COMMITTEE ON BUDGET AND APPROPRIATIONS

MINUTES

AUGUST 24, 1998

ATTENDANCE:

Chairman Wishnie called the meeting to order at 10:15 a.m.

DISCUSSION: (There is a cassette tape on file for more detailed information)

• Mr. Storch presented the Committee with a brief overview of the County’s Fund balance.
• At December 31, 1997, the fund balance was $68.7 million – an increase of $14 million.
• At year-end, the amounts previously reserved for advance to enterprise funds and designated for public benefit separation costs were appropriated and transferred to the Medical Center and RTI. The effective change in fund balance was $26 million.

• Expenditure savings in excess of amounts enumerated in the schedule represent an additional $16 million.
• The fund balance generated in 1997, was, in part, used to fund the balance of the FAA settlement ($4.5 million); establish a reserve for social services revenues that will not be collected by December 31, 1998 ($4.8 million) and set and funds for salary adjustments ($8 million). The balance results in an increase in the undesignated fund balance which, under current policy, will be applied to the 1999 budget, unless appropriated during the year.

• The Year 2000: The County has formed task forces to address the issue. SEC requires that all governments enclose a disclosure statement re: the Year 2000 in all financial statements issued after October.

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• Generally Accepted Accounting Principles (GAAP): County does not currently comply with GAAP. At their onset, the County’s principles more closely resembled the cash basis of accounting and were implemented under the auspices of the Budget Department. As the budgetary needs arose, the County has modified its practices to approach GAAP. At present, the variation from GAAP is valued at $7.5 million and the budget exceeds $1.1 billion. The auditors do not believe that this variation is viewed significantly by the investment community. Auditors recommend full compliance with GAAP. As an ancillary benefit, the County could also participate in the Certificate of Achievement for Excellence in Financial Reporting Program sponsored by the Government Finance Officers Assertion. Participation in this program is viewed favorably by the financial community.

• Trusts & Grants: Records are not maintained in a manner comparable to other operating funds. Auditors recommend that the County modify the accounting for those trusts and grants reported as special revenue funds to mirror the accounting for other special revenue funds.

• Budgetary Control: Auditors recommend that additional budgetary controls be established. The establishment of accounts not included in the original budget should be approved by the Board. The Board should also approve the establishment of all trust accounts. Transfers of funds between funds should also be authorized by the Board. This last recommendation complies with a provision of Section 9a of General Municipal Law which requires legislative approval for all transfers among funds including interfund loans.

• Department of Community Mental Health: Currently there are some finds in accounted for in the general fund and some in trusts. Auditors believe that financial oversight would be enhanced if all financial activities of the Department of Mental Health were centralized. This would preclude the need for the allocation of costs, thereby eliminating any subjectivity. Centralization would also simplify recordkeeping which has proved difficult in the past. Auditors suggest that all activities of this department be accounted for in a separate fund.

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• Health Benefits: County is self insured for health and dental benefits. An administrator is retained to approve and process payments for employees participating in the County’s plan. These payments are not approved by the Commissioner of Finance prior to payment. This practice is not in accordance with State law which precludes the delegation of authority for approval of claims. Formal bank reconciliation is prepared by the administrator. As an interim measure, the auditors recommend that internal control would be strengthened if the bank reconciliation process remained with the Department of Finance. Committee requested a listing of outstanding checks.

• Retirement Billings & Charges: The invoice for the NYS and Local Employee’s Retirement System covers the pay period April 1^st through March 31^st. This invoice is paid on December 15^th. Since the County’s fiscal year end is December 31^st, three months of the subsequent fiscal year has been paid in the current year. Since the Medical Center and RTI separated from the County’s fiscal structure on January 1^st, the County can either advance a portion of their 1998 subsidy or is due a refund. The auditors calculate the amount at approximately $380,000 for the Medical Center and $41,000 for RTI. They suggest the Board determine the appropriate resolution.

• Deposit Trusts: The County has established a "bus salvage" deposit account. The account is used for the proceeds of County buses sold at auction. The funds are used to purchase new equipment. The auditors feel this does not appear to be a proper use for these funds. Proceeds from the sale of equipment are general County revenues which are not restricted as to use. These funds should be transferred to the General Fund. Ms. Bennett stated that it is her understanding that when the County sells a bus for over $5,000 80% of the funds have to go back to the federal government; there are no restrictions for sales under $5,000. Ms. Storch will look into this. A "Flex Warranty" account is also reflected in the Deposit Trust Fund. During the year, there was minimal financial activity except for a $400,000 transfer to the General Fund. Auditors believe that these funds should be accounted for in the General Fund, since there do not appear to be any "legal" restrictions on their use.
• Department of Social Services: Auditors suggest that all claims filed for both current and retroactive adjustment be processed and recorded on the general ledger. This procedure would permit secondary oversight by the Department of finance, including collection inquiries. This procedure will greatly enhance the systems of internal control as well as facilitate interim financial projections and the year-end closing.
• Risk Retention: Office of Risk Management is budgeted as a division of the Budget Department. The 1997 budget provides for an expenditure level of approximately $400,000; with estimated revenues approaching $730,000. An analysis of the revenue stream indicates that these are charges to the County’s self insurance funds. In essence, the General Fund charges for services in excess of costs, which are funded in part by the General Fund. This cost center should not be reflected as an element of the General Fund, but should be incorporated into the Self Insurance Fund.
• Youth Aid: County is entitled to youth aid of $100,000 annually. At year end, only $57,000 had been recorded. The individual responsible for preparing and submitting claims is no longer working for the County. Consequently, this claim as well as many other claims have not been filed. Auditors suggest that sufficient resources be dedicated to bringing the billing up to date. Ms. Bennett informed the Committee that the Administration has appointed someone to take over this role.
• Insurance Recovery Trust: The County contracts for the repairing of damages to County property arising from accidents. The balance (year end $145,000) arose from insurance company reimbursements in excess of repair costs. These funds are unrestricted. The use of trusts and funds for this purpose is not in compliance with the requirements of New York State. The Laws of NYS authorized the legislative body to amend the budget for purposes of utilizing insurance recoveries to repair damages to County property. These transactions should be accounted for in the operating fund that is responsible for repairing the damages.
• Parkway Police: County has an agreement with NYS for the patrolling of certain state owned parkways. A separate trust account has been established for this function. Charges to trust consist of direct payments to the 26 officers assigned as well as any staff differential and overtime payments. Other salary related items, i.e. social security, retirement, health benefits workers compensation, materials and supplies and vehicle usage are absorbed by the General Fund. Annually, a sum purported equal to expenditures charged is transferred from the General Fund to the Trust. The remaining portion of expenditures not charged remain in the General Fund. At the end of the current fiscal year, a balance of $59,000 remained. Auditors suggest that the funds be returned to the General Fund and the use of a trust for this purpose be discontinued.

A&C CALENDAR: The Committee briefly reviewed the DRAFT copy of the August 27, 1998 A&C Calendar. Any questions will be referred to Mr. Boland after he receives the back-up material.

ADJOURNMENT: There being no further items for discussion, on motion of Legislator Stewart-Cousins, seconded by Legislator Swanson, the meeting was adjourned at 11:40 a.m.