CSMFO Magazine January 2018

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M A G A Z I N E

JANUARY 2018 #18

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CSMFO

CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS

M A G A Z I N E JANUARY 2018 #18

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 melissa.dixon@staff.csmfo.org.

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. 6

CONTENTS JANUARY 2018 #18 FEATURES

Budgeting Out of Bankruptcy…

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Cost Allocation Plans, Fee Studies, and Bears! Oh My!

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Sausalito Gains Trust with Budget Outreach P.

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18

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Sponsored Article Implementing an ERP system?

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A Picture Is Worth a Thousand Words

Enhancing the Budget

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28

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A Holistic Approach to Budget Reviews

When Disaster Strikes…

The Budget Menu: A Practical Addition to Your Toolkit

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Future of the CalPERS Train

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Job Opportunities

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INSIDE CSMFO President Drew Corbett’s Letter P.

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San Gabriel Valley Chapter Spotlight P.

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Executive Director’s Letter P.

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Keep Learning and Thriving 24/7 with the CSMFO Coaching P.

President Elect’s Letter P.

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Plan Your Mission For Success P.

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CSMFO Shines a Spotlight on Lauren Lai P.

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Annual CSMFO Golf Tournament

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PRESIDENT’S LETTER Drew Corbett

Drew Corbett’s Final Message As President After a productive trip to Riverside for our annual strategic planning session, led by President-Elect Margaret Moggia, I packed up for the final time to represent CSMFO as President at another association’s annual conference. This trip was to Anchorage, Alaska for the Alaska Government Finance Officers Association (AGFOA) conference, and here’s what I did:

After the sessions ended that evening, there was a reception at the Anchorage Museum. It was a fantastic museum that I wished I had more time to tour. After the reception, I joined Carmen and several other members of AGFOA at a dinner event that evening.

Tuesday, November 14th Tuesday was another early start and full day at AGFOA. Sessions started at 8:45 and ran the entire day. During lunch, AGFOA held its annual business meeting, and the three out-of-state presidents (CSMFO, Oregon Government Finance Officers, Washington Finance Officers Association) addressed the attendees.

Having provided an update on CSMFO activities and our webinar series the prior day, I used my time to poke fun at myself for forgetting the scholarship check, and to present Carmen with her gift. At the CSMFO conference in Sacramento, Carmen set a high bar with the gift she presented me, which was a picture of the Northern Lights. I had to make sure I properly reciprocated, and luckily for me I have a very talented photographer working in our Finance Department.

Angie Robertson, our photographer extraordinaire, had one of her photographs of the Yosemite Firefall put onto canvas and framed nicely. It was very special for me to be able to present a gift that was a product of someone that I work with each day, and Carmen really liked it.

Saturday, November 11th At 9:00 pm the night before my departure, I realized that I forgot the scholarship check. I’m responsible for showing up at these conferences with two things: a gift for the host president and a check from CSMFO for that association’s scholarship fund. I sent CSMFO Executive Director Melissa Dixon a text informing her of my poor planning, and she arranged for a check to be mailed.

Fortunately, I at least partially made up for it by showing up with a thoughtful gift for AGFOA President Carmen Randle, which I will cover in more detail later.

Sunday, November 12th I left San Jose that morning, flew into Seattle and then to Anchorage, arriving mid-afternoon. After getting settled at the Hotel Captain Cook, a historic downtown hotel that covers an entire city block, I took a brief stroll before returning to the hotel to meet Carmen, the AGFOA Board, and other guests for the President’s Dinner, which was at a nice restaurant just a block away. It was a great event and nice to get a chance to meet and interact with AGFOA’s leadership, and it was a good opportunity to give Carmen a heads up that I forgot the scholarship check so that I didn’t surprise her with that news on Tuesday.

Monday, November 13th The conference started first thing Monday morning, and unlike CSMFO, where there are general sessions for all conference attendees and then concurrent sessions on various subjects, the AGFOA conference was held in one room of the hotel. The reason for that is the attendance was approximately 80 people, including sponsors and exhibitors, which I was told was about average for the conference. For a small conference, the content was pretty impressive, including two budget-related sessions led

by John Fishbein from GFOA on Tuesday. For me, it was really interesting to learn about local government finance in Alaska and how different it is from California, particularly some of the challenges they face with their revenue streams. I even got into the act late in the day, as Carmen asked me to give a brief presentation on our webinar program, which we opened up to AGFOA in 2017.

Tuesday ended with the traditional evening banquet event, which was held at one of the restaurants at the hotel. It was a lot of fun and a great opportunity to meet and interact with other conference attendees, as well as with my fellow association presidents.

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Wednesday, November 15th The conference officially ended Wednesday at noon, but unfortunately I had to catch an early flight out of Anchorage (6:00 am!) to ensure I could get back to California on time for a meeting I had that evening. I hated missing out on the last part of the conference, but I did have to get back.

perspective

GAINED

The AGFOA conference marked the last conference I attended as President representing CSMFO. I must say that the opportunity to represent our organization at conferences has been one of the major highlights of my year as President.

Getting to travel to Oregon, Washington, and Alaska, not to mention a trip down to Newport Beach to attend CMTA, was a great experience and a lot of fun. It was also a great opportunity to learn from the other associations on how they manage their respective conferences. In fact, I picked up conference practices from both Oregon and Washington that were so good that I requested Board approval to implement them for CSMFO. I am very grateful to have had the opportunity, and I am looking forward to seeing the other association presidents at our next conference in Riverside.

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Final Thoughts This is my final message as your President. It has been a true honor for me to serve this organization and its members over the past year. CSMFO is an amazing organization, and over the last year, my respect and admiration for it has grown as I have seen it operate from the perspective of the President. From the tremendous professionalism of our association manager, Smith Moore & Associates, to the dedication and hard work of our volunteers, to the passion and engagement of our members, CSMFO continues to inspire me to strive to do great things for our profession. You’ll be in excellent hands when President-Elect Margaret Moggia takes over the reins in February, and I will very much look forward to continuing to contribute in my new role as Past President.

Contact us today to learn how we can help you succeed.

Seth Hedstrom, Senior Manager shedstrom@berrydunn.com berrydunn.com

And finally, thank you all so much for the opportunity to have served you as your President.

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EXECUTIVE DIRECTOR’S LETTER Melissa Dixon

10 Years Of Pride The 2018 Annual Conference in Riverside will be my tenth with CSMFO. TEN CONFERENCES! Where has the time gone? You hear stories about people being with organizations for 10 years and it seems like such a long time…and then you’re with an organization you love and 10 years go by in a blink. It’s rather like raising children in that way.

My first conference with CSMFO was San Francisco in 2009.

We had less than 700 attendees. While I obviously don’t have final attendance numbers yet for Riverside, our conferences now well exceed 1000 people.

We’ve also made significant strides in terms of membership in that time. When I started with CSMFO we had under 1300 members, and now we’re over 2200. Our total assets have increased from $350,000 to $1.4 million.

Frankly put—CSMFO has grown immensely since its decision to utilize Smith Moore & Associates (SMA) for its management, and me specifically as its Executive Director. While the credit for this success lies squarely in the hands of the dedicated, passionate and steadfast volunteers, I like to think SMA has helped. That we’ve taken the operations of SMA and made it possible for the leadership to think beyond the day-to-day to a dream of what CSMFO could provide to this profession.

I’m very proud of this organization, and my role in helping it flourish. As I go into my tenth year with CSMFO, I want to wish you all a Happy New Year. Whether you’re on the Board, running a chapter, on a committee or merely a member accessing the benefits, may you find participating in this society as rewarding as I do. I look forward to seeing you in Riverside, and at the next 10 conferences to come!

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10 YEARS OF CSMFO CONFERENCES 2009

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2011

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2015

2016

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PRESIDENT ELECT’S LETTER Margaret Moggia

Operation: Success As we approach the 2018 Annual Conference in Riverside, the final details are being put into place to welcome the over-1000 government and commercial members to four days filled with activities like golf and tennis, dynamic keynote speakers, 60 conference concurrent sessions, over 80 exhibitors to share their ideas and bring us solutions, and opportunities to connect with your peers throughout the conference. I am so blessed to have the dedication of so many individuals to make this happen.

To begin, the staff – thank you Teri, Janet, Candy, Melissa, Marisa and Harriet. Each year you amaze with your ideas and solutions to capture the theme and work the conference logistics.

To the Host Committee – Anna, Brent, Carrie, Danielle, David, Ernie, Laura, Mark, Melissa, Scott – thank you for your energy to help plan for all the details from scholarships, Thursday evening at the Mission Inn, CalPERS actuarial meetings, the activities, and even the conference theme. And finally, thank you to the Program Committee – Ronnie, Laura, Jimmy, Mary and Viki. Wow, 60 concurrent sessions across five different tracks. We are rich in content from our educational partners from government members and commercial members.

In the role of President-Elect, I also have the distinct pleasure to lead the strategic planning session with the CSMFO leadership in October. Building on the strategic plan that was led by our current president, Drew Corbett, at last year’s planning session, we started the day reviewing our successes and then dove into four key areas for the organization – chapter engagement; advocacy and what is our role; examining our committee structure; and engaging the next generation of CSMFO members. I love strategic plans because I believe our strengths come from reaching and achieving these goals. It provides us the opportunity to fund and allocate resources to move the organization forward. And when the goals need to be revisited, we do. After all, this is the theme for the 2018 Conference and beyond – Mission: Possible: collaborate, innovate and achieve.

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Finally, I’d like to take this opportunity to extend my appreciation to Drew Corbett, our 2017 President, for his leadership this past year. From a successful conference in Sacramento, leading the efforts to connect with our peer associations, to being CSMFO’s spokesperson this past year.

Thank you for your dedication. Also, thank you to our current Board members whose time concludes in February – Past President John Adams, Director Brent Mason and Director Karan Reid. Thankfully they will still remain active in 2018.

INSIDE CSMFO

Get Involved with CSMFO! Are you looking for a new or different way to participate in CSMFO? Volunteer to be an award program reviewer or an award program presenter, or both!

Award Program Reviewers Award program reviewers are a vital part of the CSMFO Award Programs. Every year, CSMFO receives over 100 award applications, submitted by your fellow members and local governments, for review and award consideration. Award program reviewers evaluate each submission to determine if it qualifies for an award. Award program reviewers receive one submission to review at a time. Most of our submissions are budget documents, reviews generally occur from October through December, and a review usually takes one to two hours to complete.

Don’t think you have the experience to be an award program reviewer? Don’t worry – the Professional Standards and Recognition Committee will provide you with the tools and guidance to help you through the review process. As an award program reviewer, you also get exposure to different local government documents and best practices, as well as the ability to connect with other award program participants.

Become an award program reviewer today! Contact Yolanda Rodriguez at yolanda.rodriguez@bcvwd.org.

Award Program Presenters CSMFO coordinates award presentations for the CSMFO Budget and CAFR Award Programs, as well as the GFOA Budget and CAFR Award Programs. CSMFO is looking for volunteer award presenters to make presentations for local governments who receive these awards.

Don’t know what to say? Don’t worry - a presentation script is available for award presenters to use. Your participation will allow many more award recipients to receive an in-person presentation. Be a part of this newly re-engineered award presentation program. Help provide recognition to CSMFO members’ reporting accomplishments by presenting to their elected officials.

Become an award presenter today! Contact Juliana Demers at jdemers@elsegundo.org.

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INSIDE CSMFO

The 2018 CSMFO Conference Plan Your Mission For Success The CSMFO Annual Conference is right around the corner!

Plenty of insightful and valuable learning opportunities will be available along with a variety of innovative dining and networking options. In order to maximize networking opportunities and facilitate a conference jam-packed with content, CSMFO will be offering flexible lunches for conference attendees. Take advantage of our new format by setting up networking meetings in advance of the conference or simply feel free to walk around, enjoy the ambiance and relax without a set lunch program!

Tuesday, February 20th – Pre-Conference Activities – Learn and Play There’s something for everyone at the pre-conference events in 2018. Come a day early, learn something new or grab your racquet or clubs and meet new peers.

• Innovative, all-day learning opportunities: Neil Kupchin’s “Successful Leadership Skills for Finance Directors” session; Phil Bertolini, CIO/Deputy County Executive, Oakland County, Michigan and Terry Hackelman, Managing Principal, NexLevel Information Technology, Inc. interesting presentation, “Mission Critical – Getting Through a Successful ERP Implementation” or 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 topical session “Rates 101: The Fundamentals of Conducting a Water and Wastewater Rates Study”.

• Bank of the West Tennis Mixer: Notice the word “Mixer”.

This event, to be held at iTennis Riverside at Andulka Park from Noon to 4:00PM, provides a fun afternoon for tennis players of any level, from beginner to expert.

The hired tennis pro will work with each participant and provide an expert assessment on your partner assignments that afternoon. The goal: a great afternoon with friends playing tennis, socializing and networking.

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• Annual Golf Tournament: Always a great way to start the week. Why not sign up for this fun and relaxing event to be held at 10:30AM at the Victoria Country Club? (Please note the venue change from our last article.) Meet new people, spend a great day outdoors swinging the clubs and maybe you’ll walk away with some hardware for your efforts.

Wednesday, February 21st – The Conference Begins!!

You may want to set the alarm clock because this year our conference starts at 9:00AM. The day kicks off at the Riverside Convention Center with a full Breakfast, General Session and Keynote Speaker (the always energetic Carey Lorenhz).

This begins a full day of learning, networking and unique dining options to please every palate. Highlights for today include over 20 concurrent sessions to choose, and a chapternetworking on-the-go Protein Bistro Box (think the infamous Starbucks protein box!). There will be seating throughout the convention center. Take it outside on the patio and network with your colleagues while getting some fresh air and sun! The day closes out with a first-time attendee reception followed by the “CSMFO Allies: Vendor Reception”.

Thursday, February 22nd – Learn By Day, Play By Night The day begins with a Full American Breakfast at 7:30AM in the Exhibit Hall at the Riverside Convention Center. This will provide you the fuel needed to take on what is sure to be a fulfilling and fun day for everyone. Following breakfast take part in your choice of over 35 Concurrent Sessions held throughout the day, complimentary coffee and dessert breaks and a “Walk Around Lunch” in the exhibit hall. Mingle with your associates and check out all that our exhibitors have to offer and work on filling out the scorecard for this year’s Exhibit Hall Game. As always, great prizes await the winners of this scavenger hunt favorite.

Friday, February 23rd – It’s a Wrap!

The day begins with a Breakfast, General Session and Keynote Speaker (Chris Thornberg’s engaging view of the economy) followed by your choice of 5 Concurrent Sessions. After a quick break, we’ll close out the conference with our third and final General Session and Keynote Speaker (the captivating Simon T. Bailey) along with the exhibit hall prize drawing. We will provide complimentary smoothies and snacks so you won’t be going home hungry!

Trusted .

I n n o va t iv e.

C o mprehensi v e.

WILLDAN

At this point you’re thinking “Thursday night event”. Enough said. We’ve all come to expect something extraordinary on Thursday night and this year’s program keeps that CSMFO tradition alive. Don’t miss the roving dinner party—a food extravaganza that will be happening at Operation: Explore Mission Inn. We’ll pretty much have the entire historic Mission Inn to ourselves so you’ll be free to explore every interesting and unique nook and cranny in the hotel, enjoy plenty of musical entertainment, and feast your taste buds on culinary cuisine from around the globe as you visit our delectable hospitality rooms! From Spanish Cheeses, Charcuterie and Paella in the Spanish Art Gallery, Barons of Beef and Crepes in the Grand Parisian Ballroom, a Pasta Station and Tiramisu in the Italian-themed Galleria/Atrio Courtyard and Ahi Tuna and Shrimp Kimonos in the Ho-O-Kan room, we’ll have it all! Not to mention beverages to go along with it, including champagne, sangria and more. There will be something for everyone to enjoy! Eat your heart out.

This year’s Conference is sure to impress on every level. From the innovative program and dining options to the engaging keynote speakers and onto an epic Thursday night event – This is one conference you won’t want to miss!!! Be sure to register soon and check out the conference website for more details on your great event - http://conference.csmfo.org/

www.willdan.com 15 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

Budgeting Out of Bankruptcy…

Written By Brent Mason

Brent Mason, Director of Finance, City of San Bernardino

As I started to write this article, I thought I would be writing something “more technical”, but as I began thinking this through, I realized there’s nothing “extra technical” about budgeting out of bankruptcy – no different than any of us do every budget cycle. It was really more of a human interest story – kind of a peek “behind the curtain” into the City of San Bernardino…which is what I got to do when I joined the City of San Bernardino in April of 2016.

Since then, I’ve done two budgets for the City…the first, FY 2016/17, was completed in about five weeks just after I started, while trying to get a foothold in the world in which I had just entered. Then for the FY 2017/18 budget, which was largely a rollover budget, we completed it as we simultaneously pushed the “done” button on bankruptcy. Effective June 15, 2017, we were out and I had my next budget!

But what was next…

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Speaking budgetarily, “next” meant hitting the “restart” as we made decisions about developing the operating budget for FY 2018/19. Through the bankruptcy, the City reinvented itself in many significant ways. The Fire Department was annexed into the County Fire District. The City now avoids a significant annual cost for providing fire service. But it comes with complicated property tax agreements that drain all of the ad valorem based property taxes and one-third of the VLF in-lieu dollars as well. Additionally, the Refuse operation was sold to a local service provider. Healthy upfront revenues were generated that funded much of the “one time” costs associated with the bankruptcy process; and the annual revenue stream from franchise fees was going to grow substantially, as well as other specialized revenues that address residual obligations.

Both key restructuring strategies were very helpful to breathe new fiscal life into the challenges facing the City. But when I dug deeper, I also discovered these two significant operations that were no longer a City responsibility, had also historically absorbed a significant share of the allocated fixed costs for things like the IT department. Those costs, largely unchanged, now had to be shared over a smaller operational base. This offset some of the restructuring revenues discussed above.

Additionally, while the PERS obligation for the Fire Department would not get any larger because it was annexed to the County Fire District, the unfunded component stayed with the City, and a smaller, leaner City organization will have to carry that cost until fully funded in the future. Though accounted for in the long term financial model, this cost is ever-changing as PERS continues to ratchet up our rates via their actuarial processes.

If successful, this will be a good year for the City of San Bernardino. There is so much to do, but the City is staffed with good folks ready to move forward to write a new storyline for the City. Between the five years of recession, followed by the five year bankruptcy process, it’s been a long and difficult road. But there are good things ahead for the City of San Bernardino. Managing the budget development process for the FY 2018/19 operating budget in this exceptionally detailed, “zero-based” manner will well-serve the Mayor and City Council and, we trust, provide some initial resources to get this municipal train moving down the tracks!

Now as we face the beginning of the development of the FY 2018/19 budget, with bankruptcy essentially in our rear view mirror, a balanced “rollover” budget can NOT be the goal.

The City of San Bernardino has huge unfunded needs – both deferred operational and capital costs that must be met as we move forward – and again, balanced budgets for the current service level will not get the job done.

As we have strategized about how we must approach the new budget development process, we found that the only solution is to go back to square one and rebuild the baseline budget from the ground up. We realized we don’t know what our “new” baseline budget ought to be for the organizational structure that is the new City of San Bernardino. So on Thursday, December 14th, with strong support from the City Manager’s Office, we told the city departments that they were going to have to justify/support/explain the dollars in each account with thorough explanations that will satisfy the City Manager’s rigorous review of that detail. My summary comment to them was “This is going to be a lot of work!!”

Brent graduated from Biola University with a Bachelor’s degree in Accounting. He spent four years in public accounting, primarily with Price Waterhouse Coopers. He has worked for the City of Rialto as the Assistant Finance Director, the City of Riverside for 22 years starting as Controller and ultimately Finance Director/Treasurer. In 2016, Brent transitioned to the City of San Bernardino as the Director of Finance and has been there nearly 2 years. He manages all the typical finance duties, but has the additional responsibility of managing the fiscal affairs as the City moves out of bankruptcy. Brent has been married for 27 years and is the father of 12 children, 8 of which have been adopted. He and his wife advocate for adoption - particularly children with special needs.

At the end of the day, San Bernardino, like many other cities, may very well have to explore additional revenue solutions to meet the challenges the future holds. But one thing was obvious as we considered the future conversations with our citizens on this issue. We have to be able to look them in the eye and confidently assert that we have scoured through all of our expenditure activity to find the places where we can avoid costs – either inefficiencies, duplications, programs no longer aligned with City Council’s goal, etc. That is what the FY 2018/19 budget development process for the City of San Bernardino is going to look like.

Our hope, and probably expectation, is that based on our roughly $120 million General Fund operating budget, we will be able to identify 3-4%, or $4 or $5 million that can be reprogrammed to other, higher priorities. That will become the initial funding available to explore new opportunities or expand existing services aligned with City Council priorities.

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FEATURED ARTICLE

Cost Allocation Plans, Fee Studies, and Bears! Oh My! Written By Richard Lee

Background

Richard Lee, Director of Finance City of South San Francisco

In 2013, I was hired as the Financial Services Manager for the City of South San Francisco. I came from an agency that had just completed a Cost Allocation Plan (CAP) and Fee Study, so the process was still fresh in my mind.

In South San Francisco, I discovered that a CAP and Fee Study had not been completed since 1999, well in excess of “best practices.” Given the amount of time that had elapsed, I believed it to be an appropriate time to consider updating the CAP and User Fees.

However, the City was still recovering from the Great Recession, and the City Council had no political appetite for fee increases.

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In 2015, I was appointed as the Director of Finance. As a new director, one of my main objectives was to ensure that the City aligned with best management practices, and updating the City’s user fees was the first priority. The first task was to discuss the process with the City Manager, explain the justification, and move forward once they had garnered support from the City Council. The primary purpose of the CAP and Fee Study was to provide a current and accurate depiction of what it cost the City to provide the services associated with its user fees, the related cost recovery and the “hit” to the general fund.

The Process The City selected NBS as its consultant to prepare the CAP and Fee Study given their extensive experience and expertise.

NBS conducted comprehensive interviews with each operating department and went through several iterations, based on feedback from the City, to draft the user fee cost recovery analysis. Given the amount of time that had elapsed from the last user fee study, the full cost for many of the City’s fees was significantly higher (no surprise there!) in comparison to the current fee. While the increase in certain fees resulted in a bit of sticker shock for our Council, a comparison of proposed

user fees for common residential and commercial developments provided context and addressed the Council’s concerns that the proposed fees were “reasonable”. The City Council also factored in NBS’ cost recovery analysis that indicated the City was subsidizing a phenomenal $8.3 million in annual service costs related to user fees, which resulted in a cost recovery rate of just 57 percent.

The Benefits & Best Management Practices The low cost recovery percentages highlighted the importance of conducting a comprehensive fee study every three to five years. Granted that a Council can typically adopt CPI adjustments in the intervening years, frequent user fee studies ensure that the City is in compliance with Propositions 218 and 26, and align its costs with its user fees. Frequent user fee studies also provide City staff with an educational opportunity to understand basic elements of the process, including the fully burdened hourly rate, productive hourly rate, time measurement for each user fee, and the cost recovery rate. An important benefit of such efforts can be improved budget-making, as proactive discussions on efforts and cost-recovery will inform the overall budget process.

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Establishing a current CAP and Fee Study also provided the opportunity to discuss and set a cost recovery policy. Such policy discussions should ideally occur before any new fee study effort. In addition, education and outreach are both critical for the success of any such efforts. For South San Francisco, the City Council ultimately approved the proposed amendments to the City’s user fees, which increased the cost recovery rate to 81 percent, increasing projected revenues from user fees from $10.9 million to $15.6 million.

Lessons Learned

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.

Looking back, I would have changed the timing of the user fee study to conclude at the end of April. This would have accounted for the 60-day requirement regarding developmentrelated revenues, and better aligned user fee budget revenue assumptions with the upcoming fiscal year.

Further, I would have set the expectation with the City Council prior to beginning the CAP and Fee Study that the Parks and Recreation Department user fees cost recovery would be evaluated and presented on a program basis as opposed to a per-fee basis. Given that Parks and Recreation user fees are largely market driven, local government agencies typically present cost recovery rates on a per-program basis. As a follow up to the user fee study, NBS will be reviewing Parks and Recreation programs that had a cost recovery of 70 percent of less, and providing the City Council with a cost recovery analysis on a per fee basis for those specific programs.

• Governmental Accounting • Intro & Intermediate Budget • Revenue Administration • Debt Administration • Capital Improvement Program • Treasury Management • Internal Controls • Purchasing • Human Resources For Government Officials

Go forth, seize the moment, and get your city or district thinking about costs and fees!

Richard Lee is the Director of Finance for the City of South San Francisco. He has served as Chair of the Peninsula Chapter since 2016, was one of the Vice Chairs for the Career Development Committee for 2017, and has been elected to represent Northern California on the CSMFO Board beginning in 2018. He balances his spare time between his two sons, wife, and freelancing as bass trombonist in the San Francisco Bay Area. Richard has performed with Barbra Streisand, Peter Cetera, Bernadette Peters, the San Francisco Opera Orchestra, and Disney’s Lion King musical.

www.georgiacenter.uga.edu/govfinance/GFR 19 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

Enhancing the Budget Process with Multi-Year Budgeting and Unfunded Needs Assessment Written By Scott Catlett

Scott Catlett, Finance Director and City Treasurer, City of Yorba Linda

For those of us who lived through the financial crisis struggling to balance shrinking General fund budgets, it may seem difficult to imagine that most of us are experiencing sustained revenue growth. With that growth comes an opportunity to increase service levels and add programs, and an obligation to be mindful of our current unfunded needs and known future cost increases, many of which may compete for resources with those prospective additions to the budget. Multi-year budgeting and financial planning is an important tool today more than ever to evaluate and address these challenges.

with details on each unfunded need and a recommended strategy for prioritizing and addressing each item in the years ahead.

Some key takeaways from our unfunded needs assessment process included: • Engage experts, such as your actuaries, as a critical component of accurately modelling the impact of different strategies to address your unfunded needs.

• Think long term. We looked out 30 years in the future to analyze what our needs will likely be, particularly in the area of facilities replacement. While our budget and financial plan may cover a shorter timeframe, that longterm perspective is invaluable.

• Prioritize needs and maintain flexibility. We developed priorities with our City Council as to what unfunded needs should be addressed first, and then adopted a flexible policy for how they would be funded in the future through operating budget appropriations and year-end surpluses.

While acknowledging that these needs are important, the policy also recognizes that there may be years where other budget priorities will take precedence.

Unfunded Needs Assessment Our process began with assembling a comprehensive inventory of unfunded needs with our City Council’s direction.

These include unfunded pension and OPEB liabilities, unfunded capital improvement projects, and validating the adequacy of reserves for selfinsurance and the replacement of facilities, vehicles, and equipment.

While most agencies, Yorba Linda included, do not currently have the resources to fund all of these items at the ideal 100% level, knowing what your agency’s needs are is the first step to developing a long-term plan to reach the necessary 100% funding. We also found that our needs assessment process brought to light some opportunities for operational changes that could significantly reduce these liabilities, such as negotiating new OPEB benefits and evaluating the necessity of some unfunded capital improvement projects that had been included in the capital improvement program for a number of years. With a comprehensive inventory in hand, we presented a report to our City Council

Multi-Year Budgeting Yorba Linda has had a two-year budget for many years, which has allowed both the staff and the City Council to be forwardthinking in budget decision making. While we acknowledge that revisions will be needed for a variety of things (labor agreements, contract renewals, etc.), we project the cost of those items in the second year of the budget based on historical knowledge and any known changes anticipated for the future.

As a result, staff have a good idea what the budget will look like two years into the future, and departments can take a longer view in planning and prioritizing their spending. For the City Council, the two-year budget facilitates an early dialogue regarding policy and financial priorities for the second year of the budget, well in advance of the actual spending taking place.

Some key takeaways from our multi-year budget process include:

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• The second year of the budget is a more detailed version of a long-term financial plan. A “mid-term” budget review at the end of the first year, which brings recommendations to your governing body for adjustments and enhancements to the second year of the budget as originally adopted, should be expected.

• The second year of the budget provides a good opportunity for staff and the governing body to prioritize their needs, with the more critical requests funded in the first year and others (which may ultimately evolve or be withdrawn) moving to the second year.

that the forecasts are comprehensive and account for all currently known information. Having multiple scenarios makes known what could happen, in addition to what we think will happen.

• Updating the forecast as new information comes to light, rather than only once per year, can be easier in the long run. While the forecast may not be shared more often than during budget season, it’s always good to think about the impact of new information as it is received while it is fresh in your mind.

• The detailed effort of producing the second year of the budget often brings to light issues that merit additional review and attention, which otherwise may not have been identified until the following year in a traditional single year budget process.

Long-Term Financial Planning

Next Steps

Long-term financial planning serves as a less detailed extension of a multi-year budget. If you are thinking about investing the time in a multi-year budget, consider developing a long-term financial plan at the same time. In our case, we project out five years, but some agencies include 20 years or more of projections in their forecast. Regardless of the number of years included, what’s critical is thinking about the big picture issues that we all are facing today such as unfunded needs, rising CalPERS rates and revenue trends that may impact future service levels. Just like the second year of the two-year budget, the five-year financial plan is primarily of value to staff and the City Council because it supports a thoughtful discussion of the issues that are or will likely be facing your agency in the years ahead. Without good data, it would be impossible to make thoughtful budget decisions today with an eye toward their relationship with anticipated future revenue and expenditure trends.

If you are thinking about incorporating one or more of these enhancements into your budget process, GFOA’s best practices and related materials on multi-year budgeting and financial planning, which you can find on their website at http://www.gfoa.org/best-practices, are an invaluable resource. Additionally, the California Municipal Fiscal Health Diagnostic is an invaluable tool to assess areas for improved financial management practices in your agency (or to validate that you are already on the right path). We used this tool to complement our unfunded needs assessment, which helped us to demonstrate to our City Council that we were on the right track. It also highlighted several areas where changes to financial management practices could be beneficial. You can find out more about the Fiscal Health Diagnostic on Michael Coleman’s website at http://californiacityfinance. com/#MANAGING.

Some key takeaways from our five-year financial planning process include:

Scott Catlett is the Finance Director and City Treasurer for the City of Yorba Linda, California. He has been an active CSMFO member for over 10 years, and is currently serving his first year as an elected member of the CSMFO Board of Directors. Scott is a past Chair of the CSMFO Career Development Committee, Professional Standard & Recognition Committee, and Inland Empire Chapter. He has been a California government finance officer since 2006, following previous work as a consultant to state and local government. Scott received a Bachelor of Science in Finance from the A. B. Freeman School of Business at Tulane University and a Master of Public Administration from California State University, San Bernardino, where he currently serves as an adjunct instructor in the MPA Program teaching courses in government financial management and budgeting.

• Important trends can be lost in the detailed numbers, so it’s important to highlight key issues to your governing body to ensure that they are aware of those future concerns now, even if they are several years in the future.

• There is value in including multiple scenarios in your forecast, such as an expected scenario as well as scenarios assuming lower and higher revenue growth.

Obtaining the assistance of outside revenue consultants is money well spent that can reassure your governing body

21 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

Future of the CalPERS Train Written By Tim Przbyla

Tim Przbyla, Finance Director, City of Madera

Because these cities and districts vary greatly in size, the dollar amounts of these increases also vary considerably. However, the cumulative percentage increases show a rather common upward trend. It should be noted that CalPERS assumes a 3% annual escalation in salaries for their contribution projections.

I recently completed a survey, asking participants on the CSMFO list serve to plug their CalPERS Valuation information into a spreadsheet that projected their future CalPERS contributions. I have included the information from those who responded.

I also selected various other cities for which I pulled their information and added them to the survey results.

Although there seemed to be a range of percentage increases and some weird fluctuations (primarily related to differing UAL (Unfunded Accrued Liabilities) contribution requirements), it became clear that we all are headed for large increases to our CalPERS contributions over the next seven years. Here is a graph of the results, which shows the cumulative percentage increases from Fiscal Year 17/18 to 24/25:

The chart above includes the same 3% assumption.

As can be seen above, the projected increase through Fiscal Year 2024/2025 range from just over 40% to slightly over 120%. Excluding the four of five outliers at the bottom, most cities or districts are looking at increases ranging from almost 80% to almost 121%. The information can also be seen in table format on the next page.

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The question that we are all facing at this time is: How will we deal with this large increase in benefit costs over the next several years? With the projected cost increases through Fiscal Year 2024/2025 ranging from just over $227,000 for the City of Hughson to over $79.3 million for the City of Sacramento, the impact on all of us is going to be challenging! It merits a thorough review of our respective budget forecasts and costcutting measures for those of us whose revenues will not be keeping up with expenditures.

As I’ve pondered how we might be able to gain control of this run-away train, I’ve asked why isn’t anyone doing something about this? *PEPRA is a step in the right direction, but probably will not get us to where we need to be. Why can’t we phase out defined benefit plans at some point in time and move CalPERS to defined contribution plans. The contributions could still be substantial. But, the investment risk would shift to the employees and result in predictable and sustainable benefit

Thus it appears, when the cases are considered together, that an employee may acquire a vested contractual right to a pension but that this right is not rigidly fixed by the specific terms of the legislation in effect during any particular period in which he serves. The statutory language is subject to the implied qualification that the governing body may make modifications and changes in the system. The employee does not have a right to any fixed or definite benefits, but only to a substantial or reasonable pension. There is no inconsistency therefore in holding that he has a vested right to a pension but that the amount, terms and conditions of the benefits may be altered.

costs, over time. I thought that, with advance planning, we could protect the benefits that have accrued through a certain date and then only provide for defined contributions from that point forward. Wasn’t that a possibility?

So, I took that thought to a very well-respected authority on this matter, Mr. John Bartel, President of Bartel Associates, LLC. His initial response was that it’s incredibly unlikely the courts would allow moving current employees from their current defined benefit to a defined contribution (DC) plan. I could understand why it would not be possible to take away the benefits that were promised for past years of service. But, I asked John if it could not be possible to honor that commitment and let CalPERS employees accrue defined benefits up to a certain point in time and then switch to a defined contribution plan for future service of all CalPERS employees. John indicated to me that it certainly is possible, but highly unlikely for the following reasons:

“And the California Supreme Court stated in Allen v. City Of Long Beach (1955): An employee’s vested contractual pension rights may be modified prior to retirement for the purpose of keeping a pension system flexible to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system. Such modifications must be reasonable, and it is for the courts to determine upon the facts of each case what constitutes a permissible change. To be sustained as reasonable, alterations of employees’ pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages. [citations omitted]

1. For the last 60 years attorneys have said the California rule prevents current employees of public agencies to have their future benefit accruals be calculated under a lower benefit formula.

2. The California Supreme Court might say, for the last 60 years we have just been kidding about the California rule, you can change future benefits.

3. The cases before the Court address service purchase and compensation used to calculate benefits, they do not specifically discuss benefit accrual formulas.

“Does moving from a defined benefit approach to a defined contribution approach for future benefit accruals fit under this standard? Perhaps – it may depend on the level of employer contributions under the defined contribution plan and the plan’s demographics.”

4. If the Court says you can change service purchase or compensation then we will have another court fight to see if they also say you can change ancillary benefits that you could also lower future benefit accruals.

So, we can see where the train is heading and we know the constraints that PERL places on CalPERS benefits. Most cities can also see that projected revenues are not likely to keep up with the rate of these benefit cost increases. If you add to that the possibilities of a downturn in the economy in the next few years and a further CalPERS reduction of the discount rate, the picture becomes much worse. Perhaps such negative changes would push many cities into bankruptcy and force the hand of the California Legislature to provide some kind of relief from PERL. Let’s all hope that it doesn’t go that far! As we begin this New Year, let’s take a close look at our budget projections and hope for the best but prepare for other possible outcomes of the future.

5. If the Court says you can change service purchase and compensation used to calculate benefits and they then also say you can change future benefit accruals the Legislature would have to change the PERL [Public Employees’ Retirement Law] to allow those changes. Its one thing to say you can do it, it’s something else to have the PERL provide you a path to actually do it.

6. I understand the PERL requires all employees in the same classification (Miscellaneous, Police, Fire) at an agency either participate or not participate in CalPERS. Since CalPERS does not offer a DC plan that means you can’t, without withdrawing from CalPERS, have future benefits provided through a DC plan.

The combination of all of the above led John to say “of course it’s possible, just highly unlikely that all the stars will align.”

John asked that I specify that he is not an attorney, these comments are just his opinion, and you should consult with an attorney if needed, rather than rely upon his opinion. So, I did reach out to an attorney, who thought that John and I have hit the nail on the head and provided further information.

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 for Wilcox, Hokokian and Jackson, before getting into municipal finance. He currently serves as the Chapter Chair of the South San Joaquin Valley Chapter. Tim also serves as the President of the California Affiliated Risk Management Authority (CARMA). He has also served as the President of the Central Valley Risk Management Authority in the past, and is currently serving on the Executive Committee of the CSJVRMA and chairs the Administration and Finance Subcommittee and the Investment Subcommittee for the CSJVRMA. The most dangerous assignment that Tim has recently accepted is that of Official Photographer for the upcoming CSMFO Conference. He’s sure to be capturing photos of you, there. So, be sure to smile a lot!

The attorney that I contacted was Ken Ruthenberg of Employee Benefits Law Group (www.seethebenefits.com). He had the following comments: “The courts are going to have to address this issue, especially whether they’ve been interpreting the California Constitution’s contract clause incorrectly all these years. Absent such an admission by the California courts, moving from a defined benefit approach to a defined contribution approach poses the question of whether doing so violates the law as currently interpreted. Maybe not. The courts do not necessarily prohibit every change to a pension system. For example, the California Supreme Court stated in Kern v. City Of Long Beach (1947):

*PEPRA: Editor’s note ( California Public Employees’ Pension Reform Act (PEPRA) took effect January 2013.

23 CSMFO MAGAZINE JANUARY 2018

INSIDE CSMFO

CSMFO Shines a Spotlight on...

Lauren Lai

Finance Director, City of Marina

Interviewed By James Russell-Field

Tell the readers a little bit about yourself.

James Russell-Field, City of Thousand Oaks

Lauren Lai, Finance Director, City of Marina

CSMFO vision, provide relevant topics, enhanced membership and build more professional relationships. I truly recommend getting engaged with CSMFO!

A1 – My name is Lauren Lai and I have been the Finance Director for the City of Marina since 2009. Prior to that, I worked at the City of Capitola for almost seven years, as Finance Director for five of those years. Prior to that, I worked in the Silicon Valley for a start-up tech company CenterBeam as a finance manager, Hewlett Packard as a senior analyst and Arthur Andersen LLP as financial auditor, where I obtained my CPA license.

Q3 – What have you worked on in the last month?

A3 – In the last month, I worked on the Standard and Poor’s (S&P) rating for the City of Marina. After successfully resolving the City’s financial deficit and stabilizing its financial position, S&P upgraded the City’s credit rating. This has been a tremendous journey since I joined the City of Marina with a 25% structural financial deficit.

Q4 – What aspect(s) of your job do you enjoy the most?

A4 – As a city finance director, I enjoy contributing to society and building communities. More specifically, I enjoy working with people, leading in a way that encourages engagement, and creatively developing solutions to complex problems. My job allows me to be a technical, critical thinker, and also be a people-person.

I am very passionate about serving the public and it’s a strong calling shaped by my immigrant background.

When my family fled Vietnam in 1979, stayed at a Hong Kong refugee encampment for ten months, and came to America in 1980, that was the profound foundation for my understanding. Even at my young childhood age, that made a lasting impression of corrupt versus good governance, community volunteerism, compassion and engagement, and the true value and saving grace of what good communities can do to people’s lives. Now, I am so honored to be a part of the community fabric we call local government and making a difference to help others.

Q5 – What has been your favorite project in your career?

A5 – One of my favorite projects was implementing a new ERP system (financial, human resources and payroll). This project enabled us to streamline city procedures, convert to a paperless finance organization, improve customer service and strengthen our budget management. It was a very challenging project that pushed many of us outside our comfort zone and gave many employees the opportunity to exercise their intellect and leadership skills. It was a very successful project.

Q6 – What is the most challenging situation you’ve faced in your career?

Q2 – When and why did you first join CSMFO (and what has been your experience)?

A6 – The most challenging situation I’ve faced in my career has been resolving the City of Marina’s 25% financial deficit.

That included orchestration of strategies especially economic development and successful tax measures, facilitation of stakeholders, building public trust, maintaining financial discipline, and establishing an organizational culture based upon sustainability.

A2 – I joined CSMFO in 2002 when I transitioned to the public sector from the Silicon Valley high-tech industry.

CSMFO provided educational training, public sector insights and networking opportunities. I continued my membership since then and in 2013 I became co-chair of the Monterey Bay CSMFO Chapter. The past four years as co-chair has been tremendously rewarding to directly contribute to the

Q7 – What are some of the important issues you foresee in the future of California finance?

A7 - Some of the issues I foresee in California include failing infrastructure, unfunded pension and medical obligations, staffing succession planning, and inflexible tax and revenue structures.

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Q8 – What do you enjoy outside of work?

A8 – I thoroughly enjoy surfing and usually try to catch the waves during the week before sunrise. Santa Cruz is world famous for its surf breaks and the Monterey Bay is a sanctuary teaming with marina life. When my husband and I are not surfing, I also enjoy walking our Portuguese water dogs Sofi and Angel, spending time with our family and friends, cooking with my pressure cooker, reading good novels, knitting sweaters, and planting succulents.

Q9 – Do you have a favorite quote?

A9 – “What you do has far greater impact than what you say.” by Stephen Covey I believe in the values of Trust, Respect, Accountability, Commitment and Communication (TRACC). Very importantly, as a leader my actions need to demonstrate those values and contribute to creating a positive, effective organizational culture.

10 – If Hollywood made a movie about your life, what actor/actress would you like to see cast as you?

If Hollywood made a movie of my life, Lucy Liu would be cast as me. I’ve enjoyed Lucy Liu in her role as Dr. Watson on the Sherlock Holmes TV Series Elementary, wherein she is smart, strong, compassionate and has a good sense of humor.

Photos by Tim Przbyla 25 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

Sausalito Gains Trust with Budget Outreach How Cloud-technology’s Financial Management Tools Support Your Community and Organization

Written By Charlie Francis

Charlie Francis, Retired Finance Director, Government Finance Solutions Director, Opengov

US citizens are growing more and more interested in how their government is financed. They not only want to know more about how their hard-earned tax dollars are being spent, but also want to have more say in how precious and limited resources are generated and allocated. And if they don’t feel they have the opportunity to learn or participate, then mistrust, conflict and divisions in a community can grow.

That is making collaborative and social technologies that empower governments and include citizens in making more informed, data-driven decisions, be transparent and build greater public trust, more important than ever before.

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From Transparency to Operation Reporting Like many agencies coming out of the great recession, Sausalito’s residents were more concerned with the City’s fiscal status and sudden rise in pension costs, supported by pension reform discussions across the state. In addition, more internal pressure was placed on tracking internal revenue and spending trends and confirming compliance with the City’s budget.

As an outcome of the City’s Strategic Planning Session, we launched the City of Sausalito’s open data portal as a public resource. Every morning I rushed into the office and was greeted with more public visits since the previous day. But then interest flat lined. My mother wasn’t even checking out the portal!

But after uploading our monthly Budget-to-Actual (B2A) report the following month, I decided to recast this public tool and emailed my city manager and department heads to recommend they visit our internal operations portal. It would give them the ability to see their operational reporting online instead of printing out the usual monthly report from our in-house financial system. It was very well received and our portal got another boost. This meant no more time wasted preparing, printing and manually distributing around the City paper reports. Even better, soon Sausalito’s department heads were answering their own questions about their department’s financial operations; saving us all time and energy.

• Generated summary reports with the click of a mouse – Our internal Budget Milestones report eliminated static spreadsheets and manually tabulated columns. Instead, I was now able to instantly generate summary reports and easily drill into the details with our portal’s powerful reporting solutions.

Throughout every milestone (department head submissions, city manager reviews, finance committee hearings, city council public hearings, preliminary and final approved budget), I published the iterative proposals to our internal and external portal. I created a series of citizen videos and proactively recruited public participation in using the open data portal. This in turn generated citizen engagement throughout the budgeting process. Citizen engagement helped the City Council to refine priorities. Resources were allocated based on community priorities.

We then took our approach one step further, levering our Sausalito’s saying, “What if? Why not?” I thought, “What if I began to announce in our weekly community newsletter that this month’s B2A was uploaded to the external (or citizenfacing) portal, and that citizens could go to the site and see our performance, and call with their questions?” We did just that, website traffic picked up, and again we brought new users and energy to our City’s financial status. From then on, our standard operating procedure became logging into the portal daily, and leaving it loaded throughout the day, and sending emails and newsletters to constituents.

For my last two years before retiring, my “24/7 business analyst” was the first thing I logged into each morning, and the last tool I logged off in the evening. I saved countless hours I would have spent gathering info, and invested more time adding value to information, and informing policy decisions of financial impacts. Ultimately, I think that’s what every financial director wants to do. The choice is yours: stick to your old ways of doing things, or explore what’s possible with new cloud-technology. The only thing you have to lose is countless hours of painstaking, time-consuming work.

From Operation Reporting to Intelligence The next big aha moment came one morning when a department head asked me for some complex, detailed financial information, and he needed it “now!” I groaned because it meant stopping what I was doing, going into our enterprise system, running two reports, compiling the information into excel and then emailing them back - at least an hour’s work. That’s when I realized I could compile that info in three clicks using our portal. It’s also when I discovered that I didn’t simply deploy a transparency tool; I gained the equivalent of a 24/7 business analyst who never called in sick, and I didn’t have to pay OPEB benefits for!

Charlie Francis is a retired municipal finance director. He has more than forty years of local government financial management experience in both the public and private sector, including twenty years of experience as a Finance Director. Most recently, he served as the Director of Administrative Services and Treasurer for the City of Sausalito. He has also served as a finance manager for the Town of Colma, CA and as Finance Director for the Cities of Indian Wells, CA and Tracy, CA. He currently is employed with Opengov, as a Subject Matter Expert and Director for Opengov’s Government Finance Solutions team.

Sausalito staff reports for City Council deliberation and action require a fiscal impact section. Links to the portal were now being included in this section to validate the fiscal facts that are subjected to analysis. For example, parking revenues per space informed the City’s policy to remove parking spots from inventory to create a bicycle parking and valet program.

From Intelligence to Collaborative Budget Preparation Using the internal tools on our transparency site significantly improved the budget preparation process by streamlining and transforming my budget process: • Improved decision-making and enablement of deeper analysis – It was now easy to access years of historical data and current performance with advanced multi-fund financial visualizations. This helped department heads, council members and stakeholders understand prior trends, and view spending down to the transaction level in order to make informed, data-driven decisions across the budget.

• Automatically compared requests to historical data – By putting our plans in context, and enabling data-driven decisions throughout the budget process, I was able to see how the current budget stacked up to previous years and instantly learn how proposals down to the line-item level impacted the budget.

27 CSMFO MAGAZINE JANUARY 2018

SPONSORED ARTICLE

Implementing an ERP system?

Strengthen Controls to Prevent Fraud

Written By Scott Eiler

Scott Eiler, Partner, Plante Moran

Next, while claiming to be one of the construction firm’s Imagine this scenario: Fraudsters learn employees, the criminals call your organization and demand about a large construction project your immediate payment for the invoices, wired to a new bank and organization is undertaking through account number. With your controller on vacation, and your news reports. Claiming to be one of staff member wanting to fulfill the vendor’s request promptly, your employees, they tens of thousands of dollars are transferred call the construction Baking in controls that — straight to the criminals’ account. firm you’re working properly align with your with to ask about Unfortunately, these scenarios are outstanding invoices. organization’s needs should not uncommon. According to a recent An employee at the Association of Certified Fraud Examiners go hand in hand with the construction firm Global Fraud Study, the typical organization five phases of your ERP believes the caller loses some 5 percent of revenues per year is on your staff and through fraud, with an average loss per case implementation. gives the fraudsters of $2.7 million. Those figures are only likely your outstanding to climb as cybercriminals gain access to new tools and darker invoice numbers and amounts due. internet hiding places.

Statistics like these keep many CFOs awake at night. But, even as their organizations invest in ERP systems to streamline processes and gain efficiencies, baking in strong controls — the very controls that lower the risk of these events — often gets lost in the hurried shuffle of ERP implementation.

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Design and development

Whether you’re transitioning from a legacy system to an ERP system, changing ERP platforms, or upgrading your current ERP system, implementation presents your organization and its internal audit function with an opportunity not to be missed. It’s easy to Monday-morning quarterback and say, “Oh, we should have....” once fraud is discovered. Instead, take a proactive approach to minimize the risk.

The initial step of the design phase is to develop a currentstate (as-is) understanding of existing business processes and related policies and controls. This activity transitions into the development of “to-be” processes and associated controls designed to ensure that risks associated with those newly defined processes are appropriately considered.

While most top-tier ERP platforms have an array of “application controls” as part of their configuration options, they must be designed appropriately to fit into the overall business control processes. Often, we see these controls, and the necessary design steps, overlooked or ignored altogether during the implementation process. Focusing on controls during these key ERP implementation phases can help your organization get the most out of your technology investment and help prevent fraud.

By the end of the design phase, you should have a roadmap — in the form of a system design document or blueprint — that lays out several things: how you’re going to execute the controls design, what the system will look like in terms of application (system) controls, and how the system will be configured to ensure effective controls.

Your roadmap should include development of a controls catalogue, an associated risk register, and an approach identified for the implementation of an effective security structure that’s approved by the business process owner. It’s critical to build effective controls into the design document during this design phase — retrofitting control processes after design is much more costly.

Planning An ERP implementation involves coordinated effort among a number of groups: the software vendor/integrator, the client, and other third-party stakeholders. For this reason, implementing effective business process and IT controls needs to be embedded in the overall project approach rather than performed as an isolated set of activities.

During the development phase, design documents incorporating controls-related decisions made during the design phase serve as your guide to building a useful controls framework. This framework becomes part of the deployed system, including workflows, reports, security, system configurations, user access, and more.

But, the concept of controls may be foreign to many individuals involved in an ERP implementation. There’s often a real need to educate everyone involved on the activities to be performed to ensure proper controls are built into redesigned business processes. This can be accomplished through the development and communication of a controls plan, which identifies the controls framework, approach, activities, deliverables, and roles and responsibilities for each phase of the ERP implementation. Additionally, buy-in from the various stakeholders is critical to ensure the acknowledgment of and support for controls as an integral part of the project.

continues on next page 29 CSMFO MAGAZINE JANUARY 2018

Testing The post go-live review is a crucial phase to make certain that the controls that have been implemented fully address the risks previously identified and have been adopted by users. Go-live reviews are commonly performed several months after go-live since many additional decisions are likely to be made that result in process and controls changes.

The test phase ensures that what you’ve designed has been built correctly. This phase relies on system, integration, parallel (for certain business processes), performance, and user acceptance testing. During testing, test scripts and scenarios are developed and executed to encompass control design elements built into the design documents and communicated in the controls catalogue. This includes testing of workflows, user access, and application controls.

Identifying and integrating appropriate controls throughout the ERP implementation helps Imitigate organizational risk while business processes are being migrated from one system to another. Baking in controls that properly align with your organization’s needs within a well-managed risk environment should go hand in hand with any ERP implementation. That is, if you want to assure the integrity of your data and business processes — and a good night’s sleep.

If the system wasn’t configured, or doesn’t have the capability, to address all controls, now is the time to develop new controls around specific business processes to close any remaining gaps. These include business controls that use best practices to develop appropriate risk mitigation strategies and processes intended to identify gaps, or to strengthen application controls.

User acceptance testing provides the opportunity for staff to learn how to input data and carry out routine tasks and transactions in a nonproduction environment. This is also a good opportunity to test new controls and to identify the individuals who will “own” the new control processes.

Scott Eiler is partner with the firm’s governmental IT consulting practice. He has extensive knowledge of IT strategic planning, ERP life cycle, and other strategic IT services, and he provides risk mitigation services to government clients considering significant expenditures on technology.

Training Once you’ve tested the system, process owners need to get comfortable using it. Staff must be trained on new codes and how to carry out transactions, while supervisors need to learn how to manage those transactions. Clear communication during training is paramount when it comes to controls, particularly when privileges change and employees can no longer enter or access data or perform a transaction they previously could.

Plante Moran is one of the nation’s largest public accounting and advisory firms, and has been recognized by Fortune magazine as one of the “100 Best Companies to Work For” for the last 19 years. We provide independent consulting services to help governments improve processes, address cybersecurity vulnerabilities, and leverage technology to improve efficiency and service levels.

Comparing design documents to training documents ensures all processes, controls, and best practices are conveyed to staff during training. Keep in mind that training should be a key part of a larger, coordinated organizational change management effort that accompanies the most successful ERP implementations.

Go-live and post go-live review In preparation for system go-live, the implementation team develops a readiness checklist and reviews it to confirm that all areas required for a successful go-live have been completed.

This includes assurance that all controls-related decisions made during the design phase have been developed, tested, and implemented and that staff have been trained adequately on newly designed processes and associated controls.

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31 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

When Disaster Strikes…

Written By Karan Reid

Karan Reid, Director of Finance, City of Concord

services? While our City Hall was essentially non-operational, every other City facility, including our Police Department (thankfully!), was operating as normal. In fact, due to our compromised communications, some didn’t even know City Hall was down for the count.

Imagine a world where you walk into work, eager to get started on your work plan for the day, only to find all Information Technology-related (IT) services are kaput. It gets worse as you find out that heavy rains caused a flood in the City’s most critical room housing key technology equipment and City Hall is without internet, local network, servers, telephones, and even the electronic entry door locks are inoperable. Finally, you’re facing a shortened payroll week due to the holidays. Now what?

Our IT disaster recovery design does not automatically cut over to a redundant system and requires quite a bit of work to set up for remote users; more useful for a large scale or catastrophic event lasting several days or weeks than for a temporary system outage lasting a day or two.

Our first steps were to ensure the safety of employees that were working in the flooded area, immediately assess damage, and communicate service impacts to employees within the organization as well as to the community.

Likely, all of our organizations have some sort of disaster response plan geared towards large scale incidents such as an earthquake or the recent fires that have plagued our State. How many have plans for localized incidents that impact only a portion of city

But, communication without the use of computers and land lines became a challenge. Many of us found that our phone directories were stored on the City’s network and inaccessible, that the City phones didn’t work anyway since they relied on computer data lines, and we didn’t have personal cell phone numbers stored in a central source. Others had no means to retrieve voicemail messages to respond to calls for service (our phone service was down). Life reverted to paper and pen for the few customers that came to conduct business that day, and many services were totally unavailable at the City Hall location, such as plan reviews (we could not pull up electronic plans).

Most regular business at City Hall ceased for the day.

We prioritized communication as best as possible and held internal briefings on the status of repairs, communicated the information to our staff, and then went back to our offices waiting for the next update. I personally took the opportunity to call (on my cell phone) our insurance broker to start the claim process. Fortunately, we have flood coverage so the $200,000+ of equipment ruined would be mostly covered.

In addition to the destroyed technology equipment, there was water intrusion into walls and offices. The insurance company was very proactive and sent out a team to assess the damage and begin the drying-out process with heated blowers the same day as the flood.

To our IT staff’s great credit, we were able to put together a temporary solution to get us up and running on a limited basis in just five hours! This was a huge relief as we needed to start processing a short-cycle payroll due to the Thanksgiving Holiday. And, another nod to our IT staff is that we are still running on their temporary fix, because the ad hoc systems are sufficiently stable. This is critical as we are in the midst of year-end processing and it is a critical time to not be rocking the boat. However, offices are dry and back to normal, and quotes are being gathered to replace the equipment in the next few weeks.

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• Assigning Building Captains (we have four buildings at City Hall) to ferry information from the City Manager’s office to the departments to keep folks informed • Contacting the insurer immediately allowed for quick remediation of flood damage to the facility • Positive, cooperative attitudes – everyone really came together to focus on the most critical items • Feeding the harried staff – many pizzas, donuts and other not so healthy snack foods were consumed that day!

Lessons learned: • Review insurance coverages annually to ensure appropriate levels of coverage for your agency • Have a current, paper phone book handy; the people you need to call during an incident may not be the one your keep in your contacts list on your mobile phone, and have the cell phone numbers of key staff • Perform routine risk assessments on critical city facilities:

As part of our post-incident review, the source of the flooding was identified. A rooftop downspout became blocked during the night, water from overnight heavy rains backed up on the roof and eventually flooded through the windows and roofline.

The main room that was flooded is directly over our server room in the basement, and it had two large vent holes in the floor that allowed the water to literally rain down on top of our IT equipment. This led to several inches of standing water on both floors of several rooms in the IT department. Once the PW supervisor was aware of the water leak, his first stop in the morning was City Hall where he encountered the flooding and did what he could to place tarps over the equipment and called out a crew to address both the clogged downspout as well as begin to clean up the standing water, but by this point the damage had been done.

• Ensure critical IT equipment is not in a compromised room • Maintain roofs, clear out downspouts and ensure the roof-system is in working order • Don’t assume a leak has fixed itself • Time to close the grates in the floor • Have a plan in place before disaster strikes • Run drills using your disaster recovery plan before there’s a disaster!

Let our disaster be an aid to your own contingency plans to address a similar situation and to actually practice running operations without power, computers or phones.

This turned out to be a great exercise in terms of checking our preparedness for emergencies. We had many things that went well and many lessons learned.

What Worked:

Karan Reid has more than 26 years of municipal finance experience and is currently the Director of Finance for the City of Concord managing a team of 19 and a $170 million dollar operating budget. Karan graduated from the University of Arizona with a Bachelor of Science Degree in Business Administration, is a Certified Public Accountant and began her career auditing non-profit entities. Her journey in city government began as Senior Accountant with the City of Napa and progressed to Chief Financial Officer for the City of Emeryville and Finance Director for the City of Benicia before joining the City of Concord almost five years ago. Karan has been active in CSMFO currently serving as a Board MemberNorth and participated on the Site Selection, Membership Benefits and Career Development committees.

• Departmentalized systems allowed other city facilities to continue operating seamlessly • Availability of redundant equipment (a complete coincidence; old equipment that had yet to be discarded was sitting on someone’s desk) supported reinstating baseline systems quickly • Availability of laptops and wifi hotspots got communications up and running fairly quickly • The computer lab in our Senior Center became the go-to spot for completing electronic timecards for City Hall staff, so payroll processing stayed on track

33 CSMFO MAGAZINE JANUARY 2018

INSIDE CSMFO

San Gabriel Valley Chapter Spotlight Written By Tracey Hause

Tracey Hause, Administrative Services Director, Temple City

I have been procrastinating writing this article as those who know me, I don’t consider myself very creative. So I was trying to come up with what to write in this article that would be interesting.

Well it came to me yesterday to just tell the story, as if I was having a personal conversation with you, of the history of this Chapter as I know it.

I started attending San Gabriel Valley Chapter CSMFO luncheons in 1989, yikes 28 years now. Well actually off and on for 28 years, but more on than off. The venue has not changed in all these years. It’s currently a Courtyard Marriott but has been under other names that I can’t really recall right now. We have from time to time discussed changing venues, however I always receive a lot of compliments on the food and the staff is really great to work with. Why go through a bunch of headaches to change just for the sake of change. . .not my personality type.

I was the Chapter Chair in the 2000’s but then handed over the reins when I was working in downtown Los Angeles. At some point, the infamous Josh Betta took over as Chair in about 2009 or so. Attendance really soared for a few years and people were interested in what Josh had up his sleeve for the meeting. There was always something crazy going on. I then took over for Josh in 2012 when I returned to local government and began working for Temple City. Things aren’t quite as exciting as when Josh was around but. . .hey. . .I got to be my own person.

A new development in the Chapter this year is that I once again have a Co-Chair, June Overholt from the City of Glendora. I actually had to get my son off to college and did some traveling, so her support in my absence over the last few months has been invaluable.

Our chapter has been humming this last year with active outreach to new members and a variety of topics of interest including Maximizing Enterprise Applications Software, State Budget updates from Michael Coleman, Marijuana Policies, and presentations from GovInvest on GASB 45 and 75.

I am going to sign off as I need to start planning our January meeting, another thing I have been putting off. If you are in the area on the third Wednesday of January, March, May, July, September or November, please join us for good food and fellowship.

When I first started attending the Chapter luncheons, we would go early to have a glass of wine. I still remember where that little bar was located in the hotel. Wow. . .how things have changed. I wouldn’t think about having a glass of wine at lunch now!! There were people attending that are now really old-timers and most have retired. I now consider myself a regular old timer.

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INSIDE CSMFO

Keep Learning and Thriving 24/7 with the CSMFO Coaching Program Written By Don Maruska Each webinar also has a set of “Post-Webinar Discussion Questions” to prompt thinking about how to put the information into practice.

“I’m drinking from a fire hose!”

That’s a frequent lament of CSMFO members. There’s so much to learn and so many things to keep up with in local government finance.

Don Maruska, Master Certified Coach, Director, CSMFO Coaching Program

Want to Learn in the Car or While You’re Exercising?

We want learning to be easily accessible for you. That’s why the CSMFO Coaching Program makes all of its materials available online 24/7. Here are some illustrations about how you can put the resources into practice.

If you can listen, but you can’t watch, you can download the mp3 audio recording for a webinar to listen to the session on any device.

Wondering Where You Need to Hone Your Skills?

Today’s local government finance professionals need to have knowledge and experience in many areas. Go to the “Coaching Corner” at www.csmfo.org/training/coaching to see a list of resources. And complete the Financial Management Skills Inventory at media.csmfo.org/wp-content/ uploads/2010/07/skillsinventory.doc. Take pride in what you know and focus on the skills you need to develop.

Tap Webinar Archives With investments in technology upgrades, we record each webinar in mp4 format that you can access as video on your desktop, laptop, tablet, or smartphone and in mp3 for audio only. You can find the archives (video and audio) at www.csmfo.org/training/ webinars/audio-archives.

Looking for Some Productivity Resources?

Give yourself a tune up. Check out the “Coaching Resources” at www.csmfo.org/training/coaching/coaching-resources.

Some of the proven tools you’ll find include how to manage priorities, delegate, and gain personal balance.

Use the Agenda Packets as Learning Resources

Get a Coach to Support Your Success

We make the presentation materials and other helpful resources available 24 hours before a webinar and in the archives thereafter to aid the learning process. We ask presenters to provide sample policies, examples of best practices, etc. so that you have starting points to expedite implementation of the ideas in your agency. You can use your browser controls to download and save the Agenda packet where you wish or print selected pages.

One of the great things about CSMFO is how helpful members are for one another. Want to get some one-to-one guidance about your career? Find a coach at http://www.csmfo.org/ training/coaching/find-a-coach/. Fourteen seasoned members of the profession serve as volunteer coaches to help you navigate your career.

Enjoy the many resources to thrive in local government finance.

Catch Up and Share the Resources with Your Team

Don Maruska created the CSMFO Coaching Program in partnership with CSMFO’s leadership 20 years ago. Since then, the program has grown to become an integral part of CSMFO’s professional development resources. In 2017 over 3,800 attendees participated in the nine webinars, and hundreds more gained from Speed Coaching and special sessions at CSMFO’s annual conference and other program resources. Don was founder and CEO of three Silicon Valley companies, earning a National Innovator Award. He’s the author of two books used in both the public and private sectors around the world: “How Great Decisions Get Made” and “Take Charge of Your Talent. Don earned his MBA and JD from Stanford University and became a Master Certified Coach, the highest credential in professional coaching.

You can display the digital recordings on your screen or project them for discussion with your whole team. When you click on “Video,” you will see both the video recording and the Agenda packet alongside it. You can view the video in streaming mode, click on the expansion arrows to go full screen, or download the video for viewing offline.

35 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

A Holistic Approach to Budget Reviews Written By Sara Roush

Sara Roush, ViceChairperson, California State Municipal Finance Officers Association - Professional Standards and Recognition Committee

Like all CSMFO committees, the Professional Standards and Recognition Committee is run by dedicated volunteers who are passionate about improving government financial reporting.

Therefore, there never was any hesitation by the committee to invest the necessary time over the past couple of years to evaluate and improve this program. The committee focused on maximizing the value of the program for the volunteers, whether it is for members of the Committee, award applicants or reviewers. These enhancements were based on the committee’s determination that:

As volunteer reviewers were on the decline while budget submissions to CSMFO’s award program continued strong, the Professional Standards and Recognition Committee holistically evaluated the program and has rolled out improvements to streamline reviews, created an opportunity for volunteers to gain career enhancements, created new mentorship opportunities, and gained support from agencies using the program. The result is 2018 is the time to embrace this win-win-win by becoming a volunteer budget reviewer to enhance your own career while bringing pride to your agency and giving back to CSMFO.

A. This award program is successful because of the valuable feedback each applicant receives from the reviewers. These reviewers often come from diverse backgrounds and offer great suggestions to help the applicant with their next document.

B. The budget review process offers great opportunities for learning and professional growth C. Committee members love to recognize these accomplishments, but have limited time to manage the program if they are performing the reviews themselves

Over several budget seasons, there had been a declining trend in the number of individuals volunteering for budget reviews and this led to budget reviewers and committee members performing more and more budget reviews each season. In recent years, it has become necessary for some reviewers to review multiple documents before the season ended.

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Reviewing budget documents is a great way to learn how other local agencies are doing things. Each document reveals something different. By reviewing other local government budgets, reviewers can gain great ideas for a better budgeting process or an enhanced budget document. Other local governments may also have useful information regarding upcoming changes that may also impact the budget reviewer’s agency.

Committee Member Professional Development Networking Resume Enhancement Gain Experience in Financial Reporting

When applicants perform budget reviews for other applicants, the Committee ensures that a high quality review is taking place through a rigorous quality control review process. Applicants who want useful feedback, provide useful feedback. The Committee matches each reviewer to the document best suited to their skill level and experience. By keeping the number of reviews per reviewer low, preferably limited to one review, we support the reviewer in dedicating more time to a high quality review.

Reviewer Learn About Budgeting Learn about Government Finance Get Connected with CSMFO Get Ideas for Budget Document Gain Familiarity with Award Requirements

Change for the sake of change is unnecessary. Change in order to innovate and improve is essential. Going forward, the Professional Standards and Recognition Committee will no doubt make additional changes as we continue on our journey to enhance excellence in financial reporting and improve the recognition process for CSMFO member local governments.

If you are interested in getting more involved in CSMFO please visit the website at www.csmfo.org, click on the Membership tab and select Get Involved. We would love to have you join our group of dedicated volunteers.

Applicant Enhanced Review Great Feedback Relevant Information Award?

Sara Roush serves as Vice-Chairperson for the California State Municipal Finance Officers Association Professional Standards and Recognition Committee. Ms. Roush has a Masters of Science in Accountancy from CSU Sacramento. She has worked as a public servant since 2013, first serving at Sacramento Regional Fire EMS Communications Center, and currently serving the City of Rocklin.

She has accepted multiple CSMFO budget awards on behalf of her team, reviewed multiple budget documents for other governments, and currently helps to manage the CSMFO budget award program. You can contact Sara at sara.roush@rocklin.ca.us.

The first but very significant enhancement to the program came with the launch of a new web-based program to streamline the budget application and review process. However, as part of this implementation, procedures were created that resulted in many committee members taking on new roles and responsibilities.

The next enhancement to the program was the development of budget mentorship to encourage people who are less experienced to sign up as budget reviewers. The budget review program holds immense value for those who are new to the budgeting process. These are the individuals who have the most to gain from being a budget reviewer. These new reviewers are able to help with some of the budget reviews; however, the program still needed additional support to be sustainable and to minimize the workload for our volunteers.

Ideally, each reviewer should be reviewing a single budget document each season.

Another change was to include the requirement for a participating agency to provide a budget reviewer as a part of the application process. This is a wonderful professional growth and training opportunity that is now included in the budget application process. Applicants make the best reviewers. Every applicant has someone at his or her agency who will benefit from the additional budgeting experience gained through the budget review process. When applying for a CSMFO budget award, local governments should consider which individual at the agency has the most to gain from the budget review experience. If an agency has multiple individuals who need more budgeting experience, they can sign up on the CSMFO webpage to become budget reviewers.

37 CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

A Picture Is Worth a Thousand Words Effective Use of Graphics in Local Government Budget Presentations

Written By Grace Castaneda

Grace Castaneda, Budget Analyst, City of San Mateo

We’ve all been there. We have read or produced budget books that are essentially a compilation of Excel tables and Word documents. Outside of finance professionals, these types of budget documents can be hard to read and understand. Yet a budget document is very important. It serves as one of the most essential communication tools to the community in identifying services to be provided, related funding for these services, and rationale behind key decisions.

Users of local government budget documents benefit from a high quality document that is easy to comprehend.

The Government Finance Officers Association (GFOA) recommends that governments incorporate certain guidelines to facilitate broader consumption and greater comprehension of the budget document.

One of those guidelines is on the effective use of tables, charts, and graphs. According to GFOA, graphics should be used to communicate key information in our budgets. Charts, graphs, and other images should enhance the budget presentation and clarify significant information, reducing if not eliminating the need for a lengthy narrative for interpretation, and helping make the budget document more relatable and easier to understand.

Both GFOA and CSMFO have established criteria in their respective budget awards programs that acknowledge and encourage the effective use of graphics. To sample from a few of the more notable graphic budget presentations of member agencies, here are three California local governments who received top scores from CSMFO on the effective use of graphics, artwork, and charts.

In the small coastal community of Half Moon Bay in northern California, City staff uses a pie chart to depict their share of property taxes. The 38

chart shows clearly that the City receives a small tax share, while the majority goes to local schools, the county, and the local fire district. Additionally, staff added a short description under the chart to compare Half Moon Bay’s allocation to other cities’ allocations in the same county. Doing so provides a perspective to readers, and sets the stage for the City’s constituents to better understand the funding available to provide for services to the community.

This easy-to-read chart delivers an effective and strong message about one of the City’s primary revenue sources.

Yulia Carter, Finance Director for the City of Half Moon Bay, said, “Our main goal for the new document format was to ‘tell a story’ behind the numbers, and make financial data relevant to the entire community. Our document offers analysis of major revenue sources, including simplified visual demonstrations of complex concepts (e.g. property tax allocation per Proposition 13).”

#1

The City of San Mateo, a mid-sized community south of San Francisco that serves a little over 100,000 residents, uses graphics to convey the trend of sales tax growth. The City uses a bar graph to show their historical sales tax revenues, with different colors to show actual sales tax versus sales tax that was increased by the Bay Area consumer price index (CPI).

This allows the readers to see quickly, without needing to read through a written explanation, how actual sales tax has been keeping up with the increase in CPI.

#3

Showing a number of past years’ data also allows the readers to see this revenue source’s trend, and therefore be able to better understand the assumptions that are made on its growth in future years. Additionally, amounts are shown in millions and in five-million increments. This keeps the graph clean, and keeps the message about the City’s sales tax trend in focus. “This sales tax chart has been an important graphic to demonstrate how internet sales and changing consumer spending patterns have impacted one of our major revenue sources,” explained Assistant City Manager/Finance Director and current CSMFO President Drew Corbett

#2

Graphics are a powerful tool in communicating key information in budget documents. When used effectively, they enhance the budget presentation in making the budget document easier to read and understand. As demonstrated by the agencies profiled here, graphics serve to not only enhance financial information, but also to visually communicate the services that are provided. Incorporating effective graphics can be a compelling tool to help local governments tell their story.

Grace Castaneda is the Budget Analyst at the City of San Mateo and has been in local government for the past ten years.

During her time in telling San Mateo’s budget story, Grace helped revamp her City’s budget document, which resulted in winning the GFOA budget award for the first time in the City’s history. After having her second child, Grace started running to preserve her sanity, and she is currently training for a 15k run in San Francisco in January. Grace is a UCLA Bruin with a degree in Business Economics. She will serve as Chair of the CSMFO Membership Committee in 2018.

The Water Replenishment District of Southern California, which serves 43 cities in a 420 square mile radius in southern Los Angeles County, proudly shows off its service to its communities. In the water agency’s adopted budget document, the District included a photo of its advanced water treatment facility. Including photos that are relevant to the agency’s mission makes a powerful statement, as the readers can then create a visual connection to the service that they receive.

And that is exactly what Scott Ota, Chief Financial Officer of the Water Replenishment District of Southern California, had in mind when he and his staff put together their agency’s budget document. “A picture is worth a thousand words,” Scott Ota said. “Weaving photos, artwork and graphics throughout a budget document can help integrate dry text and bring life into a budget document, increasing public awareness and comprehension.”

The agency also captioned the photo with a short explanation of what the water treatment facility does. This enhances the connection with the readers, because including a caption gives a better comprehension of the service that the agency provides.

Receiving top marks in the graphics criteria from the CSMFO budget awards program, the agency was acknowledged by the budget reviewer that, “rather than just showing a picture of the Leo J. Vander Lans Water Treatment Facility, you took time to explain what the facility does and its importance to the community.”

#1 Source: City of Half Moon Bay Adopted FY 2017-18 Budget #2 Source: City of San Mateo Adopted 2016-18 Business Plan #3 Source: Water Replenishment District of Southern California Adopted 2017-18 Budget

39 CSMFO MAGAZINE JANUARY 2018

INSIDE CSMFO

Annual CSMFO Golf Tournament The Annual CSMFO Golf Tournament will be held at the Victoria Club, a premiere private club located in the center of the City of Riverside. The club opened on October 16, 1903 making it one of the oldest clubs in Southern California.

Situated in the Tequesquite Arroyo that once was surrounded by orange groves, Victoria Club’s history and charm remain as elegant today as it was in the beginning. The course has been highly recommended by past CSMFO Golfers, and it will be an event you can’t miss! For more information on the course, please visit: www.victoriaclub.com.

Tuesday, February 20, 2018 9:00 AM CHECK-IN 10:00 AM SHOTGUN START TIME 3:00 PM AWARDS RECEPTION

Victoria Club 2521 Arroyo Drive Riverside, CA 92506 Government - $45 • Commercial - $125 Tournament Sponsors $1,000 We invite you to be an integral part of our golf tournament as a featured sponsor. Your contributions will be instrumental in making this golf tournament a success. Includes four golfers and onsite representation.

For more information contact: John Adams City of Thousand Oaks 805.449.2235 jadams@toaks.org Brent Mason City of San Bernardino 909.384.5242 Mason_Br@sbcity.org

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The MUFG logo and name is a service mark of Mitsubishi UFJ Financial Group, Inc. 41 and is used by MUFG Union Bank, N.A., with permission. Member FDIC. CSMFO MAGAZINE JANUARY 2018

FEATURED ARTICLE

The Budget Menu: A Practical Addition to Your Toolkit Written By Kathryn Downs

Kathryn Downs, Director of Finance, City of Carson

The primary benefit of zero-base budgeting is an enhanced ability to surgically cut the budget; but it takes a lot of work to get there. To address the need for budget cuts in my former agency, the City Manager and I developed an efficient hybrid approach to zero-base budgeting we referred to as the Budget Menu.

There’s plenty of best practice information available for budgeting.

We’re all familiar with civic engagement, goal setting, cost-benefit analysis, and decision packages.

Perhaps your toolkit could use a practical decision-making method for your Board or Council. This article offers the Budget Menu.

You may be familiar with zero-base budgeting. It’s basically the opposite of incremental budgeting. Originating in the 1970’s, the practice asks managers to build a budget from zero, requiring a great deal of effort and justification.

In the local government sector, the approach may appeal to the public, but has questionable benefit on a practical level. Much of the local agency budget is tied to mandates. We’re required to maintain the public record and prepare Environmental Impact Reports. Some of our revenue sources are restricted to very specific spending. Like any business, we have fixed costs such as insurance and contributions to unfunded pension liabilities.

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The Budget Menu empowers your Board to actively participate in the budget process. It’s easy to understand, and can be a fun and effective way to engage your elected officials.

Working through the Menu during a budget workshop encourages cooperation among Board Members. This decision-making process will also help remove staff from political arguments surrounding the budget.

Before embarking on any change in your budget process, make sure your CEO has a full understanding; then discuss the proposed plan with your Board. The elected officials will feel more comfortable knowing the plan, and you want their support before you get to work. Get your Chairperson or Mayor to champion the idea, so it’s less likely to be derailed.

There are five basic steps to developing the Menu.

When your Board is done with the Menu, they will feel a sense of accomplishment for balancing their own budget. This can lead to greater ownership and support for the spending plan.

You’ll also learn a lot about what is important to your elected officials, which will help you to be a better budget officer in the long run. Use some of these ideas to create your own engaging process and have fun this next budget season!

Step 1: Identify all mandated costs and minimum obligations.

The bases for your selections should be presented to your Board/Council to obtain consensus. Good faith estimates of these costs can be removed from further budget discussions and included in the baseline draft budget.

Step 2: Identify potential changes to service delivery to increase efficiency, and ask your Board/Council if there are specific service levels they would like to reconsider. If your elected officials want to consider everything, you can help streamline the process by suggesting they focus on one department or function each year.

Kathryn Downs is Finance Director for the City of Carson.

Kathryn is a CPA and has been serving cities in Southern California for 20 years, including 17 years of budgeting with City Councils. Kathryn previously served as Chapter Chair for the South Bay Chapter, and currently serves as the CSMFO appointee to the League of California Cities Environmental Quality Policy Committee.

Step 3: Prepare decision packages for the services identified in Step 2. All other core services, including the full-time employees that deliver them, can be removed from further budget discussion and included in the baseline draft budget.

Step 4: Identify all discretionary costs that are nice, but not necessary. Discretionary costs and the decision packages prepared in Step 3 are listed on the Budget Menu.

Step 5: Calculate the estimated amount available to spend on the Budget Menu. This is total estimated revenue, less the baseline draft budget.

Total Revenue Baseline Draft Budget Available Revenue Budget Menu Decision Package 1 Decision Package 2 Discretionary Item 1 Discretionary Item 2 Discretionary Item 3

Estimates $5,000,000 ($4,000,000) $1,000,000

$700,000 $800,000 $50,000 $120,000 $150,000

Available Left to Spend

$300,000 Selections $700,000

The Menu can be a simple Excel spreadsheet. Use one column for all estimates on the Menu. Use a second column for the selections to be made. Keep a running balance of the estimated revenue available to spend at the top of the spreadsheet.

Your Board/Council will select items from the Menu, spending down the available estimated revenue. This task can easily be accomplished during a budget workshop using the spreadsheet in real time. Send the spreadsheet to your officials in advance of the workshop, so they can prepare by creating draft budget scenarios ahead of time. After the workshop, load the results into your draft budget and proceed to adoption.

How many times have you presented a $20 million draft budget, and listened to your Board debate a $10,000 item for most of the workshop? Sometimes people don’t know where to start, so they focus on something they can easily identify.

The local government budget is mysterious and difficult for the public to understand; which increases public distrust. Going through this process can give your Board confidence in the numbers, and realization that there is less slush in the budget than previously thought.

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JOB OPPORTUNITIES Accounting Manager, Platinum Consulting Group Salary Range: DOQ Application Deadline:

Finance Director/City Treasurer, Sanger Salary Range: $7,423 - $9,022 per month Application Deadline: Friday, February 2, 2018 - 5:00 p.m.

Senior Accontant/ Senior Accounting Technician, City of Pomona Salary Range: See Description Application Deadline: 22-Jan-18

Budget & Analysis Manager, Midpeninsula Regional Open Space District Salary Range: $116,448 - $145,428 Application Deadline: 19-Jan-18

Accounting Supervisor, Cityo f Emeryville Salary Range: $7,098 - $9,580/month Application Deadline: 2/5/2018

Accountant, Daly City Salary Range: $7277-$8846/month Application Deadline: 22-Jan-18

Principal Accountant, Monrovia Salary Range: $73,105 - $97,969 Application Deadline: 4-Feb-18

CHIEF FINANCIAL OFFICER, San Ramon Valley Fire Protection Distric Salary Range: $160,427 - $195,000 annually.

Application Deadline: The recruitment will close on January 19, with first review

Budget Manager, City of Roseville Salary Range: $8,053.07-$10,791.89 Monthly Application Deadline:

Finance Director, SGR Salary Range: $121,000 - $134,500 DOQ Application Deadline: 1/28/2018

Accounting & Personnel Specialist, San Antonio Water Company Salary Range: $22-16 - $27.70/hr Application Deadline: 8-Feb-18

Account Clerk I /II /III, Norco Salary Range: $33,304 - $53,525 w/ Excellent Benefits & 36hr Wk M-Th Application Deadline: Weekly Application Reviews; Closes Feb 28th, 2018

Director of Finance, Modesto Salary Range: $127,518.12 - $159,387.24 Annually Application Deadline: February 5, 2018 @ 5:00pm Independent City Auditor, Ralph Andersen & Associates Salary Range: The salary for this at-will position will be competitive in Application Deadline: 26-Feb-18

Accounting Manager, Santa Maria Salary Range: $7,823.99 - $9,510.09 monthly Application Deadline: 01/15/18 @ 8 am

Accounting Supervisor, San Diego County Water Authority Salary Range: $94,404.96 - $126,965.28 Application Deadline: 1/25/2018

Director of Financial and Administrative Services, Regional Government Services Salary Range: $93,000 - $128,000 Application Deadline: Continuous recruitment - Application review 1/30/2018

Accounting Supervisor, San Diego County Water Authority Salary Range: $94,404.96 - $126,965.28 Application Deadline: 25-Jan-18

ACCOUNTING TECHNICIAN, Ventura Salary Range: $53,602.43 - $65,154.75/year Application Deadline: 2-Jan-18

ACCOUNTANT, Agoura Hills Salary Range: $5,943 - $7,241/monthly Application Deadline: First review February 1, 2018

Accounting Manager, City of Hemet Salary Range: $7,219.00 - $9,675.00 Monthly Application Deadline: 1/25/18 at 5:30pm

Administrative Services Director, Colma, Town of Salary Range: $12,192 to $14,820 per month Application Deadline: 15-Feb-18

Fiscal Officer, City & County of S.F. - Port of San Fran Salary Range: $125,736.00 - $160,446.00/year Application Deadline: 1/12/2018 17:00

Budget Analyst, Sanitation Districts of Los Angeles County Salary Range: $74,196.00 - $92,172.00, Annally Application Deadline:

Senior Management Analyst-Finance, City of Tulare Salary Range: $62,123.04 - $75,510.84 Annually Application Deadline: 14-Jan-18

Associate Administrative Analyst, Monterey County Salary Range: $5,677-$7,754 Application Deadline: 19-Jan-18

Grants/Budget Analyst, Sacramento Area Council of Governments Salary Range: $6199 - $7535 per month Application Deadline: 1/9/2018

Administrative Services Director, Suisun City Salary Range: $96,720 - $131.856 annually Application Deadline: 4-Feb-18 44

In Memory Of

Doug Bradley 1967-2017 This issue of the CSMFO magazine is dedicated to the memory of one of our members who died tragically while on vacation in Mexico. Doug Bradley, who served as the Administrative Services Director of Imperial Beach, was a CSMFO member since 2014. Doug was active in CSMFO, participating in trainings, chapter events, and the annual conference, and he was also an active contributor to our listserv.

Doug’s contributions to municipal finance will be sorely missed in Imperial Beach, where Doug made a significant impact in a relatively short period of time. His City Manager, Andy Hall, had this to say about Doug: “Doug was an incredibly talented Administrative Services Director that dramatically improved the finances of Imperial Beach, but was even more aware of the higher purpose behind the numbers. He used every financial resource to improve the lives of residents in Imperial Beach. When Doug arrived in Imperial Beach, the City had just finished an inquiry into the financial management of the City by a grand jury and in just two years presented the City Council with a completely clean audit which he maintained for the rest of his five year tenure with the City. More importantly, Doug was a part of the fabric of the community. The mission of Imperial Beach is to “Create and Enhance Classic Southern California.” No one exemplified that mission more than Doug.

As an avid surfer, he loved the authentic beach life in Imperial Beach and engaged in enhancement of the built and natural environment to fulfill the mission. He also loved the Mexican culture and chose to live in nearby Las Playas de Tijuana, Mexico. Doug was a solid financial leader that chose to wear surf gear rather than suits and ties and represented everything good about Imperial Beach.”

Doug embodied the spirit of why we get into this line of work…to utilize financial resources to improve the lives of the people in our communities. He will be missed by the CSMFO family.

45 CSMFO MAGAZINE JANUARY 2018

+ + + + + + + + + + + + + + + + + + + + +

NO. 2018, CSMFO

NO. 2018, CSMFO

M0R. F. T. DNLD

CSMFO

INTEL

Assignment: HIDDEN CODE

TOP SECRET MISSION Hidden in the last three issues of the CSMFO Magazine is a message. By utilizing your fiscal-eagle eyes and code-breakingbudget-balancing talents you can win yourself a special CodeBreaker drink ticket for our Thursday Night Event at the 2018 CSMFO Conference. Simply send your guess to david.garrison@ staff.csmfo.org by February 2nd and if correct, you’ll be one of CSMFO’s top agents… with an extra drink!

David Blue Garrison, Creative Director

Hidden in these three issues is a code for you to crack!

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A leader in public finance.

Since 2000, we have represented more than 750 California local agencies. Our singular focus enables us to provide you with the expertise you need to make your project a reality.

475 Sansome Street, Suite 1700 San Francisco, CA 94111 415.391.5780 tel 415. 276.2088 fax info@joneshall.com www.joneshall.com 47 CSMFO MAGAZINE JANUARY 2018

e, e re n c C o n f t his l a u r A nn nd er fo SM FO t e d l e a d , d e e ds a C 7 a s 1 . c d 0 e i r n 2 d i o e h e o f t h f u l a n d d w i t h his w i l e d m a c s s e t c o u gh f ait hf u l l y - e a we l l - o e su c it h t h b e e n a t h lik O w F g g n M i n ni as CS m ov O B e gin C o r b e t t h re s e n t e d F CSM r e w!

Drew n. H e rep and kept nk you, D o i a t r h T ea ni z a o rg a his s p i r i t w n e v e

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