Jim Mullins, Field Director of Eastern Kansas for American for Prosperity introduced Steve Anderson, CPA MBA. Americans for Prosperity was instrumental in arranging for this budget analysis.

Transparency:

Steve Anderson presented his analysis of spending for five budget years with trend analysis. Mr. Anderson quickly found that the way the Johnson County Government presents the budget it is very difficult to compare year to year. The average citizen would find it impossible. A taxpayer should be able to take a budget from a previous year and compare it to the current budget. Finding any changes that have occurred over time and then find the detail of those changes is not possible. Johnson County’s budget presentation fails to meet the basic criteria of comparability. The first recommendation would be for taxpayers to insist that on a budget that allows true transparency by meeting the standard of comparability. If that is not possible due to program changes, detailed explanations of those changes should include a reconciliation of those changes.

Growth:

Mr. Anderson found a wide range of growth in revenues for thirty of the departments.

The largest growth from FY-03-FY-09 was 696% for 911 Wireless Telephone. The least growth was the Department of Corrections with revenue growth of 13%. Although Johnson County has experienced the largest growth rate in Kansas, many of the agency growth rates exceed the population growth by substantial amounts. Taxpayers need to be vigilant in these growth rates to ensure they are justified.

The growth curve for full-time employees (FTEs) was found to increase sharply during periods of growth in revenue. In FY-03 there were about 3500 full-time employees. In FY-09 there are about 4100 full-time employees. Each FTE carries with it a total cost that increases exponentially each year due to the underlying costs such as FICA, KPERS, other benefits and pay increases. These become annual commitments to each year and are difficult, if not impossible, to eliminate during downturns requiring budget cuts.

Agency heads will argue for additional FTEs during boom times to handle workload. Part-time elected officials have a difficult time and lack of resources, staff and/or expertise to research the workload issues. When faced with this issue the county could employ the “Yellow Book test”. If the services are available in the yellow pages of the local telephone directory, the government should consider if it is more economical to contract out services rather than take on FTEs. The advantages to the taxpayer would help stabilize the budget. During downturns private companies are more flexible. Private companies provide the county with liability protection and workmen’s compensation insurance. The county can pursue contractors for poor work and/or damages. Johnson County is self-insured. From FY03 to FY-09 county expenditures for risk management grew 77% from $1,174,422 to $2,074,406.

Another advantage in using private contractors is that they will bear the cost of upgrades in computer hardware and software. Contractors that win a competitive bid will strive to maintain it, if it is profitable. It puts the responsibility on the contractor to continue to provide good products or services while managing all the overhead costs.

Some budget “padding” appears to have occurred in the area of “budgeted but unfilled FTE’s”. If the position is in the budget and unfilled, is that position really necessary? If the agency operated all year with FTEs that are less than the number budgeted, where was the money spent? Overall the review found $1,881,352 in “reductions” by agencies that appeared to be vacant FTE positions that were used as budget “reductions”. There most likely were more but were buried in composite accounts. If a FTE position is vacant for more than six months, the necessity of that position needs to be examined.

An attempt was made to reconcile the revenues recorded in the budget documents for various years between the individual reported agencies amounts and totals by revenue category. It was impossible to confirm by comparing agency budgets with the allotted time for this examination. The average taxpayer would have neither the time nor the expertise. Simply trusting the Consolidate Annual Financial Report (CAFR) becomes problematic when you consider the conventional audits performed for CAFR are not designed to detect waste and only marginally to detect fraud.

A performance audit of the Airport Management lacked written internal policies and procedures to ensure internal controls were documented and maintained. Further concern to the taxpayer should be that Airport Management did not see a need for documentation of internal controls and processes. Lack of these controls and processes put cash and other assets at risk for fraud, misuse and abuse. The Office of Management (OFM) is responsible for the effective stewardship of public funds. Ensuring that every county agency is trained and uses the policies and procedures set forth by the OFM is the responsibility of OFM.

Financial reporting has been a subject of pride for OFM. OFM has been a recipient of a Certificate of Achievement for Excellence in Financial Reporting by the Government Finance Officers Association (GFOA) of the United States and Canada for 21 consecutive years. GFOA is a nonprofit professional association serving approximately 16,000 government finance professionals. In other words it is bureaucrats giving awards to other bureaucrats. While this organization may be beneficial to it’s members, it does not serve the taxpayer by providing it members with ways to provide budget and financial statements that are easily understandable. Simply putting budget and financial statements online is not real transparency.

Agency by Agency Comments:

Interesting items that appear as agency budget reductions for FY-2010 are travel and food expenses. The large number of agencies and dollar amounts of “reduction” associated with travel should be cause for future review and oversight. The format used to by some agencies made it difficult to ascertain. Staff education is important part of employee development but many alternatives exist that would eliminate out of office travel. A large reduction in travel in the library’s operation budget was evident. This review recommends commissioners and taxpayers keep this in mind when better revenue times return and to limit these expenditures.

Agency food expenditures may be an area that needs investigation and continuing scrutiny. Human Resources expenditures for food for employee training appear excessive and largely unnecessary.

Reviewing the FY-2010 budget documents one finds a reoccurring theme of agencies reporting under the area of expenditure changes an increase that is reported as the “budgeted salary increase included in the budget parameters.” The appraiser reports a 4.47% increase or $253,428. A one-time increase of $9,300 for security for appeals and the rest for salary increases. Common sense would suggest that government budgets should be adjusted to reflect economic realities.

The fee-driven agencies approach to budgeting is always interesting. The Licensing Department experienced a 21.36% increase in revenues and immediately translated that into a 21.36% increase in expenditures. One would consider how much better the community would be served by reducing the licensing fee to reflect the increase in revenues.

Fund balances seem to be extraordinarily high and should possibly be subject to review and either reallocation or for reducing fees in those areas. Developer Fees record an estimated fund balance for FY-2010 of $228,175 with anticipated revenues and expenses of $9,800 during that period. This occurred with several other agencies. When there are large fund balances, there needs to be an explanation of the need for accumulation, the estimate of dollars needed, and the approximate time that these funds will be expended to address the need. Accumulating public funds in marginally interest-bearing accounts without sufficient justification is an unacceptable use of tax or fee dollars.

Public Works notes a savings of $239,572 in reduction for 4.8 FTEs that amounts to nearly $50,000 per FTE. This seems fairly high for an average unless some of the FTEs are management. Why are these positions vacant, how long have they been vacant and are they really needed.

Med-Act agency had a reduction of 1.5 FTE positions reported as saving $222,350. Although this field commands a high salary, this seems quite extraordinary. Again, how long have these positions been vacant or is this a budget padding mechanism.

The Office of Financial Management (OFM) has a vacant FTE that is being used as a budget cut. It is a Payroll Accounting Analyst Position that offered a pay rate of nearly $80,000. This is usually considered a staff position. Perhaps the county might find payroll services with a full spectrum accounting firms could completely replace staffing and technology costs to provide payroll functions.

Parks and Recreations reported an increase of 3.69% or $149,589 for salary and benefit increases. Limiting these increases in an economic downturn would seem reasonable.

Johnson County Museum of History is an example of raising fees and/or lowering costs until it becomes self-funded. While no doubt a worthy endeavor, it is a questionable use of taxpayer dollars. When the number of visits is compared to the actual population of the county, the programs and services are not frequently used. Of the 97,792 visitors there is no way to determine if they are unique visitors or repeat customers.

Government agencies submit their own performance measures and most often are less than forthright. The Oracle Support Center reported a savings of $100,000 for V12 Upgrade. Ignored in the statement were significant costs such as administration and other overhead costs. Often there is no capital asset depreciation. Further questions are raised when the effectiveness measures in the area of technical requests resolved shows that 11% went unresolved. A private contractor with that failure rate would expect to be asked to resolve the issues or lose the contract.

“The author would like to note that there are many government services provided by Johnson County that are both efficient and necessary. This review is not an indictment of all services and employees by any means; however, the citizens and taxpayers of Johnson County are at a decided disadvantage in being able to sort the wheat from the chaff within the budget and financial documents that are available to them. Additionally, it should be noted this research did not identify every area where citizen oversight should be focused and the author encourages citizens to ask questions and demand answers when they perceive shortfalls in services or waste in the use of tax dollars.”

http://countybudget.jocogov.org

Note: AFP sent a request to the Board of County Commissioners to allow Mr. Anderson to present his findings to all the Commissioners. There was no response.