Can city keep its budget dealings above board?

Editor’s Notes
John F. Schaffner

The hearings and negotiations—and ultimate voting—for the city of Atlanta’s fiscal year 2008-2009 budget are down to the wire, frenetic and possibly also frantic.

But in these last days before June 30, when a balanced budget must be approved, can we also make sure that what the city is doing in developing, passing and administering this budget also is legal?

There is at least a question in the minds of some Atlanta government watchers—including me—that things have not always been above board in past budget dealings.

For instance, the City of Atlanta Code of Ordinances requires using 99 percent of the previous year’s revenue for budgeting purposes in anticipating the revenues for the new budget. That City Charter provision was put in place in 1937, presumably to keep the city from running budget deficits.

The Internal Auditor Report of April 1, 2008, said that method of budgeting results in revenue anticipations being artificially low. Thus, the city for many years has relied on cash carry-forward to balance the budgets.

The auditor’s report indicated that the present budget crisis resulted, at least in part, as a result of estimating $241 million in “cash carry-forward” that simply did not exist. The “cash carry-forward” method was added to the budget anticipation in 2003 and continued through 2007.

My question is: Is it not a clear violation of the city’s charter?

During these budget negotiations and those to come in years ahead, what will be done to assure the taxpayers that this will not be repeated? Can the assigned Budget Commission—made up of the mayor, chief financial officer, chairperson of the Finance Committee and two members of City Council nominated by the mayor—be expected to police this properly?

After all, the section that creates the Budget Commission states: “If at any time during any year, the expenditures exceed the revenues collected and a deficit is created, it shall be the duty of the budget commission before appropriating any other sum for any purpose other than the interest and sinking fund on the bonded indebtedness to appropriate a sufficient sum to immediately discharge any deficit which has accrued during the preceding year.”

It also states: “The members of the budget commission shall be personally liable for the over-anticipation of receipts.”

A further examination of the Auditor’s report and other documents suggests that the city for years may have been shifting funds from one department to another—possibly to cover shortfalls in one or more departments—and doing so without any formal established procedure or any formal votes from City Council, which presumably would have say in such matters.

That raises the question of whether or not the administration has realized this problem of budget deficits for some time—possibly years—but has not seen fit to address it head-on or even discuss it with City Council.

For instance, the city’s Comprehensive Annual Financial Report for the period of July 1, 2006 to June 30, 2007, shows “Cash Advanced to Other Funds” from the Department of Watershed Management (DWM) in the amount of $96.8 million.

There is an additional notation titled “Transfers Out” indicating an additional $14.7 million was transferred out of DWM.

There is an item in the Notes to the Financial Statement that identifies $194.8 million owed by other funds to DWM and DWM owing other funds $88.4 million.

These activities beg questions that most definitely should be answered:

What authorization is required to appropriate funds from DWM to another fund?

Are there restrictions on which funds can be “loaned” or “transferred” to other funds from DWM?

What is the difference between “Cash Advanced” and “Transferred?” When were these transacted and who authorized it?

Exactly where was the money transferred and for what specific purpose?

If they are loans, are there established interest rates?

Have the monies owed DWM been repaid?

It is time we get serious about knowing how taxpayers’ monies are being handled by this city, where the funds are being spent and who the taxpayers can and should hold accountable for future sloppiness and maybe downright improper or illegal budget activities.