CSMFO C A L I F O R N I A
S O C I E T Y
M U N I C I P A L
F I N A N C E
O F F I C E R S
M A G A Z I N E
NOVEMBER 2017 #17
CONGRATULATIONS TO OUR SPY PHOTO CONTESTANT WINNERS! Please contact Melissa Dixon at email@example.com to redeem your two complimentary tickets to the 2017 CSMFO President's Dinner
City Of La Quinta
THANK YOU TO EVERYONE WHO PARTICIPATED! 3 CSMFO MAGAZINE NOVEMBER 2017
Piper Jaffray is committed to California municipal finance
For more information, contact the following representatives from our California public finance team: Mark Adler Managing Director 310 297-6010 firstname.lastname@example.org
Ralph Holmes Managing Director 415-616-1720 email@example.com
Tom Innis Managing Director 415 616-1635 firstname.lastname@example.org
Katie Koster Managing Director 949 494-6110 email@example.com
Dennis McGuire Managing Director 916 361-6520 firstname.lastname@example.org
Russell Reyes Managing Director 310 297-6014 email@example.com
Victor Ume-Ukeje Managing Director 415 616-1662 firstname.lastname@example.org
Tony Rapista Vice President 310 297-6031 email@example.com
Renee Vancho Vice President 949 494-6115 firstname.lastname@example.org
California municipal finance banking offices are located in Los Angeles, Orange County, Sacramento and San Francisco
5 Since 1895. Member SIPC and NYSE. ÂŠ 2017 Piper Jaffray & Co. 7/17 CM-17-0651
CSMFO MAGAZINE NOVEMBER 2017
CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS
M A G A Z I N E NOVEMBER 2017 #17
Help your employees save for tomorrow while living for today As the largest provider of government deferred compensation plans1, we work with plan sponsors to help almost 2.6 million public sector employees look at retirement differently â€” empowering them to save for the future while embracing the here and now.
NOW IS A GOOD TIME Learn how we help employees engage in their financial future. Email govtmarket-sales@ empower-retirement.com or call 800-719-9914. 1 Source: PLANSPONSOR, Top 10 Recordkeepers, 2015
2017-18 Board of Directors President Drew Corbett, City of San Mateo President-Elect Margaret Moggia, West Basin MWD Past President John Adams, City of Thousand Oaks Scott Catlett, City of Yorba Linda Jimmy Forbis, City of Gilroy Steve Heide, Chino Valley Independent Fire District Brent Mason, City of San Bernadino Karan Reid, City of Concord Jennifer Wakeman, City of Lafayette Executive Director Melissa Dixon, MBA, CAE Editorial Designer & Photographer David Blue Garrison Cover Photographer David Blue Garrison Editors Joan Michaels Aguilar, City of Dixon Marcus Pimentel, City of Santa Cruz Additional Photography Pexels, Pixabay and Stocksnap The California Society of Municipal Finance Officers is the statewide organization serving all California municipal finance professionals. We promote excellence in financial management through innovation, continuing education and the professional development of our members. CSMFO members are deeply involved in the key issues facing local agencies. We value honesty and integrity, and adhere to the highest standards of ethical conduct. Thank you to all the authors in this issue for sharing with us their time and expertise. If you have an idea for a future article, please contact Melissa Dixon at the CSMFO office at email@example.com.
Core securities, when offered, are offered through GWFS Equities, Inc. and/or other broker-dealers. GWFS Equities, Inc., Member FINRA/SIPC, is a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Empower Retirement refers to the products and services offered in the retirement markets by Great-West Life & Annuity Insurance Company (GWL&A), Corporate Headquarters: Greenwood Village, CO; Great-West Life & Annuity Insurance Company of New York, Home Office: NY, NY; and their subsidiaries and affiliates. The trademarks, logos, service marks and design elements used are owned by GWL&A. ÂŠ2017 Great-West Life & Annuity Insurance Company. All rights reserved. ERCR-ADP-3696-1704 AM116532 6
For more information on CSMFO or this Magazine, please contact the CSMFO office at 916.231.2137 or visit the website at www.csmfo.org. The views and opinions expressed in these articles are those of the authors and do not necessarily reflect the official policy or position of CSMFO.
CONTENTS NOVEMBER 2017 #17 FEATURES
Getting into a LongTerm Relationship: P.
CSMFO’s Haunted Mansion
Securing Revenues while Building an Award-Winning Budget P.
Planning Your Mission - Make the Most of Your Riverside Experience P.
Effective Communication Delivers Audit Transparency
Beverly Hills Financial Reporting and Data Transparency Triumphs
Transparency – Making Complex Data User Friendly
President Drew Corbett’s Letter
Transform and Create Value to Local Government through Audits
Governor Brown Signs SB 231 Regarding Stormwater Fee Authority P.
Building the Community’s Future through Community Engagement
Executive Director’s Letter P.
CSMFO Strategic Planning Session P.
President Elect’s Letter P.
Grow Your Supervisory Skills P.
CSMFO Shines a Spotlight On Will Fuentes P.
CSMFO Board of Directors Election P.
Mission Accepted by the South San Joaquin Valley Chapter P.
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PRESIDENT’S LETTER Drew Corbett
Where Did the Summer Go? The end of the summer also marked the end of my travel hiatus for CSMFO business. September was a busy month for me, with visits to Sacramento and the State of Washington. Here’s what I have been up to: Wednesday, September 6th Past President John Adams, President-Elect Margaret Moggia, Executive Director Melissa Dixon and I convened in Sacramento to have meetings with representatives from the California Special Districts Association (CSDA) and the California State Association of Counties (CSAC). In addition to our finance professionals from cities, CSMFO also has members from special districts and counties. In order to best serve our members from special districts and counties, we wanted to meet with CSDA and CSAC to ensure both associations were aware of CSMFO and our mission, discuss opportunities to potentially collaborate, and better understand CSDA and CSAC’s roles and missions. Overall, they were productive meetings that I hope will yield benefits for members across all three associations.
Tuesday, September 12th I hit the road again, arriving in Kennewick, Washington for the Washington Finance Officers Association annual conference. Similar to CSMFO, Tuesday is the day for preconference sessions and for arrivals into the conference location. The only item on my itinerary for the day was the volunteer appreciation dinner that evening. This was a great event celebrating the amazing work the WFOA members put into their annual conference. Unlike CSMFO, which utilizes an association manager (Smith Moore and Associates) and a conference planner (Meeting and Association Management Services) to work with the Host and Program Committees on the conference, WFOA has put on all of its 62 conferences entirely with volunteers. Truly incredible, especially if you saw what a quality event they put on. They have finally relented, however, for 2018, as their conference in Vancouver, Washington next fall will be the first where they use professional management services. I know their incoming president is looking forward to the assistance. I also learned that evening about the growing and highly successful wine industry in Eastern Washington. The dinner was held at a winery where we got to sample the local fare prior to having dinner. I was quite impressed, and the folks from the area were quite proud of the local wines, as they should be.
Wednesday, September 13th The conference started early, with the first keynote underway a few minutes after 8:00 am. Two series of concurrent sessions followed prior to a lunch break that featured new GFOA Executive Director Chris Morrill providing an update on what’s going on with his organization. I had to go to work after lunch, as their Education Committee scheduled me to speak at a concurrent session on their budget track, and when that was finished there were two more sets of concurrent sessions before the evening events began. For me, that meant three consecutive receptions (Women in Public Finance, First-Time Attendees, and Conference Welcome), followed by a dinner for special guests with WFOA President Ade Ariwoola. In attendance were my counterparts from Oregon (Tod Burton) and Alaska (Carmen Randle), GFOA Executive Director Chris Morrill, and GFOA Past President Marc Gonzales, as well as a few other guests of the President.
Next up for me is the CSMFO strategic planning session and Board meeting in Riverside in October, followed by my final conference representing CSMFO as President. That one will be the Alaska Government Finance Officers Association conference, which is in Anchorage in November. I’ll fill you in on those events in my next President’s Message.
Thursday, September 14th On my way from the hotel to the convention center, I ran into CSMFO-favorite Chris Thornberg in the hotel elevator. Chris handled the morning keynote, and as expected, was highly informative and highly entertaining. Similar to Wednesday, the morning general session gave way to two series of concurrent sessions before conference attendees reconvened for the lunch general session. WFOA had its annual meeting at this session, which included the installation of its new Board of Directors and President for 2017-18. The other association presidents also had a chance to address the membership, with my remarks focused on providing a brief update on CSMFO and thanking WFOA for its hospitality and for putting on such a wonderful conference. Three sets of concurrent sessions followed in the afternoon, and the day concluded with the vendor appreciation reception and the evening banquet.
Thank you for the opportunity to serve you as your President. Respectfully,
Friday, September 15th With a morning flight out, I had to skip out of the early Friday sessions, which concluded at noon with the closing of the conference. I did manage to make the rounds before the morning speaker to again thank the WFOA leadership for its hospitality prior to heading to the airport to return home. I didn’t mention it before, but to get to Kennewick from my home in San Jose, I flew to Seattle and then into the Tri-Cities Airport in Pasco, Washington. As you may have guessed, the Tri-Cities airport was not a big one and mostly accommodates planes that look like the one on the right. I made it back to Seattle on schedule, spent a few hours in the airport waiting for my flight to San Jose, and made it back to California that evening. And while it was great to get back home, I must say that I had a great time in Eastern Washington and was thoroughly impressed by the WFOA conference.
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EXECUTIVE DIRECTOR’S LETTER Melissa Dixon
It’s the Most Wonderful Time of the Year This time of year is my favorite—and not just because I prefer the weather. This is when things really kick into high gear for CSMFO! Membership Renewals Membership renewal notices for 2018 were sent via email on November 1. (If you didn’t see it, it could be your email is wrong in our system—you should give us a call to check!) I’m told that we had over 80 people renew their membership on November 1! Conference Registrations As you know, registration for the conference opened in mid October and at the time of this writing (roughly two weeks later) there were already over 200 full government registrations! That’s astounding! I’m looking forward to this being the biggest and best CSMFO conference yet! CSMFO Board Elections The election ballots went out on November 3, and over 50 people voted on that same day. What great numbers! And the candidates on the ballot are top-notch. In case you are not involved at the Board level, I can personally confirm for you that each and every candidate is worthy of being on the Board and would make a fantastic leader for this organization. I consider myself lucky that I don’t get to vote, because that means I don’t have to choose between them! CSMFO 2018 Appointments On a less-external front, our President-Elect Margaret Moggia will start considering what the committee rosters will look like next year. She gets to look at everyone’s preferences, and take into account who has been very active in committees at the member level that might be due for a promotion to a committee leadership appointment. It’s very exciting, setting the direction for the next year of the association.
Distinguished Service Award Each year the President-Elect gets to decide if s/he wishes to present a Distinguished Service Award at the conference. While it is technically that position’s decision, the reality is that there is typically a great deal of discussion at the Executive Committee level regarding potential recipients. It’s always encouraging, listening to all the contributions of various individuals to our organization and the profession as a whole. Listing all these activities that begin at this time of year, I see a theme emerging—that of engagement. CSMFO members are engaged, the leadership is selfless and dedicated, and I consider myself lucky to work with such an inspiring group of people. I look forward to what next year has in store. PS—For those of you who got my out-of-office message…my Disney cruise was unbelievable. It was just my husband and I, celebrating our ten-year anniversary, and we had the most relaxing, romantic vacation I’ve ever experienced. I can’t wait to do it again!
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PRESIDENT ELECT’S LETTER Margaret Moggia
Your MISSION is Possible (All you need to do is signup)
Have you received your mission? Are you ready to engage and learn with your peers, commercial vendors and other stakeholders? In October we launched our conference website and opened registration for our Annual Conference, set for February 20-23, 2018 at the Riverside Convention Center with Thursday night fun at the historic Mission Inn. Through months of planning, the Annual Conference Host Committee and the Program Committee delight in the hours spent to once again deliver a high-quality conference. From offering three Pre-Conference sessions to 60 concurrent sessions to networking with peers and commercial members, each of these is an opportunity to grow and expand our universe, to meet and exceed expectations in our role of serving the public. In addition, we have other experiences I am sure that you will want to engage in, from showing off your golf or tennis skills to a Thursday night evening to explore the Mission (Inn) and hear and see the cultural entertainment and enjoy the foods from around the world. As you make your plans to attend you will not want to miss our high-energy and thought-provoking keynote speakers. We begin Wednesday 9am with Carey Lohrenz as she shares her mission and achieving her goal to be the first female F-14 Tomcat pilot. And then we conclude Friday lunch time with Simon T. Bailey who delights and engages crowds by asking “What does it take to be BRILLANT?” Make it your mission to hear these great speakers and return to your office and home energized by their messages. Make your travel plans accordingly to stay for the full conference. CSMFO is celebrating 60 years with the mission of serving all government finance professionals through innovation, collaboration, continuing education and professional development. As you can see it is OUR mission to be engaged and we do so by following the guiding values of integrity, competency, commitment to public service, transparency, and creating a positive legacy. For CSMFO, we understand that we have enjoyed great successes in our program offerings, and yet we continue to plan and explore new ways to engage so that this and future generations will be informed and ready to address the challenges at cities, counties and special districts. So, I challenge you to prepare our next generation and invite them to learn alongside you and create that positive legacy.
For those of you who may need assistance to attend, the Annual Conference Host Committee has increased the number of eligible scholarships to 25 this year, and is encouraging new members to come be part of an engaging and informative time. As I shared in our last magazine, many of the decisions have been made and now the mission is yours. • Mission: Register today • Mission Field Days: February 20-23, 2018 • Mission Goals: Receive high-quality training and network with others Sign up today and enjoy early bird conference registration pricing. Three Months and counting! Margaret Moggia President Elect
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Getting into a Long-Term Relationship: Financial Reporting and Transparency with Bond Issuances Written By Wing-See Fox
Interest rates remain at historical lows,
Wing-See Fox, Managing Principal, Urban Futures Incorporated
and it may be an appropriate time to refund those outstanding bonds to realize savings. Or, your governing body might decide that issuing debt for long-term capital improvement projects, rather than using reserves (that may be better spent towards managing your CalPERS liability) or a pay-as-you-go approach, is more efficient and more fairly distributes the costs to future tax and rate payers that will benefit from the new projects. Whatever the reason for issuing bonds, your agency is getting into a long-term relationship with investors, tax and rate payers, rating agencies, bond insurers, and regulatory bodiesâ€”all of whom require information prior to issuance and postissuance. Here is a high-level summary of financial reporting and transparency requirements for bond issuances. Item 1: Report of Proposed Debt Issuance Prior to Bond Sale (SB 1029, Submitted to CDIAC by Bond Counsel) No later than 30 days prior to the bond sale, a Report of Proposed Debt
Issuance must be filed with the California Debt and Investment Advisory Commission (CDIAC). Information required to be reported includes estimated par amount, tax status of the bonds, method of sale, statutory code under which the bonds will be issued, proposed sale date, financing team, and more. As part of this reporting, the issuer must adopt local debt management policies with specified elements and certify that the contemplated issuance is consistent with the adopted debt management policies. Specified elements include: 1) Purposes for which debt proceeds may be used; 2) Types of debt that may be issued; 3) Relationship of debt to, and integration with, the issuerâ€™s capital improvement program/budget; 4) Policy goals related to the issuerâ€™s planning goals and objectives; 5) Internal control procedures that the issuer has implemented, or will implement, to ensure that the proceeds of the proposed debt issuance will be directed to the intended use. Your municipal advisor and/or bond counsel can help you draft compliant debt management policies. Typically, this Report of Proposed Debt Issuance is prepared and filed by bond counsel. Item 2: NEW! Disclosure of Information Prior to Authorization of Bond Sale (SB 450, Included in Agenda Packet of Council/ Board Meeting) Effective January 1, 2018, prior to authorization of the issuance of bonds, the governing body is required to obtain (from the municipal advisor, underwriter, or private lender) and disclose specified information regarding the bonds in a meeting open to the public. This information includes: 1) True interest cost as defined in the statute; 2) Finance charges
A key piece of the POS includes a history and projection of financial performance of the issuer. Therefore, if the issuer does not have recent audited financial statements, it will typically need to get caught up with audits before issuing bonds. Other important information presented in this document is a revenue and expense forecast. Since the issuer is typically issuing long-term debt (i.e., 20 or 30 years), the investor will want to know what the issuer’s projections are for its financial health (and debt service coverage for revenue bonds) into the future. Rule of thumb for projections in a POS is 3-5 years. Apart from disclosure, this exercise should be undertaken to help decide whether a bond issuance makes sense in the first place. GFOA recommends preparing, at minimum, 3-year projections (and longer if necessary) for planning purposes. Due to the immense impact on near and long-term budgets of CalPERS phasing in its discount rate reduction over time, it is prudent to forecast out 10 to 20 years, enabling proper planning. Item 4: Report of Final Sale After Bond Sale (SB 1029, Submitted to CDIAC by Bond Counsel) After the bond sale, a Report of Final Sale must be filed with CDIAC. Required information to be reported includes updates since the Report of Proposed Debt Issuance, maturity schedule and structure, call date, bond insurance, Net Interest Cost, True Interest Cost, issuance costs and fees, and more. Typically, this Report of Final Sale is prepared and filed by bond counsel. Item 5: Ongoing Reports and Disclosures After Bond Sale Continuing Disclosure Obligations (Rule 15c2-12, Posted on EMMA by Dissemination Agent) Rule 15c2-12 under the Securities Exchange Act of 1934 prohibits any underwriter from purchasing or selling municipal securities unless the issuer has committed to providing continuing disclosure with respect to the security and issuer. As part of the bond issuance process, the issuer enters into a Continuing Disclosure Agreement that commits the issuer to disclose certain information on an ongoing annual basis by a certain deadline (typically, the annual disclosure required is an update of financial information and operating data found in the Official Statement). In addition to the annual reporting requirements, issuers need to disclose certain “Significant Events” as they occur. The most common of such events is a rating change, which also includes a rating change of the bond insurer that provided security enhancement for the bonds. The issuer must disclose in its Official Statement any instances of non-compliance with prior Continuing Disclosure Agreements of any bonds outstanding within the last 5 years.
Tr us ted . Innovative.
The POS is the offering document that is presented to potential investors before the sale date and includes information about the issuer as well as a description of the terms and payment obligations of the bonds being issued. The issuer is obligated to disclose any relevant information that may influence an investor’s decision to purchase the bonds. The document is prepared by disclosure counsel with heavy input from the issuer (and outside consultants when necessary). After the bond sale, the POS is finalized and a final Official Statement is disseminated.
Item 3: Preliminary Official Statement (POS) Prior to Bond Sale that Includes Audited Financial Statements and Projections
of the bonds (costs of issuance); 3) Amount of proceeds less the costs of issuance and any reserves or capitalized interest; 4) Total payment amount of debt service plus any finance charges not paid with bond proceeds. For conduit issuers, the same information needs to be provided by the third-party borrower to its governing body as well as to the conduit issuer. The municipal advisor and/or underwriter can help prepare this information to be included in the staff report and/or Authorizing Resolutions.
www.willdan.com 15 CSMFO MAGAZINE NOVEMBER 2017
Prior to 2014, many in the industry did not take this Rule very seriously, and Official Statements would include statements of the issuer’s compliance with continuing disclosure obligations when that was not the case. As a result, the SEC cracked down on this practice and enforced the “Municipalities Continuing Disclosure Cooperation Initiative (MCDC Initiative)” in 2014 where issuers and underwriters could self-report instances of non-compliance in exchange for lenient settlement terms. The SEC continues to crack down on those that did not self-report and those that intentionally reported misleading information in bond offering documents. The process of getting into compliance can be a large undertaking, especially for frequent issuers. The Rule requires precise compliance with individual Continuing Disclosure Agreements which can be quite different from each other. Fortunately, there are a handful of firms that provide Dissemination Agent services, which include not only filing reports on EMMA, but also ensuring that reports are prepared in precise compliance with Continuing Disclosure Agreements and that Significant Event reporting is not missed. It is a good idea to bring your Dissemination Agent onboard during the preparation of the POS so that they can confirm prior instances of non-compliance, make any remedial filings before the bond sale, and make recommendations on the current Continuing Disclosure Agreement. For example, it is beneficial to create identical Agreements for parity bonds so that future reporting is streamlined. Fiscal Status Report for Mello-Roos and Marks-Roos Bonds (SB1029, Submitted to CDIAC by Issuer) For Mello-Roos Community Facilities District (CFD) Bonds and Marks-Roos Bonds (i.e., a Joint Powers Authority selling bonds to acquire local obligations), a Fiscal Status Report must be filed annually to CDIAC by October 30th until the final maturity of the bonds. CDIAC has created forms to standardize reporting and sends courtesy requests to complete the reports on or about August 1st of each year. Although typically prepared by issuers, your Dissemination Agent can assist with these reports as well. NEW! Annual Debt Transparency Report (SB1029, Posted through CDIAC’s Online Form) Beginning January 31, 2018, an Annual Debt Transparency Report is due annually for any issuer that issued or authorized debt for which a Report of Final Sale was submitted to CDIAC within the reporting period (generally, July 1 through June 30 of the prior fiscal year). Information required to be reported includes the amount of debt authorized during the reporting period, all debt outstanding during the reporting period (including previously issued debt), list of purposes for which debt has been issued, and amounts expended for each purpose. Issuers are required to submit an annual report until the debt is no longer outstanding or proceeds have been fully spent, whichever is later. CDIAC has created an online form to submit this report. Your Dissemination Agent may be able to assist with preparing and submitting this report, but will need to work with you to obtain information regarding expenditure of proceeds. Arbitrage Rebate Calculations (Payment Submitted to IRS, If Necessary) When issuing tax-exempt bonds, the issuer covenants to preserve the tax-exempt status of the bonds, which includes limiting private business use of tax-exempt bond-financed facilities, spending down bond proceeds within certain time limits to avoid hedge bonds, limiting use of bond proceeds to make private loans, preventing over issuance, and limiting certain investments of bond proceeds to the arbitrage yield or rebating earnings in excess of the maximum allowable yield. Issuers are required to perform arbitrage rebate calculations starting no later than 5 years after the issue date of the bonds (but as a practical matter, rebate calculations should be 16
done annually to plan for future payments) and every 5 years thereafter until the final maturity date. If a payment is due to the IRS, the issuer must submit a check and IRS Form 8038-T no later than 60 days after the computation date. If no payment is due, no filing is required. There are a handful of firms that can prepare these computations for you. Managing the Long-Term Relationship Although the responsibility of financial reporting related to bond issuances is a long-term commitment, the financing team assembled for bond transactions can help with any or all the requirements. The ultimate purpose of these reporting and disclosure requirements is to maximize transparency to investors, tax and rate payers, rating agencies, bond insurers, and regulatory bodies. They should not be obstacles for issuing bonds if your governing body has determined that it is the best financial solution. After all, long-term relationships can be daunting, but also the most rewarding.
About the Author Wing-See Fox is a Managing Principal at Urban Futures, Inc., a municipal consulting firm advising public agencies on debt issuances, post-debt issuance compliance, strategic financial forecasts, fiscal restructuring plans, process improvements, performance management, and economic development. Prior to joining Urban Futures, Wing-See was a Vice President with Raymond James as a public finance banker. Her background includes six years as the Chief Executive Officer of Prevent Blindness Northern California, a nonprofit organization focused on vision health. Wing-See received a Master of Business Administration from Columbia Business School, a Master of Social Work from Columbia University School of Social Work, and a Bachelor of Arts in Psychology from Stanford University.
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Center for Continuing Education & Hotel Carl Vinson Institute of Government
Online Courses in Government Finance If you are a steward of government funds, these self-paced online courses from the University of Georgia can enhance your value—and your career. All qualify for CEs/CPEs. • Governmental Accounting • Intro & Intermediate Budget • Revenue Administration • Debt Administration • Capital Improvement Program • Treasury Management • Internal Controls • Purchasing • Human Resources For Government Officials www.georgiacenter.uga.edu/govfinance/GFR 18
ENTER FOOLISH MORTALS The following pages are a tour of CSMFOâ€™s Haunted Mansion and some of the best Halloween costumes from CSMFO Members across the state. Enjoy the spooky halls and good luck on finding your way out!
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Building the Community’s Future through Community Engagement Written By Xenia Bradford
Participatory democracy engaged
Xenia Bradford, Finance Director, City of San Luis Obispo
through effective civic engagement enhances community buy-in, satisfaction and trust in local government. Municipal finance rests on the notion of democracy and optimization of resource allocation to maximize the services desired by its citizenry. As communities evolve, financial policies and interim financial reporting to the City Council and the community should ensure long-term fiscal structures aligned with the community’s highest priorities. Effective engagement and continuous conversation with the community creates a vision, or a roadmap, for governance, thereby creating the place to live and play in the way the community envisions. Davenport Institute with the Pepperdine University School of Public Policy further examines civic engagement and defines “legitimate” civic engagement which requires that the following four pieces should be integrated to the degree possible:
1. Incorporating results of engagement into actual decisionmaking process 2. Presenting of unbiased information to participants 3. Gathering a representative and diverse group of participants 4. Facilitating the discussion in a way that involves all participants The engagement of its citizenry is an evolving process that takes time to nurture and grow as communities evolve. Financial planning ties the fiscal framework with community priorities. Long-term vision and strategic plans help guide longterm fiscal health. While fiscal policies and financial reporting ensure fiscal health by setting parameters for available resources, effective participatory “legitimate” democracy enhances the outcomes. Each community is unique with its own set of demographics, topography, and economic environment. Communities have their own identity. Some communities have a history of community engagement, while others may be searching to find their own. The Story of the City of San Luis Obispo: The story of the City of San Luis Obispo community engagement began in the early 1990s, when early Council involvement in setting major city goals became the first major
policy step in development of a two-year financial plan and work programs to achieve the highest priorities over the twoyear financial plan horizon. The City has continuously focused on long-term fiscal health through financial forecasting and fiscal policies, while focusing on delivery of the work programs that are the highest priorities as determined through the democratic process of active community engagement. The City of San Luis Obispo community engagement begins with a survey that shapes the functions and ideas that shape the highest priorities and work programs. The community then gathers together, in-person, where citizens have an opportunity to discuss the ideas with each other and the City Council and to rank the priorities through “dotmocracy” or dot voting. In today’s age of internet, the City also reaches out to the community online and through social media to receive feedback from those who prefer to participate remotely. The Government Finance Officers Association speaks to utilization of information technology stating that “while the factors influencing which tools a community should select often vary, the benefits that can be realized from new methods of civic engagement are clear.” The community participation informs and influences the City Council decisions for allocation of resources. The financial plans are then developed, aligned with long-term plans and the community’s highest priorities, to achieve both in the longterm and the short-term. The City allocates resources based on program outcomes, which should be periodically evaluated through performance management and intermittent reporting back to the Council and the community.
Building a future through community engagement is an iterative and ongoing process in a changing environment. Fiscal conditions should be continuously evaluated and the community conversation should continuously influence and determine the highest priorities. 1. Ongoing Financial Reporting to City Council and Community: Do’s 2. Develop long-term forecasts that evaluate operating and capital needs 3. Monitor fiscal health by continuous evaluation of financial structures and risk factors 4. Continuously review financial trends and report to the City Council and the community on agreed upon intervals: quarterly or semi-annually recommended 5. Report to City Council and the community progress of work programs through performance management and work programs progress reporting
About the Author Xenia Bradford is Finance Director and Treasurer for the City of San Luis Obispo. In this capacity she oversees the longterm economic analysis and forecasting and development of financial plans. Xenia is a graduate of the Pepperdine Graduate School of Public Policy with a Master of Public Policy degree, a graduate of Santa Barbara College of Law with a Juris Doctorate Degree and a graduate of the University of California with a Master’s degree in Economics.
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Effective Communication Delivers Audit Transparency Written By Jim Godsey
Independence is the foundation of
Jim Godsey, Senior Assurance Services Partner, MGO LLP
the audit profession. An organization undergoes an audit to have an independent third-party provide an objective opinion of its financial position and the results of operations. Parties that rely on the audit opinion to make or evaluate the results of financial operations – elected governing bodies, citizens, regulatory bodies, lenders and senior management – rely on the auditor’s access to complete and accurate information.
monitored internal controls over financial reporting provides the auditor with a road map from which they can evaluate risk and design an effective and efficient audit approach. For example,
The key to this covenant of trust, between auditor, organization, and third-parties, is open, accurate communication. By enabling avenues of communication, a government organization can position itself to get maximal value from the audit process. The following are a number of factors that contribute to, or hinder, effective communication before, during, and after the audit. Creating an Ideal Environment for Effective Communication The presence of qualified, experienced accounting professionals in appropriate roles within a government organization is the foundation for effective communication. These tested professionals –supported by a professional education program and with the appropriate years of institutional knowledge – can communicate technical details to the auditor, thereby limiting time and information otherwise lost in translation. Placing qualified professionals in positions of authority and supervision is integral to facilitating communications and leads to best practices throughout an organization. There are a number of operational factors that support a positive communication environment. The presence of effective, documented, and 28
an advanced Enterprise Resource Planning (ERP) solution allows for more precise and efficient data reconciliation through integrated controls and segregation of duties. Consistent practices throughout large, complex organizations allow the auditor to streamline documentation, communication, testing, and reporting of control weaknesses. Factors that detract from effective communication include a lack of experience, structure, and consistency within an organization and high staff turn-over associated with economic and financial constraints. Resource-limited, unqualified, or undertrained staff lacking in historical knowledge of the organization can prove to be an impediment to communication. This is particularly the case when overt misdirection or misrepresentation is present as groups or individuals pursue special interests. In most of these instances, there is a notable lack of standardized procedures, and frequently, one person controls access to critical information.
Flow of Information Across an Organization Effective preparation is the first step toward enabling and maintaining transparent, open, and timely communication during an audit. Before the engagement begins, an organization should make a concerted effort to have books closed, significant accounts reconciled and be in a position to inform the auditor of transaction recording weaknesses. This will save time and help ensure the accuracy of the auditor’s analysis. Once the auditor is on-site, an organization’s staff can deliver significant value. Delegating authority to appropriate staff to discuss transactions, processes and disclosures provides the auditor with direct access to professionals who understand and perform these activities. Direct, in-person interactions between the auditor and staff provides an efficient communication path and engenders candid discussion. Once the audit opinion has been released, it is of the utmost importance that an organization accurately and comprehensively communicate the auditor’s opinion to
effectiveness and contest the appearance of transparency. The Fundamentals of Transparent Internal Communication When an audit must address, or reveals, fiscal distress it is all the more important to follow high-quality communication practices. There are many instances of local government entities avoiding further calamity by adopting dynamic supplemental communications externally. Examples in California include Orange County and the City of San Diego following the disclosure of their public financial issues. Unfortunately, there are many more examples of local governments that chose to delay or eliminate information from being provided to interested parties, resulting in the lack of transparency. Frequent, consistent communication within an organization can help prevent fiscal distress from occurring in the first place. An organization can use fiscal planning (debt and capital management plans) to provide periodic reviews of financial health, which are not limited to the budgetary cycles. Additionally, monthly management reporting with department, agency, and controller oversight will assist in risk mitigation through timely identification of issues. Effecting these checks and balances gives an organization advance notice and provides the opportunity to stabilize an adverse situation and plan a long-term course correction. The unfortunate truth is that some local governments have delayed addressing potentially significant situations and elected to provide “rose-colored” perspective to stakeholders further exacerbating the problem. Activities like these are hallmarks of an organization unable or unwilling to forecast financial difficulties on a timely basis. Reliance on annual financial statements to provide fiscal stewardship is a “too little, too-late” approach that virtually ensures an organization cannot coursecorrect in time to avoid fiscal distress. Transparency and Accuracy are Fundamental to Trust Local governments reside in a unique operating and audit space subject to a complex array of oversight from elected officials, regulatory bodies and public accountability while at the same time facing an ever-narrowing corridor of options to address fiscal constraints. Open communication, based on accuracy and transparency is fundamental to completing the annual financial audit on a timely and effective basis.
stakeholders and meet all requirements for continuing disclosures. Inaccurate, incomplete, or untimely representations effectively undermine the audit process. An important element of communications during times of fiscal distress is access to the media. Leaks and whistleblowers with incomplete or inaccurate information can create a hostile environment that should be avoided. A significant factor that works against effective information flow is erecting barriers that prevent auditor access to information and require an auditor to go through a single (in many cases overwhelmed) point-of-contact. Finally, the need to delay the closing of the books, or closing the books multiple times, incomplete supporting information, and non-disclosure of undesirable conditions, will destabilize the auditor’s
About The Author Jim Godsey is a Senior Assurance Partner for MGO LLP with over thirty years of experience in governmental auditing, training, accounting, and management services. Jim’s areas of expertise include state and local governmental auditing, forensic audits, fraud audits, management audits, and audits in compliance with the Single Audit Act. Jim is a frequent speaker, instructor and facilitator for the American Institute of Certified Public Accountants, the California Society of Certified Public Accountants, California Community Colleges and the National Association of JTPA Auditors.
29 CSMFO MAGAZINE NOVEMBER 2017
Securing Revenues while Building an Award-Winning Budget Written By Tori Hannah
M onterey One Water (formerly
Tori Hannah, Administrative Services Director, City of Pacific Grove
known as Monterey Regional Water Pollution Control Agency) leveraged the California Society of Municipal Finance Officers (CSMFO) and Government Finance Officers Association (GFOA) Budget Awards criteria to produce transparent, financial reporting that demonstrated fiscal responsibility, and provided an overall organizational operating plan to obtain critical capital funding and offset increasing personnel and operating costs. The organization relied on the award objectives as best practices and to obtain key stakeholder support in the development of guidelines to effectively communicate fiscal responsibility, establish and maintain the appropriate level of reserves, and fund increased capital improvements. The Story: Like many areas in California, Monterey County was impacted by the multi-year drought. . The issue was compounded by the State Water Resources Control Board issuing a
Cease and Desist Order to the California American Water Company to reduce the amount of water taken from the Carmel River and the Seaside groundwater aquifer by 70%. These challenges created a regional emphasis on identifying alternative water solutions. In conjunction with a partner Agency, (Monterey Peninsula Water Management District MPWMD), Monterey One Water (M1W) commenced efforts to design an advanced water purification facility (AWPF), which became known as the Pure Water Monterey Project. This project would enable Cal-Am to reduce its diversions from the Carmel River System by up to 3,500 acre feet per year. Monterey One Water used a combination of reserves and capital contributions from MPWMD to fund the initial planning and design costs for the $103 million Pure Water Monterey Project. In the last year of the design phase, reserves were reduced to just above the Boardsâ€™ $2.5 million policy level and other maintenance projects had to be deferred while the Agency waited for final approval on a State Revolving Fund Loan. During this same period, M1W initiated a comprehensive rate and fee study to support a Proposition 218 initiative. The goal of the initiative was to assist in funding a projected annual $10 million capital improvement plan (CIP), along with offsetting rising retirement and healthcare costs. While it was anticipated that the state loan reimbursements would be used to restore or increase reserve levels, there was concern that the rate increase would be perceived as a mechanism to replenish reserves or fund the AWPF, rather than support CIP projects. Communication was key to assure stakeholders that the rate increase was necessary to accomplish two of their Three-Year Strategic Goals, which included M1Wâ€™s commitment to ensuring financial stability, sustainability, and stewardship; and providing sustainable, reliable and safe wastewater collection, treatment, and reuse. In addition, the Agency was also considering increasing Reserve Fund Policy levels and transitioning from a flat dollar amount to a percentage based formula
• Additional Future Years of Forecasted Revenues, Expenditures, and Fund Balance: This assisted in communicating the long-term budgetary impacts, if rates were adjusted for different levels. The Board and the community could clearly see that with rising operational costs, the amounts available for CIP were reduced. A ten-year listing of capital projects was also provided to demonstrate there was a defined need for the requested funding. (B9) Staff also engaged in outreach efforts by providing presentations that referenced this material at City Council and community meetings. The Result:
to align with increasing budgetary costs. The Method: The Agency began proactively communicating the need for increased CIP and reserve funding levels a year in advance, with efforts increasing at least six months prior to the Proposition 218 hearings and budget adoption. Some of the key concepts, with the related award criteria references are listed below: • Highlight Major Organizational Priorities and Funding Sources: The Agency referenced the Three-Year Strategic Goals as the foundation for developing funding priorities and initiating the rate setting process. Emphasis was given to demonstrating the balance between stewardship for maintaining reasonable user rates, with fiscal sustainability and providing a reliable treatment system. This message was consistently relayed in budget documents, educational materials to support the increase, and staff reports. These high-level goals were also included on department budget pages and aligned with departmental goals, accomplishments, and performance metrics to demonstrate the overall organizational commitment to the Strategic Plan. (A5, B10-B13) • Financial Trend Indicators: The Agency referenced historical and prospective rate increases against the Consumer Pricing Index (CPI) and the Engineering News Record to demonstrate the reasonableness of proposed increases. Multi-year graphs emphasized that while the Agency was considering an approximate 10% increase in rates or a $1.55 monthly increase in residential user rates, there were several years when the rates were flat. This assisted in communicating that the Agency was trying to catch-up with rising costs. (B21) • Comparison of Financial Status and Other Data with Other Jurisdictions: The Agency used benchmarking with similar organizations, as well as cited GFOA best practices and debt rating criteria to assist in increasing reserves and supporting rate increases. Comparisons included average CIP costs as a percentage of O&M for similar organizations (five-year trends, with adjustments for major construction); unrestricted cash as a percentage of operating expenses, unrestricted cash as days of operating expenses, regional residential sewer rate comparisons, and regional liquid waste discharge fees. To assist in validating a percentage-based formula for capital reserves, the resulting amount was reviewed for reasonableness with the projected costs of a pump station failure. (B22)
These efforts resulted in the approval up to a 10% maximum annual increase in user rates for each of the three subsequent years. These new revenues assisted in covering rising pension and healthcare costs, while increasing the annual CIP budget from $2.7 million to $7.3 million over the three-year period. There was also sufficient confidence in the data presented to support a decision to fully recover all costs associated with Miscellaneous Fees, which resulted in over a $500,000 increase in additional revenues. Support was also given to transitioning the Reserve Fund Policy levels from a flat level of $2.5 million to a percentage of budget method to arrive at a target level of $6.5 million to provide fiscal assurances in a capital intensive industry. Finally, as a bonus to implementing these published best practices, the Agency was also successful in receiving CSMFO’s Excellence in Operating Budget Award, as well as GFOA’s Distinguished Budget Award. A copy of the budget document, which includes some of the graphs and charts in the Appendix section, can be accessed from M1W’s webpage (www.montereyonewater.org).
About The Author Tori Hannah is the former Chief Financial Officer for M1W and the current Administrative Services Director for the City of Pacific Grove. Tori has over fourteen years of progressive, governmental financial experience, including serving as the Finance Director for the City of Capitola and a Finance Manager for the City of Santa Cruz. Her experience includes financial management of general, enterprise, internal service, and special revenue funds. Her education includes a Bachelor of Science Degree in Business Administration with a Concentration in Accounting from California State University Bakersfield and a MBA Degree from San Jose State University. Tori serves as Co-Chair for the Monterey Bay Chapter of the California Society of Municipal Finance Officers (CSMFO), and has previously served on CSMFO’s Professional Standards and Recognition Committee. Under her leadership, entities have received the CSMFO Excellence Award for Operating Budgets, the Government Finance Officers Association (GFOA) Award for Excellence in Financial Reporting for Comprehensive Annual Financial Reports and GFOA’s Distinguished Budget Award.
31 CSMFO MAGAZINE NOVEMBER 2017
Transform and Create Value to Local Government through Audits Written By Bryan Gruber
The citizens in our communities
Bryan Gruber, Partner, Lance, Soll & Lunghard, CPAâ€™s LLP
demand accountability and oversight over public funds. These elements are critical to provide for public confidence and support in government. For those of us working with local governments, this seems basic. It is a primary reason we go through our annual financial audit, right? Well, I want to challenge you to ask yourself, how well does my agency demonstrate commitment to these principles and communicate the results to the board and community?
an important role, but cannot by itself, completely demonstrate an organization of accountability and oversight. However, the concept of audit in a broader sense, is very important. In
Citizens are concerned about many things which include financial reporting, however, there are other concerns contemplated. We all see this. Other concerns include, how well your organization is performing. For example, are you efficient and effective with your resources? Are you economical? Are you doing what you said you were going to do and following policy and plan? Are you complying? Can we rely on the information provided? In addition, citizens are concerned about things like public corruption too. Can we trust the entity? Is the entity a good steward? Is there theft/misuse of public funds and abusing positions of power? These questions are all very important and must be answered. The list of concerns in our community goes on and on. At the end of the day, local governments are entrusted with public funds and held to a very high standard. But back to my original question, does the way your entity operates right now, demonstrate a commitment to accountability and oversight that addresses concerns of the community? Does your financial audit alone, address all these concerns? Well, a financial audit alone, does not and cannot address all the concerns of the community. A financial audit plays 32
fact, the concept of audit can be incredibly powerful and be transformative, and provide for increased public confidence too. But how? Audit means a lot of things, and different things to different people. One thing I have learned is people like to use the term audit as an all-knowing and all-encompassing term. Being an auditor, you realize there are many types of audits and even many more objectives, which also differ between public agencies. For local government to capture all the value of audit and support accountability and oversight, a variety of audits must be deployed through an annual audit plan, which addresses risk, involves governance, and is transparent. Many organizations go through this process every year, typically performed within the capacity of an internal audit or equivalent function. Annual Audit Plan: Public and private entities alike, have used internal auditors for years to create and implement annual audit plans because
they realize the importance and value of accountability and oversight. They understand an audit is more than just a financial requirement and more than just the annual financial audit. An annual audit plan is changing and evolving with varying objectives, as goals and risks change. The annual audit plan deploys different types of audits, assessing performance, systems, compliance, consulting, risk, and more. Each with its own unique objectives and tasks. The audit plan can provide a more comprehensive system and direction to monitor activities to address the wide array of concerns in your organization. Risk Assessment: A good audit plan is determined based on a risk assessment. Government continues to become more complex everyday through changing operations, financial impacts, technology, and new regulation. Assessing risks is increasingly important and very valuable when determining an audit plan. The risk assessment involves information gathering to determine relevant risks present. The assessment will result in the identification of
Transparency: No one likes to hear their weaknesses, mistakes, and areas of improvement. But it is only through identifying these areas and being transparent and honest with ourselves and others, that progress is made. Transparency with issues can help solve problems, allocate resources, and make difficult decisions. Audits help to bring these things out. There should be transparent communication to governance and the community which will help build trust and provide for results and action. Management, the Board and the Community are only as good as the information they have and what they know. Being transparent helps all interested parties make better decisions. Public confidence and support in government is essential. The principles of accountability and oversight help make us all better and achieve more. As public agencies use audit as a tool to provide accountability, ensure that in addition to required annual financial audits, your organization has internal audit/equivalent functionality in place. The functionality should provide for a variety of types and objectives of audits as necessary through an annual audit plan which addresses risk, involves governance, and is transparent to the board and community. Through embracing these techniques and taking a broader view of audit, we truly have the power to transform local government and achieve more!
About the Author Bryan Gruber, CPA is a Partner with Lance, Soll & Lunghard, LLP (LSL), a leading CPA firm specializing in the audits of local governments for over 80 years. Bryan Gruber specializes in the audits of cities and special districts including financial and internal audits. He is a member of the Association of Local Government Auditors, serves as a technical reviewer for GFOA and is a regular guest speaker at CSMFO chapter meetings.
a wide range of risks. The audit plan uses the risk assessment to understand how audit efforts could be best directed. The plan should consider the whole entity which may require the deployment of a variety of audit methods and objectives. The results of risk assessment and audit plan should be communicated directly to the board or audit committee. Governance: Our governing boards play an important role in setting the tone of accountability and oversight. They oversee organizational direction and rely greatly on the role of audits to make good policy and ensure positive change. In my opinion, it would be difficult for the organization to be truly effective and for governance to make informed decisions without a comprehensive annual audit plan and risk assessment in addition to a financial audit. Governance should be directly informed on the audit plan, risk assessment and financial audit. Governance should also be directly involved in the reporting and results of audits. The direct reporting provides for greater independence of audit and improved quality of the audit plans. 33 CSMFO MAGAZINE NOVEMBER 2017
CSMFO Shines a Spotlight on... Will Fuentes
Director of Financial Services, City of Milpitas
Interviewed By James Russell-Field Tell the readers a little bit about yourself.
James Russell-Field, City of Thousand Oaks
Will Fuentes, Director of Financial Services, City of Milpitas
My name is Will Fuentes and I have been the Director of Financial Services with the City of Milpitas since May 2017. I had the absolute privilege of serving as the Deputy Finance Director for the City of Hayward for 1 month prior to being presented an opportunity to serve in my dream executive leadership position with Milpitas. Prior to that, I was Assistant Finance Director at the City of San Leandro for 2 years and Revenue and Budget Manager at the City of Union City for 17 years. I am a graduate of the University of Notre Dame, with a B.S. in Finance and an M.B.A., and am an avid fan of all sports played by the Fighting Irish. I also obtained my Certified Public Finance Officer (CPFO) designation from the Government Finance Officers Association (GFOA) and serve as Co-Vice Chair to the CSMFO’s Career Development Committee; providing career development and training opportunities to membership statewide. And most importantly, I am the proud father to 2 smart and beautiful daughters, Madeline (12) and Lyla (10), and husband to my funny, smart, and beautiful wife, Ammy. I am originally from Buffalo, New York and currently reside in Dublin, California; which provides me plenty of opportunities to be active in running, hiking, golfing, and enjoying the outdoors with my family and friends. When and why did you first join CSMFO? I have been a CSMFO member since 2013. I had heard of CSMFO for years, but wasn’t very active. It was only when I began to research the group further that I realized the wonderful educational and networking opportunities that it provided. It was a long standing goal of mine to be
a Finance Director and I joined CSMFO to improve my skills, enhance my knowledge, and grow my network of professional contacts that I could call upon with questions, advice, and mentoring. I have not been disappointed, and only wish that I had joined sooner. Along with obtaining my MBA and CPFO, it was one of the best things that I did for my career I have met so many wonderful people the last few years whom I also now call friends. What have you worked on in the last month? I have presented several enhanced policies to Council which improve the City’s internal controls and transparency. I have also worked with my outstanding Finance team to prepare for our annual audit and financial report and develop our adopted budget document. As a new Finance Director, I have also worked to learn about my team, inspire them, and provide guidance and leadership. What aspect(s) of your job do you enjoy the most? I truly enjoy being a leader to my Finance team and helping those to grow in their careers that may not have initially had the confidence or support to develop. In every one of my agencies, I have sought out those individuals that had the talent to progress in their careers, but needed guidance, mentoring, and support. As a result, two of my prior employees took over my position when I left for other agencies. To me, this was my proudest accomplishment in either agency. What has been your favorite project in your career? While at Union City, I was involved in implementing several technology projects such as a new telephone system and citywide copier transition; both as project managers. I enjoyed expanding my comfort zone and taking on new challenges in areas that I previously knew little about. However, by utilizing a combination of my finance skills, management skills and ability to collaborate, along with great efforts from internal employees and external vendors, I was able to deliver high quality products to Union City that have stood the test of time. Throughout my career, I have enjoyed working on projects that weren’t in my typical everyday job description, but provided great benefit to my organizations. I highly encourage others to search and volunteer for learning and growth opportunities outside your normal work. It has proven to be a great way to grow and advance in my career. What is the most challenging situation you’ve faced in your career? Becoming a manager and progressing to the position of Finance Director has been a very challenging experience for me. Providing leadership to employees with different and
sometimes conflicting personalities as well as varying and diverse needs is a very challenging job. I look back on my years as a young professional and now laugh at some of the complaints and difficulties I gave my supervisors. Only now through experience, do I see how difficult of a job they had and how challenging it is to be a leader. Nevertheless, despite the challenges and the need to occasionally make unpopular choices, it is also one of the most rewarding things I have done in my life. I love every minute of being able to make an impact in the lives of my team and my community. I highly encourage others who may be thinking of going into leadership roles to accept the challenge and believe in yourself. What are some of the important issues you foresee in the future of California finance? Without a doubt it is achieving long-term fiscal sustainability in the face of rising pension, retiree healthcare, and other employee benefit costs. It will take a concerted and collaborative effort of the public, elected officials, executive leaders, and employees statewide as well as intellectual assistance from the private sector to solve these immense challenges. I am excited to be part of that ongoing effort for the benefit of our employees and our communities statewide. Succession planning is also another critical issue as there is a shortage of skilled and experienced individuals currently ready to take the next step into leadership roles. Thus, we must develop our staff and seek out those employees that have both the capacity to be great leaders and the willingness and humility to learn. What do you enjoy outside of work? I enjoy spending time with my family and friends outside; running, hiking, and golfing. I also enjoy good music, attending concerts, and dancing whenever the opportunity presents itself. And I love Notre Dame football. Go Irish! Do you have a favorite quote? “It’s not how many times you get knocked down that count, it’s how many times you get back up.” -George A. Custer As possibly one of the only, or the only, Finance Directors in the State that stutter, I have faced my fair share of rejection and disappointments along the way. Nevertheless, I always got back up, dusted myself off, learned from my mistakes, and looked for ways to improve myself so that my disability would never limit my ability to be a leader and to impact the lives of my teams and my communities. I had the goal of being a Finance Director for 10 years before I became one. Through hard work and determination, I achieved that goal, but the work is not yet done and I look forward to the next 20+ years of being a financial leader.
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If Hollywood made a movie about your life, what actor/actress would you like to see cast as you? George Clooney. One, because I like to think we both look professional in a black suit with a little gray hair and two, because I believe that Clooney would be well equipped to tackle the State’s complex financial issues.
Active User Community
cgi.com/cgiadvantage36035 CSMFO MAGAZINE NOVEMBER 2017
Transparency – Making Complex Data User Friendly Written By James Orr
O ver the last decade there has been
James Orr, Product Manager, Questica Inc.
a push towards greater open data and transparency within local governments. The push comes from many directions: the state, trends seen in other governments and a growing interest and expectation from citizens, community groups and media outlets. So, why should governments share their financial and other data? Because it directly impacts the trust and engagement citizens and others have with their local government. One factor that impacts this connection is the level of data trust stakeholders have, or the belief in the reliability, truth or ability of the government’s data practices.1 An important part of that data trust is data transparency. People are more likely to have a higher degree of trust in an organization when they also have higher visibility in that organization’s data practices.2 “Transparency” or “open data-driven” is also one of the seven elements that defines a high-performing local government. The other factors for a city to be considered a higher performer are if it’s dynamically planned, broadly partnered, resident-involved, raceinformed, smartly resourced, and employee-engaged.3
Three ways high-performing cities do open data better 1. They collect and share data across departments, with leadership and with residents. 2. They create open data policies to support the sharing of performance metrics and transparency initiatives. 3. They increase resident access to data through the web and other educational programs, plus expand opportunities for local businesses.
Encouraging greater participation and engagement in government affairs using open data and transparency can lead to: • Improvements in public services by giving citizens access to data about those services • Better budgeting and prioritization for public budget expenditures through stakeholder input • More informed policy and increased administrative efficiencies within departments • New opportunities for governments to collaborate with citizens and businesses Transparency is more than just a web posting Just sharing your datasets and financials with stakeholders on your website will not necessarily promote interest or engagement. The main reason is that many of these datasets are complex. For example, members of the Budget Office are likely quite skilled with Excel spreadsheets, so digging down and searching a posted dataset is not difficult. But for the average citizen that’s a barrier they are not likely to get past. The recent Governing and Living Cities study on highperforming cities found that while 8/10 cities have open data portals, only a third of those feel that this data is consumable by the public. There are many technology companies with software solutions that can help transform tabular data (or Excel spreadsheets) into engaging content. Beyond making this data more accessible, it can also have the effect of reducing administrative costs for Freedom of Information Act requests. It reduces both the time the citizen devotes to the inquiry and the process and paperwork the civil servant undertakes to release information that could been readily available. It also gives citizens a way to answer their own questions about what’s going on in their neighborhood, and thus allows staff to focus on higher priority projects and programs. Similarly, there are opportunities to leverage and connect with devoted and engaged citizens who dive into their local or state or federal governments’ open data offerings and find those stories that they develop and share with other citizens. For example, I Quant NY4 blog shares stories developed from analyzing New York City’s open data. While these open data citizen sites can help promote your city, it’s still makes the most sense for the city to be proactive in telling its own story.
So how can you make your complex data more user friendly?
Three key ways to demystify complex data • Make it searchable • Make it visual • Make it sharable
When a citizen comes to your city’s open data portal, if they’re looking for something specific then they may be able to find that information. But if they’re looking to have that data tell them a story about how the city’s run – all they have is 10,000 datasets from tabular numbers. There are three key things your city can add to its open data offering – whether you already have open data that’s published, or are just launching your information – it’s about making your data searchable, visual and sharable.
requirement by doing just a little more work to make it much more accessible. Break out some of that financial information into smaller visualizations and presentations that could then be used by your mayor, councillors and staff to disclose how the city’s budget translates into the activities and programs for each of the communities they serve. If your city wants to reach more people, consider how your open data and transparency initiative can build a connection and a story. Create a better understanding with your stakeholders about how their tax dollars are spent, where funding comes from, and what programs and services your city provides to their communities. Explore how visual software tools can make the process easier to engage with constituents, elected officials and staff to showcase how your city is managed and how it works collaboratively to plan for its citizens and businesses today and for the future.
About The Author James Orr has 12 years of experience developing budget, performance and data visualization solutions for the public sector. Follow him at @Questica_James, or email questions and comments to firstname.lastname@example.org.
Beyond the basic published searchable datasets, you should consider providing interactive visualizations that allow citizens to explore the data through searchable graphs, pictures and infographics. Plus, you can also include short stories and embedded videos to take your What datasets to share flat, gigantic dataset and turn it into The Sunlight Foundation6 reported that an application that is illuminating the most popular open dataset topics for for your constituents. To make your local and state governments were: data shareable, embed it as part of 1. Police and crime: incidences, your city’s website and enable social booking, station locations, statistics sharing through your channels (i.e., Twitter, Facebook, Instagram and 2. Transportation: data related LinkedIn). Also consider working with to transit, taxi licences, round your public affairs team to regularly infrastructure, parking communicate your city’s story through 3. Emergency calls: police, fire, EMS your own social and other channels responses, 911 call, response times, including online/print publications, incidences community meetings, etc. 4. Development: commercial, housing, When it comes to best practice, property data data-driven cities San Diego and Long Beach, California were recently recognized as best-performing cities, specifically for how they share their open data. Other data driven cities recognized included Kansas City, Missouri, El Paso, Texas; Long Louisville, Kentucky and Phoenix, Arizona.5
5. Building safety: permits, occupancy
Open and transparent isn’t just external
8. Businesses and licences: vendors, contracts, procurement
1. https://www.invisionapp.com/ blog/data-trust-gap-design/
9. Inspections and service requests: restaurants, 311 requests, code violations
2. https://www.cognizant.com/ whitepapers/the-business-value-oftrust-codex1951.pdf
6. Finance: revenue, spending, salaries, capital budgets, payments 7. Elections: results, polling locations, campaign finances
When it comes to making data more searchable, visual and sharable, it 10. Education: student health, library isn’t just about how you share with locations, schools and programs citizens, but also how you get your internal partners – elected officials and civil servants – engaged. For example, the finance team and other departments expend a huge effort each year to develop the annual budget and then prepare a Budget Book (that can be a 1,000-page printed document). Now consider how your city could leverage this important regulatory
3. http://www.governing.com/equipt 4. http://iquantny.tumblr.com/ 5. https://cms.erepublic.com/ common/forms/ajax_form/80621 6. https://sunlightfoundation. com/2017/09/11/whos-at-thepopular-table-our-analysis-foundwhich-open-data-the-public-likes/ 37 CSMFO MAGAZINE NOVEMBER 2017
CSMFO Board of Directors Election CSMFO is now conducting elections for the 2018 Board of Directors. Positions up for a vote are one Northern California Board member, one Southern California Board member and a President-Elect from the North.
Meet the Candidates PRESIDENT-ELECT Joan Michaels Aguilar, City of Dixon CSMFO has been a part of my life since 1996, when I first served as a room monitor at the Burbank conference, before I even knew the extraordinary benefits to becoming a member of such a fantastic organization. I attended my first conference in 1998 in Newport Beach and had the good fortune to sit at a table with a past president and president of CSMFO. Bill Statler appointed me to the Budget Committee back when only three members were on each committee. It was a lot of work, but for an Administrative Analyst new to CSMFO who wanted to learn more, it couldnâ€™t have been a better opportunity. JOAN
Through the years, I have been blessed to meet and work with so many talented professionals and participate in Strategic Planning Sessions to help guide CSMFO forward. As President-Elect, I would want to maintain some of our core strategies such as professional development, but I would also like to see us reaching out to the next generation of talented finance professionals. This has been discussed amongst the leadership within CSMFO and I would like to see us reach out to universitiesâ€™ accounting programs and career centers to share the benefits of a career in municipal finance and CSMFO membership. CSMFO is a volunteer organization that has over 100+ individuals in leadership and not only do we need to be thinking about investing in training for the skills for our everyday jobs, but we also need to nurture the future CSMFO leaders of tomorrow. One exciting idea that I really support came out of our recent Strategic Planning Session which would be a Leadership Academy. CSMFO has helped me grow in my professional career and I would like to give back and help foster a positive environment for the next generation to embrace CSMFO. I appreciate your consideration and would be honored to serve as your President-Elect.
BOARD MEMBER - NORTH Craig Boyer, County of Alameda I appreciate the opportunity to be a candidate for this year’s Board of Directors. In the spirit of the upcoming Annual Conference, I will focus on how I would utilize my board membership to facilitate collaboration, innovation and achievement.
We collaborate because CSMFO is about building relationships with other professionals in local government. In the spirit of collaboration, I want to focus on casting our net of participation wider. One of our underserved populations is college students. I would like to use my time on the board to help develop a more formal program for promoting CSMFO to the college community and recruiting college students to become active members. CSMFO continues to be relevant to its members because it constantly innovates. CSMFO has promoted innovation in local government for many years with its Innovation Award Program. As a board member, I want to continue to sponsor programs that promote innovation. CSMFO can achieve these goals to collaborate and innovate when the Board of Directors provide the tools for success. I want to join the Board of Directors to continue providing these tools for achievement. Please vote so CSMFO can continue to be the preeminent resource for promoting excellence in government finance.
Richard Lee, City of South San Francisco Over the past sixty years, CSMFO leadership has faithfully served its members through innovation, collaboration, education and professional development. To ensure another successful sixty years, our leaders’ efforts will include the following:
The Career Development Committee will continue to evaluate existing core course offerings, survey members, develop new courses, build a comprehensive library of “Quick Hits”, and coordinate with the Technology Committee to evaluate and implement new solutions for content delivery to meet members’ diverse needs. The Membership Benefits Committee will strategically expand membership, enhance existing member engagement, and in collaboration with local chapters, seek out new members by connecting with local universities, special districts, large agencies, and other non-member government organizations to demonstrate the value of membership and further broaden the diversity of the organization. The Communications Committee will continue to produce a high quality magazine and augment the use of social media to connect with CSMFO’s multi-generational membership and enhance the CSMFO brand. The Professional Standards and Recognition Committee will coordinate with the Program Committee, Career Development Committee, and GFOA to design a training track at the annual conference sessions and core courses in alignment with GFOA’s Certified Public Finance Official (CPFO) certification.
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BOARD MEMBER - SOUTH Carrie Corder, Cucamonga Valley Water District CARRIE
Being active in CSMFO can be a career-changer. CSMFO’s Board Members, leaders and volunteers work hard every day to plan and care for its members. I can personally attest that I have benefited from their thoughtful and hard work from the very first conference that I attended in 1995. CSMFO has provided me with valuable and time-sensitive training, given me opportunities to improve my public speaking skills, and has introduced me to colleagues throughout the state that I have been able to turn to when I need advice and perspective. CSMFO has enriched my career and I want to ensure that CSMFO’s critical mission is supported for all county, city, special district and school district members. A new generation has entered the workforce; they will be the new leaders of CSMFO. Supporting this generation of upcoming leaders cannot be done the way it was in the past; new leaders learn differently, process differently, and present more creative ideas than we thought possible. I want to be a part of developing these leaders, and I would be honored to serve on the CSMFO Board of Directors to create greater value for our members.
Stephen Parker, City of Stanton STEPHEN
First I would like to say that CSMFO is as successful as it is because of dozens of volunteer members who do a fabulous job. Two other super-volunteers are on the ballot with me for South Board Member, and leadership at CSMFO will see no dip regardless of who you select to be your next South Board Member. I love CSMFO - I think the organization is incredible and headed in the right direction. Our focus has always been on integrity, professional development and public service. Those core values are not going to change, but our approach on how to provide them to our members will.
As a Board Member, my goal will be to provide ever-increasingly valuable professional development, through a variety of delivery methods to promote growth for our members in their profession as they help lead the governments that they work for. If elected to the CSMFO Board, I will encourage the historical ideals we have always had as our organization looks to become even more relevant and valuable to our members in the future.
Ernie Reyna, Western Riverside Council of Governments ERNIE
Building on the momentum I’ve gained by serving as Committee Chair of the Membership and Administration Committees, as well as Chapter Chair of the Inland Empire, I’d like to continue to shape CSMFO into a premier organization. There are currently 84 cities and some chapters that are not active within CSMFO and with the assistance of the Committees and Chapters, I would like to see as many agencies participating in CSMFO as possible. I believe California has the best and brightest minds and by extension, this makes CSMFO the best organization among all the states. With the best and brightest minds coming together, this will allow CSMFO to continue to bring members the highest quality professional development, the best technology, and the best instructors providing continuing education. As a member of the Board, I would work to increase CSMFO’s digital footprint and begin the succession plan for the future members of CSMFO so the organization can continue to be a leader in governmental finance. Students are the next generation of leaders and it is very important that the college campuses be tapped into as a valuable resource so students can attend their local chapter meetings and the annual conference.
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Planning Your Mission - Make the Most of Your Riverside Experience
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Planning Your Mission - Make the Most of Your Riverside Experience After months of meeting, discussion and planning, Mission Possible has taken shape and we’re almost ready to go. There’s a lot to be excited about as you plan to visit Riverside February 20th – 23rd, 2018 for your Annual Conference. From the museums and shops within easy walking distance from any of the Conference hotels, to the always fun and exciting golf and tennis tournaments onto the interesting pre-conference workshops and the Conference itself, there will be no shortage of events and sessions that will help put you well on your way to achieving your own strategic mission through collaboration and innovation. Our Conference location. Downtown Riverside, has something for everyone, and it’s all close by! Numerous museums, including the Riverside Art Museum, the Mission Inn Museum and Riverside Metropolitan Museum, are all minutes from wherever you are. On your way to visit these fine institutions there are plenty of antique and collectible shops, coffee shops and Pedestrian Malls that make you feel right at home. Why not grab a cup of your favorite beverage and take a moment to relax on the Pedestrian Mall and watch makes of Downtown Riverside a true destination! If friendly competition is your passion, why not register for the CSMFO Golf and Tennis tournaments? These events are a great way to network with your peers while trying to show the competition that it’s all about fun and getting together. Both events are scheduled for February 20th, with the golf tournament being held at the picturesque Oak Quarry Golf Club, a club full of picturepostcard views and challenging golf. Equally as fun, this year’s tennis tournament will be held at iTennis at Andulka Park. This venue has 10 championship tennis courts, including a stadium court and a state-of-the-art clay court. Either way, pack your golf clubs or tennis racket and enjoy a day of fun with friends. Also being held on February 20th are the always interesting pre-conference sessions. These innovative, all day sessions give you a jump start on learning opportunities at this year’s Conference. Attendees can register for Neil Kupchin’s “Successful Leadership Skills for Finance Directors” session, Phil Bertolini’s (CIO/Deputy County Executive, Oakland County, Michigan) and Terry Hackelman’s (Managing Principal, NexLevel Information Technology, Inc.) interesting presentation, “Mission Critical – Getting Through a Successful ERP Implementation” or the topical session “The Fundamentals of Conducting a Water and Wastewater Rates Study” presented by Kevin Mascaro, Director of Finance, Western Municipal Water District, Sanjay Gaur, Vice President, Raftelis Financial Consultants, Inc. and Kelly J. Salt, Partner, Best Best & Krieger LLP. Registration to any of these sessions includes materials and lunch and cover great topics that are relevant and sure to provide you with more tools for your management toolbox. While we are talking about learning and development, and as with past Conferences, your Planning Committee had put together a strong assortment of learning opportunities at each of the over 60 concurrent sessions planned for the Conference. GASB updates, budget issues, financial conditions and the important topic of water management are just some of the important topics to be covered by these sessions. There’s a topic and track for everyone and we hope to see you at the sessions. Plenty to do, plenty of people to see and plenty to learn! We’re looking forward to seeing you and showing you all what Riverside and your Conference has to offer. Check out the Conference website today and start planning your journey to Riverside: http://conference.csmfo.org/.
45 CSMFO MAGAZINE NOVEMBER 2017
CSMFO Strategic Planning Session Written By Joan Michaels Aguilar
On Thursday October 19, a group
Joan Michaels Aguilar, CSMFO Magazine Editor, City of Dixon
of dedicated CSMFO members who hold positions in leadership gathered together at the Mission Inn in Riverside. We had an Opening Exercise “60 More Years: The Mission is Possible” working in groups to come up with ideas for the future. Among the ideas generated: • Be digitally minded in all aspects • Engage leadership at Chapter level • Develop student engagement program – next generation
This was followed by each responsible committee sharing the status of 2017 strategic goals. Many of these goals have been successfully achieved, while others are on track as part of the three-year plan that had been initially developed in September 2017. Members than had the option to break into groups to focus on discussion issues: • Examining our Committee Structure • Advocacy • Chapter Engagement • Engaging the Next Generation of CSMFO Members
• Professional development should go beyond just technical training • Consider regional meetings/ conferences for entry/mid level staff • Evaluate offerings – are we meeting special district needs? • Look to membership for expert speakers • Consider focus groups • Expand chapter offerings • More peer to peer mentoring/ coaching • Develop a designation or badge program
The experience in the room was remarkable with past presidents and long-time members such as Bob Biery and Mary Bradley, to Ronnie Campbell and Jesse Takahashi. Several Chapter Chairs were first-time attendees such as Nitish Sharma, Tim Przbyla, Paul Melikian, Vanessa Portillo, Karla Campos, and Stephanie Reimer. President-Elect Margaret Moggia noted “I loved the energy and thoughtfulness of the group to move this organization forward so that we could be relevant for the next 60 years.” Neil Kupchin, who facilitated the planning session, will compile the notes from the planning session and identify new 2018 goals. The next Board meeting will be an in-person meeting to be held December 1 in San Mateo (in lieu of the monthly conference call that conflicted with Thanksgiving) that will include discussion of the goals developed by the working teams.
Grow Your Supervisory Skills CSMFO strives to provide high quality training and professional education opportunities on the subjects that members request. We are excited to announce a resource for municipal finance professionals to build their skills with the launch of CSMFO’s newest class, Developing Successful Supervisory Skills. Facilitated by Neil Kupchin, a management and training consultant and favorite CSMFO conference presenter, this class provides participants with a framework and toolkit to become more effective with specific supervisory skills, including situational leadership, coaching and counseling, and effective conflict resolution. The first offering of this course was held on September 28th in Mountain View, with registration filling in just two days. John Kachmanian, Finance Operations Manager from the City of Fremont, attended the training and said “Neil’s course was an insightful and informative discussion on the key attributes, skills and practices of an effective leader. Neil is an engaging presenter and a master story teller. In addition to being a fantastic coach, Neil has a great sense of humor, which adds to the enjoyment of the course. I would highly recommend this course for anyone who aspires to learn and grow as a leader.” Another CSMFO member, Nick Kurns, Budget Analyst from the City of Sunnyvale, agreed and said “The value of this class is that you get tangible advice for how to approach common supervisory challenges. This training provided me with a real decisionmaking framework that I can implement immediately.” Due to the high demand for this class, additional sessions have been scheduled. Upcoming training sessions are scheduled in Southern California (Agoura Hills) on November 16th and Northern California (South San Francisco) on January 11, 2018. Registration is limited to 25 participants. The fee to attend is $200 and includes course materials, light breakfast and lunch. We look forward to seeing you at the next training! For more information and registration please visit the Events tab at csfmo.org.
47 CSMFO MAGAZINE NOVEMBER 2017
Mission Accepted by the South San Joaquin Valley Chapter Written By Tim Przbyla & Paul Melikian
The CSMFO members within the South
Tim Przbyla, Chair, City of Madera and Paul Melikian, Vice Chair, City of Reedley
Paul Melikian, Assistant City Manager, City of Reedley
San Joaquin Valley Chapter don’t think that it’s any secret that we are all facing the same impossible mission over the next several years – the mission of balancing our general fund operational budgets with the impending increases to our CalPERS contributions and a possible downturn in the economy. With that in mind, we are all anxious to see what we can gain from attending the 2018 CSMFO Conference. Every year, we gleam prudent and pertinent information from attending the annual CSMFO Conferences. However, we hope to gleam even more than usual from the Mission Possible Conference in February, so that we can help prepare our cities for the challenges to come. Over the past year and a half, the South San Joaquin Valley Chapter has been rebuilding itself after the retirement of past leadership within the Chapter. We have attempted to leverage off of existing organizations and friendships, meet in a convenient location for most entities, encourage participation, and (most of all) have fun. Many of the cities within our Chapter belong to the Central San Joaquin Valley Risk Management Authority (CSJVRMA), which meets roughly on a quarterly basis. And, many of the cities’ representative on the CSJVRMA Board are Finance Directors. So, we try to meet on dates that the cities have already gathered for the CSJVRMA meetings, to save them travel time and expense. We started offering CPE credits, so that CPAs, CPFOs and others who need continuing professional education credits can build up those hours of credit while further-benefitting from the wonderful presentations and the networking that takes place as lasting relationships are built between the representatives from each city or
agency who attend the luncheons. Many of us had a lot of fun together at the 2017 CSMFO Conference, and we have photo to prove it!
Since then, we have attempted to keep the fun flowing throughout the year, at our Chapter luncheons. At our last luncheon, we took the Spy Photo Challenge to heart and had fun taking photos of our group and then enhancing some of the photos in to better-fit the Mission Possible theme. Seeing some of our photos in the recent CSMFO Magazine was fun and strengthened our bond as Chapter members. Over the past year and a half, we have invited speakers on topics of interest that will help us prepare for changes in the economy and save money for our cities or agencies. Our first presentation under this revived Chapter was on Demographics and the Economy, by Doug Robinson. Our last topic was on Capital Financing and helped us consider options for financing or refinancing that could help us provide the funding we may
need for projects and take advantage of the still low interest rates. Kenneth Dieker gave that presentation, and he warned us all that we should be looking at our long-range forecasts and prepare for the burden that CalPERS will certainly be passing onto us. Most recently, Co-Chair Paul Melikian has been successful in scheduling presentations from CDIAC and Michael Coleman for upcoming Chapter luncheons. He was also influential in getting CDIAC to schedule a full-day training session in the Fresno area, which will help to provide excellent professional education for many in the San Joaquin Valley who would previously have had to travel to Sacramento or the Los Angeles area to receive such training. As we continue to improve our program in the South San Joaquin Valley Chapter, we hope to see more cities, such as Fresno, join and actively participate in CSMFO. We are a very inclusive group that truly enjoys associating with one another, and we don’t want to leave anyone hanging (well, other than Tiffany Couto).
As many of the great leaders within the CSMFO retire and the demand for new municipal finance leadership continues to outpace the supply, it will be more important than ever for us to network, strengthen and support each other and train up the next generation of great CSMFO members. CSMFO is vital to our success! The South San Joaquin Valley Chapter looks forward to strengthening our members and becoming the hot bed of professional development for municipal finance officers and the poster child for fun and creativity over the next several years! Your mission, should you accept it, will be to keep up with the SSJV Chapter and to have as much fun as we are! Best wishes from all of us! We hope to see you all at the 2018 CSMFO Conference – incognito or not! Cheers!
About the Authors This article was co-written by Chapter Co-Chairs, Paul Melikian and Tim Przybyla. Paul is the Assistant City Manager for the City of Reedley, with 14 years of experience in municipal finance. He spent 8 ½ years with the City of Fresno, 4 ½ years with Reedley as the Director of Finance & Administrative Services, before accepting the Deputy City Manager position with the City of Tulare in early 2016. Paul also served as the Interim City Manager for Tulare after the retirement of the City Manager, before returning to Reedley earlier this year. Paul is also a Certified Public Finance Officer (CPFO) through the GFOA. Tim Przybyla has been a Finance Director for the past 16 years – 2 years with Huron, 10 years with Kerman and just over 4 years with the City of Madera. Tim is a Certified Public Accountant (CPA), and worked for Ernst & Young and Wilcox, Hokokian and Jackson, before getting into municipal finance.
49 CSMFO MAGAZINE NOVEMBER 2017
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CSMFO INNOVATION AWARD
Innovation Award Program CAFR Award Program
While the Budget Award Programs deadline has now passed, CSMFO is currently accepting applications for the Innovation Award Program. The CSMFO Professional Standards and Recognition Committee encourages all municipal members to consider applying to this Award Program: Innovation Award Program CSMFO established the Innovation Award Program to recognize innovation within the field of public sector finance in the areas of: • Accounting • Budgeting • Treasury • Debt administration/issuance • Procurement • Risk management • Technology Applicants are required to complete the online application and include documentation related to the innovation. Completed applications and documentation are due by December 31, 2017. There is no fee to apply to the Innovation Award Program. Prior Year’s Award Winners The following is a brief summary of the prior year’s award winners. Additional information on these award winners can be found at www.csmfo.org/2017-innovation-award-winners/ . While these award winners are illustrative of the innovation that can be found in local government, they do not comprehensively cover all areas where innovation can occur. Please consider applying if your innovation falls into one of the categories listed above. West Basin Municipal Water District – Asset Management System The District went through a comprehensive process of identifying and separating the individual components of its water infrastructure and equipment so that it can better track the estimated useful lives and replacement cost of individual components. The value of individual components that had been disposed were removed from the accounting records. In 2015, the implementation year, the District disposed 236 individual components with a disposal value of $27.1 million. City of Newport Beach – Excel-Based Pension Funding Amortization Model The City developed a model that allows local governments in CalPERS to understand how the default amortization period for CalPERS amortization bases affects local governments’ unfunded pension liabilities. The model displays the advantages of accelerating payment of the CalPERS amortization bases as soon as they are known. How to Submit an Application In order to submit an award application, CSMFO members must be pre-registered as an applicant in the award management software. If you are not yet registered as an applicant in the award management software, please contact Craig Boyer at firstname.lastname@example.org. Feel free to contact us with any questions regarding the award programs.
51 CSMFO MAGAZINE NOVEMBER 2017
Beverly Hills Financial Reporting and Data Transparency Triumphs Written By Roza Jakabffy “Data are widely available; what is scarce is the ability to extract wisdom from them”, Google’s Chief Economist Hal Varian.
Roza Jakabffy, Accounting Manager, Beverly Hills
I’m sure we’ve all heard the nicknames that accountants have all around the world: “bean counters”, “number crunchers”, “double entry deviants”, or “reserved reconciler”. But is this what really goes on in the daily life of our accounting/finance profession? Is this how we are to be defined? It easily can become the perception, if we limit ourselves to nothing more than filing numbers in the right general ledger codes. But history proves an undeniable dependency between the quality of recordkeeping and financial insights and the wellbeing of any entity, from the smallest family run business to large private sectors business, from small, single purpose districts to full service governmental entities, and from regionally limited agencies to those that span continents around the globe.
And, if you remember the hero in the movie “Schindler’s list”, you might remember that, when setting up the manufacturing entity that later becomes a human rescue project, the first thing he did was hire an excellent accountant. He remembers a saying from his father: “My father was fond of saying you need three things in life - a good doctor, a forgiving priest, and a clever accountant. The first two, I’ve never had much use for.” We can’t deny that every transaction that humans perform has a monetary value attached to it and as such can be recorded and analyzed as potential incomes, revenues, increasing or decreasing equities by creating assets and involving liabilities. But sometimes we don’t want to acknowledge the implied opportunity costs, or intangible costs, and created values these transactions can represent. Accounting is an interesting and powerful language that civilizations depend on. Jacob Soll in his book, The Reckoning, says “Whether building a road or fighting a war, leaders from ancient Mesopotamia to the present have relied on financial accounting to track their state’s assets and guide its policies. Basic accounting tools such as auditing and double-entry bookkeeping forms the basis of modern capitalism and the nation-state. The 2008 financial crisis is only the most recent example of how poor or risky practices can shake, and even bring down, entire societies.”
RECORDING VS. ANALYZING: Efficient and useful data needs to be timely and correctly recorded. The first step in the finance process is undeniably the data gathering, translation into accounting codes and the processing itself when every figure with the correct attached code goes through the right module. At Beverly Hills, we started revamping the entire accounting/finance process by first focusing on the timeliness and correction of the accounting records. The following statement governed our team’s day to day life: “we need to know every dollar that entered the City, and every dollar that left the City. And even more: every dollar that was supposed to enter the organization but for several reasons didn’t happen, and every dollar that left the organization, but was not supposed to.” The first part of this statement guided us to contact operational divisions and validate if our understandings of their transactions were correct. During this exercise, we not only deepened our understating of City’s operations, but also had an opportunity to collect feedback from departments/divisions about their reporting needs. If the data was not coded at the correct level of granularity, we redesigned our coding structure, or if it was unnecessarily complex and served no purpose for the end user, we reduced the complexity and redundancy. These occasions were also efficient opportunities for financial analysis education: departments were made aware of existing reports that can increase visibility over their stewardship capabilities, efficiency measures, potential deficiencies or discrepancies. Concepts such as Operating Income, Investing and Financing Cash Flows were introduced to those leaders that oversee enterprise funds such as parking and water operations. This is how we built periodically recurring monitoring reports designed to watch trends, look for anomalies and proactively inform users of budget versus actual variances. While in the first phase we designed and built these reports based on manually extracted raw data, today’s efforts are more oriented and refocused on automations. Automation will include not only system managed integrations between our ERP systems, but also more and more involvement of algorithms along with data mining artificial intelligence tools that will extend the effectiveness of our monitoring efforts.
For example, old internal control processes to monitor duplicate invoice payments relied heavily on manual processes to download thousands of AP transactions and then used excel formulas and conditional formatting to highlight potential duplicate invoices; either errantly entered twice or that could have been manually altered to circumvent built in system controls. Our vision now is to deploy a data mining tool that based on prebuilt algorithms will not only automatically scan all transactions (potentially including supporting document attachments), but will also automatically generate warning emails with scheduled reports. “Let’s solve this problem by using the Big Data none of us have the slightest idea what to do with” unknown. We are all familiar with how outdated technologies prevent decision makers from receiving timely information, and how it often takes hours of meticulous manual labor to compile. This led to decisions being made for the future that were based on outdated and incomplete information. These problems arose from insufficient data connections within governments, as so much of our data is stuck in an ERP, payroll, and other systems, and retrievable only by scarce analysts that can run complex queries. Furthermore, as many of these systems are run “on premise”, they are inherently hard to access by an increasingly mobile organization. And the training and hours necessary to retrieve and analyze data limit the intelligence that can be gathered and shared in a timely manner. The end result is that information blockades become intelligence blockades and our departments feel like quasi-independent businesses. To engage our workforce required evolving into business intelligence. Business Intelligence is all about making dry figures accessible and useful to the right audience at the right time. Let’s be honest again and admit: while we accountants and finance minds enjoy “oceans of data”, and while we feel we can easily spot trends and outliers, our audience doesn’t have the time, gets bored, or is intimidated by complex finances. Enter the new paradigm, a partnership to leverage our data with new analytical tools made available to our governmental profession. Our City embraced this strategic alliance and 53 CSMFO MAGAZINE NOVEMBER 2017
partnered to bring an innovative, online, cloud-based business intelligence tool to our workforce. I still vividly remember my February 2015 introduction to our transparency tool, when our CFO Don Rhoads walked me through the reporting and graphing capabilities. We focused our efforts on getting our tool implemented as soon as possible for our internal day to day life, but with prior history so we could build new, multiyear trend reports. We choose to upload nine years’ worth of financial data since we just finalized the conversion from one ERP system to another and were able to easily map imports from the two separate legacy systems. This deep collection of new data analytics allowed for decisions on services to be grounded in relevant data and analysis and to match current needs. FINANCIAL vs NON-FINANCIAL DATA VISUALIZATION: Capabilities offered by Beverly Hills data tool amazed us even more when we started building our own reports. The capability to design your own templates, and to visualize non-financial data together with financial data, was unprecedented. Once we had the financial reports designed and in use (various revenues and expense trend reports, map based Transient Occupancy Tax trends, etc.), we ventured into and explored various needs for non-financial data. We used our system to visualize Red Light Camera Incidents, Overtime trends, and my favorite one: analyze purchase order rejections by users, divisions, frequency, and reasons. While financial reports pull data mainly based on trial balance imports, these newer systems offer functionalities to connect Accounts Payable details to general ledger totals. This allows users to further drill into details as vendor name, check number and date for the presented figures. Agency Comparability Tool. While most government agencies operate independently with a multitude of particularities that make every entity unique, desire for comparability always existed among cities. Our transparency solution filled this void, too. One entity can pull another entity’s data and after a quick exercise of synchronizing chart of accounts, entity’s various facts can be compared among each other. Another value-added feature is the possibility of pulling census data to increase and enhance the meaning of the results. A concrete example is when comparing various costs for police departments, the number of burglaries and other crimes have a great influence in determining the total efforts in which a City needs to engage.
Beverly Hills Success. For our City, it has been a great journey to start with less complex data reporting tasks and, step by step, extend the capabilities of existing tools, going from analysis to monitor transaction to analysis to predict future results. As Carly Fiorina said: “The goal is to turn data into information, and the information into insight.” 1. Data reporting: provided us with insights into what happened and helped us to know our history 2. Analysis: all our analysis efforts extended our understanding of why things happened-know the factors that can change the output 3. Monitoring: we are able to answer questions like: is everything on the right track? Our next efforts will focus on building dashboards that will help us monitor in a user-friendly way the progress of all our key performance indicators. This will allow the City to have a proactive role in correcting undesired trends and to use the knowledge and change course of action. 4. Prediction: by using predictive analytics, during the planning phase various simulations can create various outcomes, allowing decision makers to make better decisions during budgeting exercises.
About The Author Roza Jakabffy, CPA, CMA, CFE, CGMA has been Accounting Manager for the City of Beverly Hills for the past three years. Before joining the public sector, Roza Jakabffy spent 18 years in private sector including public accounting, starting as Cost Accountant for Coca Cola, then overseeing accounting and financial operations of various other entities, spanning from small local entities to multi billion global corporations. Roza Jakabffy is a Certified Public Accountant, as a Certified Management Accountant, Certified Fraud Examiner, and a Chartered Global Managerial Accountant. Mrs. Jakabffy earned a master’s degree in Economics with focus on Accounting from Babes Bolyai University, Romania and a bachelor’s degrees in Economics from the same university. The City of Beverly Hills uses OpenGov as its transparency tool.
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CSMFO MAGAZINE NOVEMBER 2017
Governor Brown Signs SB 231 Regarding Stormwater Fee Authority Written By Nick Ghirelli & Trisha Oritz
In recent years, stormwater permits
Nick Ghirelli, Associate, Public Law Department at Richards, Watson & Gershon
Trisha Oritz, Associate, Public Law Department at Richards, Watson & Gershon
issued by Regional Water Quality Control Boards, which regulate stormwater discharges from municipal separate storm sewer systems, have become increasingly onerous and expensive. Cities and counties are expected to install new and expensive infrastructure that both captures and treats stormwater runoff entering their stormwater systems. For example, price tag estimates for the latest Los Angeles County stormwater permit are as high as $20 billion over twenty years.1 While enhanced stormwater programs improve water quality, cities and counties have struggled to identify dedicated funding sources to comply with their permit obligations. SB 231, which the Governor signed into law in October, is the Legislature’s latest response to the growing budgetary problem of stormwater permit compliance.
SB 231 addresses how Proposition 218 applies to fees for municipal stormwater systems. Proposition 218 is the 1996 voter initiative that amended the California Constitution to strictly limit local government fees for property-related services. As important here, Proposition 218 requires a public hearing at which properties subject to the fee have the right to prevent its adoption with a majority protest.2 If there is no majority protest at the public hearing, Proposition 218 also requires voter approval for the fee, but this additional requirement is inapplicable to water, sewer and refuse collection fees.3 SB 231 seeks to allow local governments to adopt a stormwater fee without voter approval by amending the definition of “sewer” in the Proposition 218 Omnibus Implementation Act. Specifically, consistent with an existing Public Utilities Code statute,4 SB 231 expands the definition of “sewer” to include infrastructure relating to the “collection or disposal of sewage, industrial waste, or surface or storm waters.”5 In 2002, the California Court of Appeal ruled that stormwater systems are not sewer systems and that Proposition 218 requires voter approval of a stormwater fee.6 SB 231 attempts to legislatively overturn this decision, and the bill includes numerous findings and legal arguments intended to guide how courts interpret Proposition 218.7 Future litigation will likely resolve whether this legislative measure changes how the courts view voter approval for stormwater fees.
SB 231 aims to provide one more potential tool that cities may utilize to fund costly stormwater programs. Previous efforts include AB 2403 in 2014, amending the Proposition 218 Omnibus Implementation Act to expand the definition of “water” to include “other sources” such as rain.8 In addition, several test claims are currently pending before the Commission on State Mandates that argue provisions of various regional stormwater permits constitute unfunded mandates, and therefore require a subvention of state funds to reimburse local governments for their costs.
About The Authors Nick Ghirelli is an associate in the Public Law Department at Richards, Watson & Gershon and assists cities with stormwater permitting and compliance. Trisha Ortiz is a shareholder in the Public Law Department at Richards, Watson & Gershon and specializes in advising clients with regard to elections, imposing and increasing taxes, fees, and assessments, and clean energy financing.
1. Steve Scauzillo, LA County cities have a $20 billion storm water cleanup bill but they want help, San Gabriel Valley Tribune, March 22, 2016, available at http://www.sgvtribune. com/2016/03/22/la-county-cities-have-a-20-billion-storm-watercleanup-bill-but-they-want-help/. 2. Cal. Const. art XIIID 6(a). 3. Cal. Const. art XIIID 6(c). 4. Pub. Util. Code § 230.5. 5. Gov. Code § 53750(k), effective January 1, 2018 (emphasis added). 6. Howard Jarvis Taxpayers Ass’n v. City of Salinas, 98 Cal. App.4th 1351 (2002). 7. Gov. Code § 53751, effective January 1, 2018. 8. Gov. Code § 53750(m). 57 CSMFO MAGAZINE NOVEMBER 2017
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Included in the September 2017 edition of CSMFO Magazine are stories about finance here in California and the professionals who make it work...
Published on Nov 15, 2017
Included in the September 2017 edition of CSMFO Magazine are stories about finance here in California and the professionals who make it work...