for the resignation of the Finance Department head.

The Finance Department problems are clearly revealed in the recently concluded report of the internal auditor of the city of Coral Gables.  The audit process was initiated in 2009, a first round of comments and recommendations was submitted for review and responded to by the Finance Department.  Subsequently, the city’s Internal Auditor prepared rebutal statements for unfulfilled recommendations and submitted the final report to management in September 2010.

The internal functional review of operations by the city of Coral Gables Chief Compliance Auditor (who works for the city manager)  confirms

  • dramatic dysfunctional management oversight ofoperations and control over the city budget, income and expenditures;
  • a persistent failure to review and balance accounts on time and correctly;
  • incomplete standard financial controls to avoid possible misuse or malversion of funds;
  • incomplete department-wide  information coverage and access via the EDEN software;
  • serious deficiencies in communications between management and staff and among departments;
  • defects in the EDEN financial module that the Finance Department hasn’t resolved;
  • consistent failure of management to supervise and give oversight to accounting review and information flows;
  • inadequate oversight over maintain current and consistent information flows among departments;
  • lack of efficient, integrated use of the IT systems of the city, among many others.

One may conclude that there is a top down management culture and weak communications within the Finance Department among staff and supervisors. The EDEN accounting software is incomplete, not fully applied and subject to incomplete supervision by the IT Department and the Finance Department supervisors.  The audit raised claims by both departments that the other is to blame for the break down in accounting.  This shifting of blame has led to an obvious failure to communicate from bottom to top between the two departments.

There are too many issues to discuss in a single posting and I hope to expand on this in coming days.

Good Management and Major Projects in Coral Gables

In further reading of the Mayor’s_State_of_the_City_Address_2010 I am struck by his good defense of good management and better city organization.  Better management is a good step forward for the city and all are to be congratulated for this.  Witness the relative success of the the new city manager and his quiet, ambitious steps to bring in good people and restructure some of the management units.

In his speech,the mayor singles out three major successful projects: the Biltmore lease agreement, the “re-birth” of the Coral Gables Country Club and the University of Miami Development Agreement.  All three of them came about as problems, or were delayed, because of weak city management that let problems run until they became crises.

However, still there is much to do.

  • The Biltmore lease still seems much like a postponement of a problem before the current budget cycle, pending negotiation of a long-term agreement between the city and the lessee.
  • The Coral Gables Country Club arrangement has yet to prove itself after having been restricted by the city commission.
  • The University of Miami Agreement, while certainly important, has the feeling of being rushed through because of the possible approval of a constitutional change in Florida, Amendment 4, that might put land us plan modifications in the hands of voters.

Amendment 4.  Establishes that before a local government may adopt a new comprehensive land use plan, or amend a comprehensive land use plan, the proposed plan or amendment shall be subject to vote of the electors of the local government by referendum, following preparation by the local planning agency, consideration by the governing body and notice.

Therefore, the major projects are still mostly projects and agreements; they are important achievements, but they have yet to prove their viability and worth to the community. Time will tell.

Deferring Benefits: Would that have happened in Coral Gables?

I wonder what sacrifices the city’s management, commissioners and mayor are willing to make for the good of the city.

So far there is no evidence that the city leaders are willing to take the lead in making sacrifices for the city.  Indeed, more than once we have heard that we have to keep employees, salaries and benefits up to sustain our quality of life.  Who is willing to forgo some of their salaries and benefits to demonstrate to the unions that they will lead the city in a time of sacrifice.  Will the candidates for public office make a pledge to work ad honorem for the well being of the city.

Florida A&M University President James Ammons says he’s deferring an $80,000 performance bonus due to tough economic times.

via Florida college president says he’s deferring $80K bonus – Miami-Dade Breaking News –

Simple Acts of Citizen Engagement for the City of Coral Gables

What kinds of new citizen engagement could be undertaken in Coral Gables that would increase community participation and input into the most important decision of the community.

Here are some simple community initiatives for the city manager and the commission that would cost little to do.

  • Send out an email to the citizens announcing all meetings of boards, committees and the commission; similar distribute agendas and minutes.
  • Send via email or included in the the city’s website results information on the execution of the budget.
  • During the year organize a series of public forums in neighborhoods on the annual budget and to report on important investments and spending.
  • Have meeting with business groups and citizens to discuss the economic and business future of Coral Gables (UM could be asked to lead the discussions.).
  • Create an online forum so people could contribute ideas the city (civility required).
  • Make public presentations by the city manager and department directors to explain their work.

Please contribute your ideas to this list.

Legacy of the “Slesnick Commission”

The city is nearing the close of an era and we may be getting a different commission next year.  The end of what we might call the “Slesnick Commission” has left a background of living through a bubble economy, a break down in management oversight and an abortive adaptation to changing economic conditions.

The next commission and mayor will find:

  • Still a bloated government;
  • A pattern of relentless property tax increases in goods times and in bad;
  • Mismanagement of the Country Club lease;
  • Mismanagement of the Biltmore Hotel lease;
  • A $200 million (to date)  pension liability;
  • An accumulation of unsustainable salaries and benefits;
  • A contracting tax base;
  • A resistance to building the edifice of a modern, open, well organized government with the participation of residents in significant decisions;
  • Weak and compliant city boards;
  • Unwelcome and costly projects, such as the new museum;
  • A government without an apparent strategy to promote new industries and businesses in new growth clusters; and
  • The end of large-scale commercial and residential real estate development for long period.

Certainly, there have been achievements of the commission, but they are swamped by the problems.  Some of these problems are not the blame of the commission, including the inevitable economic collapse.  But the reaction of the City of Coral Gables to the crisis has been insipid.

The Mystery of Millage Rates

City officials are repeatedly saying to us that the millage rate is “lower than two years ago”.  (And why didn’t they mention that the millage rate is much higher than last year–more misinformation and misdirecting the commentary!).  In fact, the millage rate is a simple residual after calculating the budget needs and other sources of revenue such as permit, fire and other fees.  What counts for the city are property assessments and new construction and the budget requirements, and then comes the millage rate to calculate the revenues to fill the gap with the other income source.

The city fathers do us no favor by having a lower or higher millage rate.  They do us a favor by better managing the city’s budget–that is the variable that counts.  Why in the world does the city want to keep spending merrily on capital projects during a crisis–this gives the impression that the commissioners and city manager think that the recession will be over quite soon.  Why can’t the city reduce the number of the senior managers now they have reduced the number of low level staff?

Now that the unemployment rates is 11 percent in Miami-Dade (this means really means 20 percent measuring discouraged workers and part-time employment at lower wages) and will certainly not be back to normal for several years, and is much higher than the national average of 9.8 percent.

Also, there is talk in financial circles of mortgage problems increasing among new groups of homeowners, not in the subprime category, but in conventional loan categories.  The does not portend a good future for the city’s property taxes.

Another kind of silly statement is that the Coral Gables taxes are only (say) 27 percent of your total tax bill.  Right, it is only a 27 percent, but two years ago it was a lower percentage of the tax bills.  Now Coral Gables is the fastest growing share of our property tax bills.

Therefore, mayor and commissioners, plan for the worst and hope for the best.  Let us see what happens in the coming months.

Where are the City’s Reserves and Capital Improvements?

In the recent Budget Hearing the mayor and commissioners (e.g., Mr. Withers) explained the need for high wages and pensions for public security staff (and by implication all other employees) and justified this by a tight labor market in Miami.

A cursory look at Bureau of Labor Statistic data for the last decade in the Miami area for firefighters and police patrol officers do not show a rise in salaries similar to that which occurred in Coral Gables during the period 1999 and 2007 (overall wage payments rose by about 7 percent on average in Coral Gables).

In the Miami regions the average salary for firefighters increased from $42,000 in 1999 to $54,000 in 2007. This an average annual rate of 3.2% per annum that approximately covers inflation during the period. For police patrol staff the wages increased from 44,100 in 1999 to 57,800 in 2007. This is also an average rate of 3.4% in the period without in major fluctuations on a year to year basis.

This suggests that the market for these workers was not especially tight in the period in which Coral Gables dramatically increased salaries and benefits and wages were good and they more than kept up with inflation.

City income increased dramatically during the real estate bubble that lead to an average annual increase in property tax revenues for the city of almost 12%, and total revenues increases of about 10%. Under these circumstances the city should be sitting on an ocean of reserves and top notch capital improvements.

Rather the funds were squandered in exaggerated salaries and pension benefits that has left the city with immense pension liabilities that have “come home to roost” because tax revenues are falling dramatically now and will not grow in coming years.