Finance Committee gets guidance on understanding big annual report

Benicia’s draft of its next Comprehensive Annual Financial Report (CAFR) shows the city is in a strong financial position, Finance Director Karin Schnaider told the Finance Committee on Thursday.

Schnaider also provided the panel with guides that members can use as they study the hefty document during the next month.

The committee won’t be asked to weigh in on the document until January, when the city’s auditors, Maze and Associates, will send representatives to walk them through the fiscal analysis.

Meanwhile, Schnaider distributed copies of Dean Michael Read’s “The Quick Guide to Local Government Financial Statements,” a handbook written for the Government Accounting Standards Board as a guide for understanding CAFRs and other financial reports.

But Read focuses on numbers, she told the committee, and “if you focus on the numbers, your eyes will spin. And they don’t tell the story.”

She supplied committee members with a her own CAFR “cheat sheet,” and guided them through the elements of the document she considers important, starting with the transmittal letter that is a summary of the city.

She told committee members the “Management Discussion and Analysis” is a reading essential, since it highlights changes that have taken place, both positive and negative, and what the city may experience in the future.

Schnaider reminded the committee that unlike a business, the city has monthly expenses, but gets the bulk of its income twice a year.

A CAFR may appear confusing, she said, such as when it appears to say a city has no assets. What the document means in that case is that a city hasn’t added to its asset inventory during the year the CAFR examines.

The document examines a government’s major funds, such as the General Fund, which is a government’s operating fund; special revenues; debt and capital funds; and proprietary funds that should operate more like a business.

The “Note to the Financials” is a comprehensive assessment of the financial condition, Schnaider said, providing detailed clarifying and defining information for the CAFR’s numbers. “They’re required for a reason,” she said.

Another must-read is a CAFR’s statistics section. “That’s my favorite part,” she said. The statistics give the reader a 10-year perspective of historic trends, she noted, and also shows where the city gets the bulk of its revenues, why it may have borrowed between funds and other elements in a decade of financial information.

She said the CAFR should be available to the public on the city’s website, www.ci.benicia.ca.us/, in about a week.

In other business, Schnaider and her staff revised the Finance Committee’s work plan, prompting Chairperson Michael Clarke to say, “I like this format.”

The new way the plan is presented is not by priorities, as has been done in the past. Instead, it’s more like a calendar, starting with Thursday’s introduction of the CAFR and the committee’s training on the document.

The plan indicated 2015 would be a busy year for the Finance Committee.

According to the schedule, the panel will hear auditors’ review of the CAFR Jan. 22, when it also gets the second-quarter report and consider the city’s investment policy and strategy.

If the schedule works with the City Council, that body will meet with the committee Feb. 3 to discuss the city’s 10-year financial forecast and the General Fund, the Water and Wastewater funds and possibly internal services funds.

The committee will see the request for proposals for financial software Feb. 26. Staff will share a report on city fees and the drought surcharge March 26.

The panel will meet with the Council again April 21 on proposed water and wastewater rates. Two days later, the committee will see the third-quarter report and the annual solar project reports, and will continue its discussion on water and wastewater rates.

At its May 28 meeting, the committee will get its first look at the city’s 2015-17 budget, and June 25 the committee will hear recommendations about purchasing the city’s new financial software.

In addition, the panel may hear a presentation about the California Public Employees Retirement System’s program for fiscal sustainability, but Schnaider said no date has been set for that talk.

Besides these issues, the committee will begin receiving information regularly about the Measure C 1-cent sales tax approved by voters Nov. 4.

In other matters, the committee by consensus decided not to recommend the city treasurer become a voting member. The treasurer is one of three elected officials who are ex-officio members of the committee. The other two are Council members.

Most of the city treasurer’s former duties were transferred to the city finance director in 1976.

The previous treasurer, H.R. Autz, had hoped those in that office would be voting members of the panel, but the current treasurer, Kenneth Paulk, agreed with committee member John Potter that elected officials should remain ex-officio members.

However, the panel may look at suggesting additional duties for the treasurer, who currently needs only attend Finance Committee meetings, sign warrants and review the city’s quarterly investment reports.