has accepted the risk of not taking those actions. This matrix that you have before you is an important part of that process. As you will note in the various columns contained therein, it lists findings by project, recommendations provided by internal audit, management's response, that is, the action plan they will implement as a result of the findings and recommendations, a follow-up date, and the status of management's action plan with an update on that status typically being requested about six months after the final report for the audit has been issued. This follow-up approach was recommended to us during our quality assessment that was conducted in November of 2007, and it should be noted also that internal audit also schedules a few field-level follow-up reviews each fiscal year as well, and those are approved by the Internal Audit Board. but this follow-up process gives us a chance to at least reach out and get some fresh communication from management responsible for action plans as to what the status of those plans is and whether or not they have been able to complete the action plans or if they're in partial completion or what that status may be. Now, the matrix represents negative assurance, and by that what I mean is the responses are not validated by an internal audit field review. So if, for example, a division of revenue had an audit eight months ago, and I send a request to the division of revenue director and ask him, you had findings one, two, three, and four, you said in your management response, these would be your action plans to address those findings. Tell me what the status of that action plan is. So in that particular case, Director O'Mara would send back a response to me saying, well, here are the things that we said we would do, and here's their status. So in this particular case, we're not going out into the field and validating that each statement made to us by those directors is actually what has taken place. However, I will tell you that having worked with many of the directors and commissioners of urban county government, I have no reason to believe that their statements would not be accurate and that their representations would not be true. The reason that we take that approach is we have a small shop, so it's not practical for us to go out and look at, revisit all the audits that we have actually conducted. In order to do that, I submit an annual plan to the board, and it has two to four follow-up, what we call follow-up reviews. And in that case, we would actually go out to the field, do the follow-up review at the particular shop that had been previously audited, and issue a new audit report on the status of that follow-up process. If during our follow-up process, management admits to us that they have not implemented a promised action plan, but they agree to do so in an expeditious manner, then I would generally consider that to be a sufficient response. Depending on the nature of the cause for failure to implement, I may pass on to senior management that the action plan had not been implemented and that a new expected timetable for completion was set. And I would also then follow up again with emails or just sit down discussions with them and talk about, did you meet the second timetable that you promised us? Another effect, and I'm thinking worst case scenario here because I'm thinking in terms of if the director comes back in this first follow-up matrix process and says, well, sorry, internal audit, we actually haven't implemented. Another effect of their indication they have not implemented an action plan could be to elevate that prior audit to a full follow-up review process, depending on the nature of the findings and the degree of effort and cost needed to correct the issues, the impact that might result should the action plan fail to be implemented, and areas of time and complexity. So if they come back and they say, well, we haven't actually implemented yet, if it's a really, really hot-button issues at that point, I might decide we need to elevate this to a field-level follow-up, and let's go back in and see what's happening. Now, we haven't had to do that so far, so I'm speaking hypothetically here as a worst-case scenario. To summarize, this action plan tracking matrix before you represents an increased effort on the part of internal audit to gain assurance that action plans agreed to by management are being implemented as promised. This process puts management on notice that internal audit is following up on the action plans and it increases management's accountability, and it also acts as a reminder to management that they need to implement their action plans if they have not already done so. Now, this matrix was actually presented to my audit board on September 22nd during our internal audit board meeting, and Dr. Stevens thought it would be a good thing to bring before the Budget and Finance Committee so that the whole committee would be aware of some of the follow-up processes that internal audit has in place just to make sure that our audit recommendations are actually acted upon. So at this time, I'd be pleased to answer any questions you may have about the matrix. Sorry, Mrs. Garton has a question. Mr. Stennett also is on the list. Thank you, Dr. Stevens. Thank you very much, Bruce. You're welcome. Just one quick question and then a comment. So the idea with this would be to you would continue out your follow-ups as long as there was still an issue. Is that correct? Typical approaches will be that after a final audit report has been issued, and depending on whether the timetable for implementing corrective action is longer, but typically after six months or so, I would go back, typically through an email process so that answers are documented, I would go back out to the director of the responsible division and say, you know, Director Solly, we did an audit of your shop six months ago. Here are the findings. Here are our recommendations. And here's what you said your action plan would be. Please inform me of the status of that action plan. And then that person will respond back and say, we've implemented A, B, C, and D, or some things are still pending because of cost concerns or whatever the issue may be. So then once I've received that representation, typically then that would end that follow-up process. That would end it, even if they say, we haven't done thus and such. If they say we haven't done it, then I will ask them for a new timetable. Okay. When do you think you are going to be able to implement? And I will revisit it probably through the same process. Great. But if the findings from that initial audit are very significant or severe in nature, and they say we haven't implemented, it's possible that I might just decide, and I would, of course, go to the board for approval on this, maybe we need to go back in and take another look and just see if, well, you know, since they haven't implemented, have things deteriorated. Okay. I think this is excellent. Thank you. I think it's a really good way for solid follow-up in those cases where there was some change requested. So I appreciate your bringing this to us. Thank you. You're welcome. Thank you. Council Member Stinnett. Thank you, Chair. I, too, appreciate this matrix and your effort to get to us and your explanation of all the different parts of it. But I guess I want to hit on a little bit what Councilman Gordon was talking about, is if a division doesn't implement some of the recommendations or findings, I think you just said, if I'm clear, you just extend the time frame, go back and revisit with them. I would ask them, I would say to them, okay, so you say you have not implemented. When do you, what were the reasons that you haven't implemented? And when do you expect implementation to be complete? And I'm assuming you'll put that information in this matrix as you give it to us going forward. Yes, I would. That would go in, and then that matrix for that particular audit would expand out for a second timetable to revisit them, probably through the email process. Okay, here's your extended timetable to fix. I've come back three months later or three weeks later or whatever you say you needed. Now tell me again, what have you done to address this problem? And who do you usually direct your comments or follow-up to? Is it the director level, the commissioner level? Are you copying our commissioners so they can help implement some of these things too? How do you follow up? Who do you follow up with? The follow-up is to the director because he or she has that first line of responsibility to implement the issue. Now, if someone comes back and they say, I haven't implemented, then most likely I would go to that person's commissioner and make that person aware as well. How often do you encounter that issue? Well, if you look through some of the comments that we've received so far, I mean, basically nobody has come back and said, well, we haven't done anything. Now, some of them, as you can see, if you've read through some of their responses, some are still in some partial completion phases, and there may be any number of reasons for that, but nobody has come back and said, well, we didn't do anything. Matt, I would think, though, you know, should there ever be issues that are extending the timetables and, you know, there's just not good enough reasons given as to why some of the things aren't implemented, there would be some type of action taken rather than just giving them more time. I don't know if that's in our current ordinance, but it may be. You know, again, you said it's not necessarily a huge problem right now, but I know there may have been a case last year we did on division, which, you know, they never implemented anything that we know about as a council. I don't want to name that division particularly, but there seems to be a need to be an end point, so to speak, or some type of action taken either against the director in their file for not taking the action or something. So, you know, we don't have that issue going forward. Well, as I stated to Ms. Gordon, too, depending on the severity of the findings that were not addressed, we might decide, I might take to the board and say, let's just go back in and do another field review of that whole situation. going back and revisiting the findings that we had reported on initially, see if things had deteriorated. You know, I'm speaking purely hypothetically here. If we had discovered, for example, that there was missing money, and then someone comes back, say, six months later, and they say, well, we still haven't fixed the problem, that may have led to it, then in that scenario we would probably go back in and say, well, is anything else missing? Now, that's a hypothetical, but that is a kind of severe situation where we would go back in with a field follow-up. And certainly, it's a good question about letting the commissioner know, if I did have a situation where someone came back and said, well, we just really haven't done anything, I mean, it would be my practice to inform that person's commissioner so that another level of management is going to push for implementation of the action plan. One last thing. When you do issue an internal audit report, are you going forward from today, are you going to be able to put in there a time frame which they'll implement these things? Do you recommend a time frame that be done, and then do you follow up at the end of that time frame? Is that how we're doing it now? What I look for is for management to tell me what their time frame is because I know they're the ones who have to implement, and they're actually probably better aware of all of the intricacies, including budget issues, than I am. If they don't give me a timetable and they can't give me one, for example, because they say, well, it's too fluid to know for sure, then I'm going to go back about six months later and say, well, where are you at? But typically I want a timetable. So you ask that question before you issue your report or after the audit's issued, report's issued, on the timetable question? Timetable and management response is the best process. Is that before you issue the report to council that we get? That would be the final report that you get. You've already asked them what timetable it would take to correct these measures. That is what my goal is. And I admit that process has been a little inconsistent, but that is the goal that we're shooting for is that we can have some good clear timetables. And it helps me, too, when I go back to review, because if they're saying we can do it in three months, then I'll go back in maybe four months, give them a little extra time, go back in four months with this matrix, and say where are we with our plan. Very good. Thank you. Councilmember Myers and member of the Internal Audit Board. Thank you, Mr. Chair. Thank you, Mr. Sally, for coming in. And this is a great matrix. I agree with what the other two council members have said. Sitting on your board, however, we've talked about some different things that would help you be able to be even more effective than you already are. And one thing that is great about this audit division is it's one of the few divisions in government that actually make us money. Well, we do all we can, sir. Right, right. And it's not always a good thing when you're making this money because sometimes there's problems that need to be corrected, and that's how we end up making that money. But I know that you've asked for more auditors in the past. Can you talk just a little bit about what your staffing needs are so that you can kind of make us all aware so that we can get some more push to help you out with that during this next budget cycle? Well, I have an authorized strength to bring in three more internal auditors. And those, of course, were asked for during the last budget process. And I understand the financial situation the government's in. So at this point, those three positions are still unfilled. Any additions will help. And if it's not feasible economically right now to make those additions, then we will work with what we've got and do the best that we can. Okay. On this report, I'm more of a proactive. I like being more proactive than reactive. I know that you're already short-staffed, and it's cumbersome for you to have to follow up to the nth degree to make sure that the recommendations are taken care of. So I'm still wondering if there isn't a way that when you issue your final report, you don't actually come before the council and issue that most times, do you? It's just submitted and it's put up on the website, or do you actually? It is just submitted as an e-mail, a final report, yes. Okay. I'm just kind of thinking out loud, wondering if there's a proactive way that when that report is issued, that either if you wanted to take some time to come in to a work session and just kind of report out, and at that point in time the council could understand the recommendations that you've requested to be made and then the timeline that the administration said that they can get those things accomplished, And then maybe the council can put some constraints on the administration with respect to reporting back to the full council when they've got those recommendations made, rather than making it come back to you and your short staff having to follow back up on it. Well, actually, it is the international standards for the practice of internal audit actually put the responsibility for follow-up on my shoulders as a chief audit executive. Okay. So, you know, that at least from the Institute of Internal Auditors' perspective, of which I'm a member, their expectation is that the chief aud executive, which is my position, has that responsibility to follow up. And then if I see that that follow-up is not being implemented, and then, you know, it is my duty to take that to administration and to senior management. Okay. So we'll go the other route then and see if we can get you some more staff during this budget cycle. Well, thank you. I appreciate that. Okay. Thank you. I would also add to Council Minister Myers that the internal audit board supports the addition of the additional auditors. And when resources permit, and right now the resources aren't there. but the internal audit board also helps with some of these delicate matters when divisions are whoever's being audited doesn't exactly agree with the recommendations or with the follow up doesn't conform and follow up so and we meet about three times a year but I mean four times a year but can meet more often as necessary under the chairmanship of DeWitt-Heisel, who's done a very good job as chairman of the internal audit board. Council Member Ed Lane. Thank you, Dr. Stevens. Do you need any type of ordinance or additional resolution from the council to support any of the actions you'd like to take on the audit committee? In terms of follow-up, you mean, sir? Well, do you need any supporting legislation? Do you feel like you administratively can do anything you need to do to implement the plan you discussed today? I can't think of any, sir. I truly feel that both the administration and the council support the Office of Internal Audit, and the cooperation that I get is consistently good. Administrative personnel work very well with me. Council members work well with me in serving on my board. So I'm not aware of any need for an answer, no. Okay. Let me just close by saying I think the final review, and I would like to see perhaps a memorandum to council members when you do a final review after you've done a previous audit, just to give some closure to us also because I was thinking about a couple of audits that I was involved in, and I haven't seen any follow-up on that. I really don't know the status of those issues, and I find it very beneficial. Some of those probably haven't had follow-up. Because of the size of our staff, we typically only do two to four follow-ups a year. Now, when a follow-up is done, a field-level follow-up is done, then a final audit report, I think it typically will call itself audit review, is issued out in the same format as a normal audit report would. So it would have findings, recommendations, management responses, and that goes out to the full council as well as the board and responsible management. All right, the summary sheet you provided today, is that all of the issues that have come before you since this has been, the audit has been active, or is this just currently, things that are currently active? This goes back to the beginning of fiscal year 07. Whenever, when I had my quality assessment performed back in November 2007, Richard Epping, who was in charge of reviewing that process, he was an independent validator. This was one of his recommendations to me, you know, develop this matrix. It gives you a better chance to track the action plans if it makes management a little more accountable. But he didn't feel that it was necessary to go all the way back to our inception back in May of 2003. He said what's really more important is to start it and move forward with it. So really from his perspective, I could have just put in like the last fiscal year, but I wanted to have some history in it. So I put in the last two fiscal years. Well, just in closing, we appreciate your work. I think it's an important tool for the government to be able to closely evaluate its operations, so keep up the good work. Thank you, sir. Appreciate it. Thank you. How many audits pending would you estimate, Mr. Saleh, on your list? We issued a landfill audit just yesterday, and I have two more that are in the management response phase. So I'm hopeful that within the next week or two, two weeks, we'll say two more internal audit reports should be forthcoming. I meant those which have not been taken up yet on the list. I'm sorry, sir. Those are audits that are underway right now. Is that right? Mm-hmm. How about audits that have been suggested or on the list of ones we considered at the board meeting? I'm just curious how many of you got backed up in the system. Well, there's a few. Whenever, obviously, each year the audit board approves my recommended audit plan, but then whenever special requests come along, we have a process to evaluate those special requests, see if they're valid, which typically they are. and so whenever we insert those into our program, it pushes back some of the audits that are on our plan docket, and most of those then will carry forward to the next year. Well, I was impressed at our board meeting that there were so many in the file to be considered and be done at some time in the future. Of course, the council had one audit they were interested in, which related to standards of engineering related to certain projects, which I know you're giving serious thought about how you can work that into your schedule. Yes, I will, sir. Actually, that was approved in that meeting, you may recall. The board voted to include that in the annual audit plan, and then that audit plan was approved, and I understand that that audit needs to have a high priority, and it will receive it. Okay, thank you. Are there any other questions for Mr. Salley in the internal audit activity? Okay, thank you very much. Thank you. Appreciate it. Good luck with your tooth. Thank you very much, sir. The second item, formerly the first, is Commissioner Kiena Koe on the August financial report. Good afternoon. I think we put a copy of the report in your boxes late last week. If you've had a chance to review it, I'm not going to spend a whole lot of time on it. I do have a couple other issues to discuss with you, though. But if you look at the month-to-month comparison as well as the monthly budget report and the cumulative report, in all three situations, we actually are not where we expected to be. The Division of Revenue has done a lot of analysis, particularly on the receipt side to this point, and been working with some of the folks at the University of Kentucky to develop some mechanisms to kind of dig into the numbers a little bit deeper. And we really think with this July-August report that we are looking at some timing issues that may straighten themselves out in September. We hope that's the case. And if it is, we should be back on track in September. If not, we're going to have to take some action and bring some recommendations to the council on how to kind of pull things back a little bit. But we recently have done an analysis of our largest taxpayers and the frequency with which they pay. And we have a number of those that pay in a 26-pay cycle like we do here at LFUCG. And, of course, that three pay periods in a month changes every year on what month it is. So they've done some analysis there, and there's some thinking that that's one of the things that will help us catch up in September. All I can do is tell you that we're watching everything very, very closely. and while the numbers are off a bit, they aren't off significantly enough right now to cause me or any of the administration any alarm. On the expenditure side, I think you saw some kind of what would look like funky numbers. And part of that is that we have a lot more money going out in the first two months in professional services. and in outside agencies. I would say for the professional services, we're doing a lot better job of encumbering the money up front, and when it's encumbered in the way it reports out of our system, it shows as expensed. So we're actually working with the Metaformers people to come up with a report that would let us track a little closely what actually has been expended and what is just encumbered and not really out the door yet. On the outside agency, I would say we've just done a better job this year of getting those purchase of service agreements before you earlier. If you'll remember, in 2008, we kind of dribbled those in, and some of them were even coming in in the last quarter of the year. So we made a significant effort to try to get as many of the purchase of service agreements with the outside agencies or partner agencies out that we could. So a lot of that money went out the door earlier this year than it has gone in previous years. But, again, I don't think there's any reason for concern. It was the appropriate thing to do. So with that, I'll just stop and see if you have any questions about the report. Yes, there are several questions. Mr. Lane is first. Thank you, Dr. Stevens. Yes, you know we're having some uncertainty in the financial markets, and I was wondering if you could maybe address the cash management policy of the Irvin County government. I think that our council members and maybe the general public would be interested in that. Well, I think everyone's a little bit nervous, but let me say, you know, I met with our folks again this morning just to kind of rally the troops and make sure we all know where we are. National City is our local bank that holds the cash that we operate on, and the money that's at National City is secured by a line of credit, I mean with a letter of credit from the Federal Home Loan Bank of Cincinnati. So we're well positioned with the money that's there. The rest of our money is, the part that we have invested, is generally in money markets, And we're actually looking this morning at some CDs, but right now we are with the strongest banks in the country. We're with Bank of New York. I think there's some money with Bank of Boston, none of which have had any problems. I've advised the mayor that we should not be moving our money right now because right now you could move from one situation into one that's even worse. So we think we're well positioned. Everybody in the country is at risk, so I'm not going to tell you that we're not at risk. But I do think we're in a fairly secure situation. Thank you very much. Thank you. Mrs. Gordon. Thank you, Dr. Stevens. Thank you for your report. I just had a couple of questions about the report. I was curious about why it's marked draft. Will we be getting a final report? It's marked draft because August has not been closed finally in the accounting system because the folks have been working on the 08 audit. We expect in September to get on target so that we'll be closing by the 10th of the following month. So we mark this draft simply because we haven't technically closed. Now, we can still see all the expenditures and still see all the revenues, but we haven't balanced and done all those kinds of things that we do on a monthly basis. So will you be issuing a final report to replace this? Actually, what I was planning to do is come back in September. No, this is September. Come back in October with a closed report through September. I see. Okay. And I really think that's our best report to this early in the year because we'll have a full quarter and we should really be able to feel pretty solid about where we are. Okay. On page two of your report, down at charges for services on the left-hand column, one of the bold categories in the text. Yes. This said that August is down in this category, mostly due to outstanding collections from other counties and the Commonwealth of Kentucky jail fees. Are we working with them to try to clean that up and get it in a more timely fashion? Can you give us some insight on that? I can follow up with that for you next month. I'm not sure what efforts there are to get that in a timely situation. But part of it, too, is that we are acting on a cash basis instead of accruing. If we were accruing, we would know that it's already in, and we're not doing that right now. So I'd be happy to talk with the folks who are actually in charge of these collections and see what we can do to try to be more timely. Okay. Does this have to do with the payments we get from the state? Yes. Okay. On the actual prisoner costs? Yes, and from other counties. Okay. And then on the third, page three, about a third of the way down, one of the categories in revenue is property sales? Yes. Third of the way down the page? Yes. I just wondered if you could provide the committee with a detailed list of what properties have been sold. I'm presuming that might be vehicles. Is that vehicles? Part of it's vehicles. Okay. This is all equipment. Jim says it's all equipment. It's all equipment? Including vehicles. Vehicles are considered equipment for our purposes. Okay. Okay. Okay. Is it broken down into little, like, individual vehicles, or are there big items in there? We can get more detail than this number. Yes, yes, we'll get you some more detail on this. But you will remember that we have $300,000 budgeted to sell just for vehicles. Right. But I'll get you what we have on the detail on this. Okay, and this will be kind of an ongoing thing until we get everything. Yes, and then we still have looming this other $3 million sale that's budgeted. Okay, I appreciate it. Thank you very much. Thank you. Mr. Stennett. Thank you. Commissioner, thank you for your report as always. I just had a couple questions on the numbers. Under licenses and permits on page two, some of our main categories we give some bullet points on from last year. It looks like for employee withholdings and business returns, we're up from last year $1.3 million. And then insurance premium fee, we're down $572,000, which still makes us positive about $700. And then franchise fees also dropped $172,000. So it looks like in the final number is written here, it says we're only up $90,000 from last year at this time. It looks like it should be more like a half a million or more up from last year. There are more categories than are shown on licenses and permits. Those are the major ones on the left-hand side of the page. So there's a long category. I guess there's not another 500,000 drop somewhere. I guess it's amongst several, several categories. It's a lot of little ones. Okay, just making sure. There was nothing exciting there. Also, the retirement number list, the current list that we've received, I think we've budgeted 180 retirees. There are about 170, 180. The current list only shows 34. Right. I assume, we hope, October and November. How soon will you all be looking at that number and really putting your finger on trying to come up with a strategy? Are you waiting until the end of the year? No. Are we going to wait until the end of October? Actually, we're waiting for around October 15th because if people are going to retire November 1st, they will give us two weeks' notice by October the 15th. And November 1 appears to be a good day to retire around here because October is a three-pay period month, and it makes a difference in how they calculate your retirement. The folks in budgeting are already working on projections, assuming we have no change in personnel, and actually hope by the end of this week to have that number. And that's something that we're going to stay on with every payroll to kind of see where we are, given that we're not getting the retirements. So all of that I hope to have a better picture for you in October. because October 15th will give us a number on retirements, and I hope to have a full-fledged report for you by then. We're watching it daily. Sure, and I know you are, but there's just a lot of hearsay out there. I just wanted to clarify some things because there seems to be some thump and magic about October 24th, and I hadn't heard anything. I don't think any other council members had or that you had already developed how many you were going to lay off and things like that. So none of that's out there. Some of that's out there. There is no layoff plan. The commissioners and the leadership have been meeting to talk about things that we might be able to do if we don't get the retirements, ways that we might be able to pull back on the expenditure side. So we are working on a plan. But as of this moment, that plan doesn't include layoffs. But we don't know how big the number is yet. There are some things that we can do back to pull back small amounts of money. But if we're faced with a downfall that we're not meeting our revenue projections, in addition to that, not meeting our retirement projections, then we'll be looking at things more seriously on the layoff side than we are right now. Okay. And one other housekeeping item, so to speak, the pension savings from the state pension contributions. I think there was a misconception out there that we're getting a big check for $1.7 million all at once. And as I understand, you correct me if I'm wrong, but it's a monthly savings. By the end of the fiscal year, we actually realized maybe 1.7 in savings over the whole fiscal year, and it's not a check or anything we're getting. So it's a savings monthly. Okay. You're right. It's monthly. And, again, we'll be taking that into consideration as we calculate what our needs are going to be, what we will need for payroll going forward. So that will be included as part of that whole calculation of whether we're making it or not. Good. And then when will we get the final audit from last year's 08 numbers? Next month? Actually, the auditors are just about to complete their work. We're hoping mid-October to have something from them, and actually then if we can get everything from the component agencies, we'll have a final, final audit in November. but we will have, should have, final audit numbers from the auditors when I report to you in October. So the $4 million we talked about is still an audited number. Well, actually, I have another little sheet of paper here I wanted to share with you today. Good. Okay, some good news we can stand. No. Okay. Is it okay to move on to this? Yes, I did have one question on your report. Do you post that on the website? I don't think so. Do we? Because I have a certain number of citizens I know who like to follow our financial situation, and this would be a good way for them to get a synopsis each month. Might I suggest a meeting with Council Member Lane next week or later this week. I can't even remember now when we scheduled the meeting. But later this week to work on what we would refer to as a dashboard report, which would be a one-pager that kind of gives you a lot of different views. And I might suggest that we wait and just put the one-pager out there, because this is a lot to put out there every month. But one page that gives a synopsis and contact information might be. Well, I think that might be okay, but I think the explanations you have that goes along with this report are helpful, too. There are hardly any financial report that doesn't need footnotes. Okay. Okay. And also... Would it be all right if we leave the graphs out? Because the graphs get really difficult for the webpage. Yes, I think so. Okay, we'll go ahead and put the rest of it out there then. And on your cumulative, that means year-to-date also, does it? Yes, sir. I think we need to clarify that? Well, no, I think I understand, but I don't know. We usually traditionally have used year-to-date. Right. Okay. It doesn't make any difference. It might be. Okay. I always find it helpful to put months in, you know, like two months ending or three or four or five months. We'll clean that up a bit and see what we can do about getting it out on the web. Okay. Thank you. And please proceed with the news, whatever it is. Last month I reported to you that we were projecting our carry forward from 07 to be $4.1 million, and we had actually budgeted $1.4. That's still the number we're holding on because we don't have anything back from the auditors yet. So everything that I'm talking to you about today is unaudited, and I can't say that enough times because there could, I mean, all it takes is one adjustment that they want us to make, and all this kind of falls apart. But we also ended FY08 in a negative position in the health insurance fund, which I think is probably a surprise to you because it was a surprise to me. But we also, and I think this is not a surprise, we had the negative position in the risk management fund. As it turns out, we have a working capital reserve that has been on our books for a number of years. There's a calculation for how you calculate the working capital reserve. We've been doing that judiciously every year. and as it turns out, we can't find an ordinance or anything or a GASB requirement that says that we have to have this working capital reserve. Now, that's really good news because it means that there's money on our balance sheet that's sitting there that's not otherwise obligated. So what we plan to do... There you'll see. Again, you need to see the top of it if we could because it says unaudited. And we're talking about general fund only here. Our health insurance fund was almost $4 million short. Risk management was down almost $9 million. And if you remember, the risk management fund has been growing for a number of years in its negative position. I would add, too, that we've been recently contacted by the state that they weren't really happy with our negative position in the risk management fund, nor were the auditors, and that we needed to put together a plan to address this pronto. So fortunately, we have a mechanism to do that. In this working capital fund, and I'm sorry, there's a typo there. I did this right before I came in here. it is capital and not cap-to-y'all, there's almost $13 million. We were projecting a carry forward of 4.1. What we are proposing to do is cover the negative in the health insurance fund and the risk management fund with the working capital fund. We then are short only about $800,000, which we can take out of the projected carry forward, bringing it down. We'll still be in a better position going forward than we are budgeted to be because we're budgeted to be at $1.4 million. If we take $800,000 off, we'll still be at $3.3, which still gives us a little bit of cushion on the projected carry forward. But we take care of our negative obligations that are on the balance sheet, and then we begin to, in the budget process, work toward not having these negative situations at the end of the year. The health insurance fund is one that is truly already cash out the door. It's not like this is somebody's estimate of what we might owe down the road, which there's a portion of the risk management fund in that. Health insurance is truly cash out the door. So we really have to go ahead and cover that. And the state is going to force us into some position on the risk management fund. So my recommendation to the mayor and his degree that we need to go ahead and make these adjustments and give them to the auditors so that they have an opportunity to work the numbers so that when they come back to you in a couple weeks, we all are on the same page. I'd be happy to answer any questions. Thank you. You do have several questions from Council Members Garten, Sten and Ellinger and Lane. So Council Member Garten. Thank you, David. Well, can you go back and explain the Working Capital Fund and how we've used it in the past and how we might need it in the future and why we didn't realize it was there? Or is it just that we didn't? We knew it was there. And I have to say I thought it was a GASB requirement. When I looked at our balance sheet, I saw it, and you know there are a number of things on our balance sheet that are just required that we do because we're required to do in governmental accounting. Mary was the one who first asked, well, where's the ordinance for this working capital fund? So we started looking, and we contacted Susan Lamb. There is no ordinance. So we had been in contact with some folks who used to work in the Division of Accounting. And what we've learned is this was a decision by a prior mayor that they would reserve this money on the balance sheet for future needs. There's a fairly extensive calculation that's done every year, and that was passed along. And we did it last year. In 2007, we added to this working capital fund. I think, well, I know, it was a creation before we had a rainy day fund. And this was a prior mayor's way of setting aside money in case there ever was a need. But then the rainy day fund came along, and we have it now, too. So I think we're the first administration that inherited both funds. So this fund has never been used? To our knowledge, it has not been used. No. And was it, it says capital, was it actually set aside in the event we needed money for capital projects? Working capital is simply operating, would be considered operating. Okay. So it was in lieu of a rainy day fund. It was, yes. Because there wasn't one? Yes. And so does it go back? How many years do you think it goes back? It was actually started in 2000 in conjunction with some new GASB that came out at the time. However, it wasn't a require of the GASB. So this was something that was done by administration, but it all happened when GASB 34 and the statements changed back in 2000. And it's never been used? No, it is purely a reserve that is equal to basically 60 days' worth of receipts for license fee, net profit and franchise fees, less accrued payroll, the very first accrued payroll for the year. But it does reflect real money. Yes, yes, it is. That's the good news. Yes. Okay. And then so if this plan, if all of this was put into place, there would still be a projected carry forward of? About 3.3. About 3.3. Yeah. Okay. Thank you very much. Could I add to this? The negative position in the health insurance fund causes us pause in that we're getting ready to go into open enrollment, and we are going to have to seriously look at our rates. We had assumed the rates could stay the same. Because the health insurance is on a calendar year instead of a fiscal year, we might have already made those adjustments, But Michael Allen and Mary and I are spending some time together at the end of the week to try to figure out what we need to do with rates because clearly we don't want to budget a negative situation. Mr. Stennett. Thank you. I had a question on the risk management fund. Now, we've already projected taking more money towards that fund. in this 09 budget? Is that $2 million, $3 million? Well, we reduced what we had been contributing by about $2 million. So is that in addition to this number, or is that included in that number? This is at the end of 08. The other money is money that we would put into the fund for 09. So this is accumulation. It's not just an 08 negative. It was accumulated over years. I think we added in 08 about $1.8 million. So our reduction in 09 is in addition to this negative 8.9? Well, our reduction in 09 was a reduction to a smaller number that we put in. We're still going to be putting money into the fund. The administration recommended and the council approved that we put in less than we had put in in 08. Right. So my point is I just want to make sure the negative 8.9 catches us up once and for all. It catches us up. But, again, at the end of 2009, we'll have to take a look at it because we have money going in, but we don't know yet what the exposure is going to be for 2009. So at the end of 2009, we could be in a negative situation again, but we will have wiped this out and started over. Well, and I guess my other point, this is sort of like our pension problem. I mean, we don't have – I know I don't like to compare the two really, but we don't have all these claims, 8.9 coming out at once. Well, that's true, except that in risk management you have workers' comp and liability. And some of this is an estimate of what's going forward, but some of it is already cash out the door. So it's a mixture of the two. I mean, some of these payments go back to the early 80s we're paying people for whatever happened. We still have IVNRs that are incurred but not reported and other kinds of claims against the fund that go way back. Well, is it possible to have Patrick come in and just do a 15-minute work session just on that risk management fund so everyone really understands what that number means? Well, actually, the insurance program is no longer in risk management. It's in the Department of Law, so I'd be happy to ask Commissioner. Yeah, whoever would be fine, just so we get a better understanding of what that Rule 8.9 represents and why it is important to go ahead and fund it and get it back solvent. Okay. I would, again, stress that a portion of that, in fact, in FY07 we were at 11.4, and 8.3 of that was workers' comp. And that's what the state is really concerned about. So the bulk of this is an issue with the state. Okay. But we'll get a presentation to you on exactly what this is. The other thing on the working capital fund, if we use that, what happens to our everyday cash flow? It wouldn't affect cash flow other than, I mean, we've already spent the health insurance fund, so that's already cash out the door. So this is just substituting $1 for a different dollar. True, but I guess what I'm worried about is I know we floated a lot of bond projects and then reimbursement resolutions. Does it have any impact on proceeding with those projects before we issue the bonds? We know we hadn't issued bonds in a while. Right. We're watching that really, really closely. We try to keep in a cash position only what we think we're going to need for the next few weeks operating and making payroll. So that's what's in cash at National City right now. Everything else is invested. So we're watching that whole cash position very closely. I would mention that part of our plan on moving forward with some of the capital projects would have been to borrow money from Kentucky League of Cities on a short-term basis before we go to the bond market. But their money is variable money, and when I talked to them earlier this week, it's now at 8%. So we won't be borrowing any of that money by the way. So if we get to a position that we can't handle any more cash projects before we sell bonds, we may have to suspend a project. But we're not expecting to do that. We're expecting that the market will correct by the 1st of November. We're hoping to go to market mid-November. That's our plan right now. Everything that's in place is for mid-November. Clearly, we're not going to go if the market is still crazy. But I'm on the phone with our financial advisors daily, if not three, four, five times a day, and we won't put the city at risk for anything like that. If we have to pull back on projects, we'll pull back on projects. Well, let's hold on to our cash right now because, you know, that's – even though the market's up about 320 points right now, there's no guarantees yet. Absolutely. The 12.9 million, is that in cash, though, in a bank account? Is that how it's always sat? It's got to catch up. It's invested. But is it in a bank, i.e. National City? It's probably with Bank of New York or Bank of Boston, yes. Okay, but it's not in local banks. It is not in a local bank, no. We have it spread out and safe. Right. Right now we have just enough at National City to cover our expenses for the next couple of weeks. Good. Very good. Thank you. Thank you, Mr. Ellinger. Thank you, Chair. Keena, I think my question has been addressed. I just want to kind of ask you again. I guess start with the health insurance. That's on the calendar year, you said, and so we won't know if we're going to have to, if we're going to have this problem continually, that we're going to be short again for. What we would propose, and for this we would come back to you, but we need to look at the rates again, again, because we ended last year in a negative position. We don't want to end there on June 30th again. But we only have January to June to make that up because of health insurance being on a calendar year instead of a fiscal year. So if we make a recommendation to increase the rates, we will bring that back to you because you adopted a budget assuming the rates stayed the same. And now the next question is on the working capital. Yes, sir. Do we know about that number? You said that happened in 2000. Have we been putting money towards that? Yes, sir. We've been adding to it every year. Okay. And where does that sit in the budget with the light item? Where is that under? It's not budgeted. So it just sits out there kind of like a contingency fund? It's just like in the budget you don't see the rainy day fund other than a appropriation that's going to transfer to it. It's. And how much have we been putting in? We started in 2000, you say? In 2000. What did we put in this year? You say it's not by ordinance, though? We put 2.4 in this year. Yeah, do we have a fund or account number that we would know? Off the top of my head, I think it's an account. It's in Fund 1101. If you look at the audited financial statements on the balance sheet, it has an undesignated. There's a 27th payroll. There's economic contingency, which is the one that has the ordinance for the Rainy Day Fund. And then there's this working capital reserve. Have we taken anything out or we just keep adding to it? Never taken anything out. And it's purely always been a calculation of, like I said, license fee, net profits, franchise fees, less your accrued payroll. And it was something that was started back in 2000. And when the GASBs changed and, you know, the accounting standards required governments to begin accruing revenue and expenses into the year that they belong. And so when that happened, the administration decided to put the impact of the accounting practice in this account so that it didn't flow through the unreserved working capital. So we're going to basically just do away with this account then? Yes, correct. and just use this to pay off the seather? Yes. And what about putting it into the rainy day? Because we've always tried to bump that up. Well, I would say it would not be good financial practice to have funds that are in a negative position on one part of your balance sheet and pump money into another fund that does have money in it. Best practice, in fact, I mean, the law says that you can't spend more than you take in in a year. And quite frankly, we did that in the health insurance fund. We spent more than we took in. We ended up $4 million. We spent $4 million more than we took in in premiums. So health insurance, we absolutely have to take care of. And there's a part of the risk management fund that the state will require us to take care of. And it just makes good sense with the Rainy Day Fund having $13 million in it already. Let's get these negative funds off our balance sheet. This is not good financial management. This working capital fund, have you always known that you're sitting there and that we didn't really know what we're doing with it? You would have to ask somebody who did it in 2000. That's a big number that we have 12.9 million in there. Yeah, but there's a calculation that everybody's been doing every year and adding to it. And, you know, as you add eight years to that, then a million and a half to $2 million a year that has been being reserved on the balance sheet. All right, I might have another question, but thank you for now. Thank you, Mr. Ellinger. Mr. Lane? Thank you, Dr. Stevens. Well, I'd just like to say I appreciate your bringing this information to the council. I'm personally shocked that this number has been on our balance sheet, and it's been there for eight years. Particularly shocked because I was on the committee with a couple other council members, the commissioner of finance and the budget director, when we went over the Rainy Day Fund proposal, and this information was never disclosed to us or to the council as far as I'm aware of. And I don't think this is what I call transparency in a way to have an open government. You know, I'm just very, very disappointed because we have, if we had this money available, there have been some issues that we've had to deal with in the past that would have been much streamlined, and to keep this information away from the council I think is bad. So I want to commend you for digging this out and bring it to the council. The other question I have. Could I just apologize, though, for not bringing it to you in 07? But, of course, we just finished the 07 audit, but that one was such a struggle for everyone that we contributed to the problem, and I apologize for that. Well, this is reflective of our poor financial accounting system that we've had in the past, and hopefully as we get this new program better implemented, maybe this would never happen again. Now that I've made my editorial comment, I would like to ask a couple of questions on the risk management fund. All right. Our policy has been, as far as I'm aware, that we do not accrue money when we have, like, somebody suing us or it's been an accident, and put the money into the account. We pay as you go. Is that policy changing, or is that what we're doing now? I would have to get back to you, but that's not my understanding of our policy ever. My understanding was that we were accruing as we became aware of things now. That said, I think there have been some situations that we've discussed with you all about lawsuits that we would say there's no reserve on this lawsuit. So some lawsuits that have come forward have had reserves and others haven't. So I couldn't speak to how the decision was made of when to reserve and when not to. But clearly, a large part of this is about what has been reserved. Right. Well, maybe I didn't ask that question very precisely. The point I was making is that if you're an insurance company and you have an accident happen, the insurance company says we may have to pay out $250,000 in cash to settle this claim. So we're going to put $250,000 cash into a fund over here and reserve that money for the payment that may be coming up in the future. And they may discount it because maybe it will be 24 months before it is payable. My question is, based on what I know, we have not been putting the cash in the account. We've merely only been accruing an estimated loss and making it on the balance sheet as a potential loss we have. I think that's not conservative enough for my taste. I would like to see us start accruing some of the cash into that fund. I know we're budgeting cash in there, but that's sort of a pay-as-you-go. So could you perhaps have, when risk management comes and makes their presentation, maybe we could look at that issue and discuss that. Right. We will cover that whole issue. And, again, it's the Department of Law that will be sending that to you. Okay. And you answered my question regarding where the funds were located on the balance sheet. So, you know, I'll be looking at that. And thank you very much, Commissioner. Mr. Myers. Thank you, Mr. Chair. Thank you, Commissioner. When I look at these top two lines, I hear the Health Insurance Fund and the Risk Management Fund, outside agencies, outside agency oversight committee as well as the full council at the last, I guess it was the first budget meeting that we had, or bonding meeting that we had over at the library, was given a spreadsheet that had the various types of support that we're giving outside agencies, whether it be insurance or health insurance, et cetera. Yes. Can you speak to these top two funds here that we have a negative $12.859 million, can you speak to how they relate to that spreadsheet that we were given? On the spreadsheet, we noted a number of partner agencies that use our health insurance. Right now they are paying the same premium that LFUCG employees pay. But the last time we reviewed that, the partner agencies represented a larger piece of the claims as a percentage than LFUCG. So one of the things that we brought to your attention was whether we needed to ask the satellite agencies to pay a different premium than that which is being paid by LFUCG employees. And, in fact, I think you got a letter from CSEA about that very issue that LFUCG employees felt like they were subsidizing the satellites because the satellites have a larger percent of the claims. When we look at this whole issue of the 3.9 negative, we'll be coming back to you with a recommendation if it's to change anything for going forward beginning January 1. But I really need some time to kind of dig into this and look at the claims for FY08 and where that stands. I'm speaking from us having looked at it, I think, probably about a year ago. Before you move on to the risk management, can I ask you a question? It's my understanding that prior to this year, LFUCG was subsidizing the partner agency's family premium. Was not subsidizing the satellite agency's premium. Was subsidizing the – we are not now, but we were before. We are now, and we were not is my understanding. That's true. Okay, we are now subsidizing, and we were not. Prior. Oh, I thought it was the other way around. Well, I'll have to get back to you because I had the same understanding that you're saying to me, and I'm 99% sure that I was told just in the last week and a half that, no, it was the other way around. If that's the case, I have to be the first to say I was not aware of that. I didn't understand it that way when we set the rates for the year that we're in right now. So we just got to open this whole issue back up because we're getting really close to open enrollment. So we'll have to bring this issue to you not at a budget finance committee meeting but at work session or something like that because it's going to need attention before budget finance meets again. I'm just afraid that I'd be speaking out of turn to go any further right now. I just wanted to make this committee aware of it and also make the public that's watching aware of it so that you can come back and speak more fully to the issue. I know that there was sort of a general consensus that we would look to 010 to make some drastic changes, but I think that at least it's my opinion that those changes probably need to happen 09. Okay. We did make one change in that beginning July 1 of this year, we started requiring the satellite agencies to pay the administrative fee that we pay to Humana. And prior to that, my understanding was they were not paying the administrative fee. So that's a per-person per-month charge that the satellites are now paying that they weren't paying previously. But the whole issue of where we fall on the premiums and our experience in terms of claims and all that, we just need to dig a little deeper and get back to you. Because when you look at the claims, the percentage of the claims and the amount of money that that is, it's either costing the taxpayer more money because there's more general fund dollars going into our health care plan, but it's also costing the city employees more money. That's true. So I think I'm looking forward to hearing back from you. That's your earliest work session that you can come present. I think we need to do something before open enrollment of this year rather than wait until 2010. Okay, but let's just, I mean, because this is something I think we're all going to kind of sleep on, let's just keep in mind that a large number of those outside agencies or partner agencies are social service agencies. And are we going to ask them mid-year to pay more money? And I don't know if that's the case. I mean, we really have to work this and work into the numbers. But if the satellites are not carrying so-called carrying their weight rate right now, is that something we really want to do as a government? And, of course, that's your call and not mine, and we'll bring you options to the table. But I just kind of want to set the stage for the most part we're dealing with social service agencies. And I appreciate that, but I also would say that when you bring that information forward, can you really look at the percentage of claims because I'm just going to say it. I think that they need to be off of our insurance completely. Now, when that happens is probably the sticking point, but the percentage of claims that they have and the money that's costing the government and the taxpayer, you know, we're not doing that. There's a whole lot of outside agencies or social service agencies that don't get that benefit. There's a lot of other companies out there that don't get that benefit. So, you know. I agree. I think we need to look at moving them off of our insurance completely. So I look forward to hearing that information. And then could you move on to risk management because I think we have some of those things. We have a similar issue there. Right. And I have absolutely no information about the difference between the claims from satellite agencies and LFUCG. So that one, we'll have to put something together and come back to you. I just don't know anything at all about that. Okay. Okay. Thank you. Mr. Blemons. Thank you, Dr. Stevens. I just had a couple of follow-ups, too. The working capital fund, you mentioned that I think you said $2.4 million this year in 2009's budget was scheduled to go in there. No, we put $2.4 million in at the end of 2008. It was our 2008 calculation that went in. Nothing is ever done in that fund until the end of the year. So we put $2.4 million in at the end of 2008. Right. And we haven't done anything yet this year. That's right. Is there a budgeted amount that will go in this year? No, sir. So we only do that if we have cash left over. Is that sort of? Pardon me? We only do that if there's a surplus at the end of a fiscal year. Well, I'm not. So basically for financial statement purposes, what we do is that year in, when we see what the total fund balance is, we segregate a portion of it, and that portion of it that's segregated equals the 60 days' worth of receipts that we're going to get for license fee, net profit, and franchise fees, less the accrued payroll. So basically it's just a segregation of the fund balance. Okay. The fund balance is not cash. It's cash plus the accrued. I misspoke. What I meant was if there was a fund balance at the end of a given fiscal year, that's where this money, this calculation is placed, and then eventually money is actually transferred, so to speak, within our accounts. We do not, let me phrase it differently, we don't budget an amount for this. Is that correct? We do not. Correct. Okay, that helps. And then the other question I had was assets. I think part of the problem that at least I'm wrestling with, and I don't have the right accounting terminology for this, so help me out, but when we do a budget, that's one way of looking at our financial position. There's another way of looking at your financial position that accounts for things like this fund, and it would be an assets and liability statement, I think. Does that sound, am I saying that correct? A balance sheet, yes. I would like to see one of those at our next meeting, if that can be done. That way it will reveal to the council the working capital funds and other entities like that. I like to keep tabs on the rainy day fund as well, that kind of thing. So I think it would be very helpful for the council to see that and have an understanding. So that's a request. I wanted to ask, what is our cash position? both, I guess I don't care so much about National City, but what is the cash that we have invested? I shouldn't say cash. What is our total investment right now? I don't have that number for you. I know about what we have at National City, but I don't know the total investment. Because, I mean, we have hundreds of millions of dollars in the Police and Fire Retirement Fund alone. So we have hundreds of millions. So that will be revealed if you bring me an asset balance sheet? Yes, it's on our balance sheet. Okay, then I'll hold that question. I'm similarly concerned to Councilman Stenet that we've been floating a lot of things with our cash basis because we seem to have been very strong in that regard. And what we're about to do, we'll remove $12 million worth of money that we could use, so to speak. No, why? Everybody's shaking their heads. It doesn't impact cash. This is in your fund balance. So this is when you take your total assets, which would include cash, minus all your liabilities. It's what's left over. Think of your checkbook. It's your balance in your checkbook. Okay, you're right. I misspoke. I misspoke. So it's more than just cash. It could be receivables. It could be inventories, things like that, anything of value over and above. You're quite right. I stand corrected. I stand corrected. Okay, next question is the health care insurance fund. late last year in this committee as well as during the budget cycle, that didn't rear its ugly head. So did we have the final two months of the year generate a surprise? How did this happen? I want to understand how we can get a $4 million surprise today. All I can say at this point is that we had a difference of opinion internally about where the fund was going to end up. and I was on the wrong side of the internal discussion. So you had to project some, and we just projected wrong. I'm trying to understand, because these are actuals. This is cash that's gone, so to speak. So to speak, the health insurance fund is not really cash out the door, but it's either cash out the door or obligated to be paid. Right. Right. All right, I'm going to let that go. I'll tell you what I think we can do so that you can feel more comfortable about this is report to you on the health insurance fund monthly, just like we do the general fund. Okay. We can bring some of these other funds to the table monthly so that you – I mean, I don't want you to feel like we're hiding anything. If it was anybody else, that's what I would think. But because of my faith in you, I'm going to let it go. But I'm going to tell you, that's exactly what that looks like. It looks like we're getting bait-and-switch movement around. In the old days in this government, it was very easy prior to the current financial system that you could move through budget amendments or even not really budget amendments. You could move money around and have things occur that you wanted to occur. It was a frequent trick of previous administrations. The Sanitary Sewer User Fee Fund was a particular target of this kind of practice. that kind of surprise harkens back to old days, or maybe it's an honest mistake. So I'll let it go, but gosh, you know. I mean, it was a fund that we projected, just like we projected what the carry forward was going to be. We projected the carry forward to be $1.4 million, and we're looking at $3.3. There are so many moving pieces, but on the health insurance fund, I had some of my folks projecting a negative and some of them projecting it positive. Well, now, see, that's a better explanation. So you had to estimate as best you could, and we guessed wrong. Absolutely. That I can live with, but okay. Let's see. Last question is how are we going to move forward with this? Are you all going to be bringing us some budget amendments or something in the next few weeks to resolve this? We don't really have to do a budget amendment to do an interfund transfer because these are off-budget. Okay. These are off-budget. Well, the working capital is off-budget. We can bring you a budget amendment if that's what you want us to do. We'd be happy to do that. I'm just curious how you were going to do it. I don't have a preference. Okay. That's all I had. Thanks. Mr. Gray. Thank you, Dr. Stevens. Keena, I think we're all sort of getting our arms around what it is you're telling us today. And I'm the same way. And I think everyone recognizes and continues to acknowledge certainly credit for good intentions and appreciation for sharing this with us today. And I think as much as anything, we need to be able to really understand the – or get as good an understanding as we can, I'm going to suggest that maybe the, that maybe, who's our auditors? I forget. It's not Potter, is it? No, Mountjoy Bressler. Mountjoy. You know, that maybe they can confirm this and translate in lay terms exactly what we have here present. The way that I look at it, I'm translating this into private sector financial terminology, is that 12.9 million round numbers, that's 13 million, of unexpected profits that have accumulated over time. Is that correct? Or surplus, whatever you want to call it. This is cash that has been on the balance sheet, has been identified in the financial statements within this category, working capital. Is that it? Is that the way the financial statement? Yes. Yes. This has been a designated part of our fund balance since back in 2000. And it's been held. Right. Right. Right. And go ahead, Mary. Well, I was just going to kind of lead to more with Kina's, you know, and as far as the spirit of open disclosure, the way that this came up, you know, when I started in October, closed the 07 books, I followed the exact calculation of how it always has been done. Didn't really ask to see the ordinance because as an accountant, when you see a designated of your fund balance, you assume there is an ordinance behind it. Did it that way for 07. And in 08, in closing the books, there was a question that came up, and I think Keena's already discussed with you guys about accruing back some insurance revenues. And that's when I began to search for the ordinance and learned that we didn't have an ordinance and investigated and called individuals who used to work in the accounting division to try to get the history as far as and actually talked with Mount Joy. and they confirmed that they had nothing in their work papers as far as an ordinance to support why we do this. So that's how it came up. And that transpires just in the last couple of weeks. And then the way that, Kena, earlier you were translating this, you were saying that this occurred or was created, this fund was created before the Rainy Day Fund was created. So in a sense, it's like we had the belt. We didn't know we had the belt, and we added suspenders. That's right. So now we've got a belt and suspenders. That's right. Okay, great. It's a really good thing we have both right now. Right, I understand, yeah. Sometimes surprises are a good thing. Sometimes surprises are a good thing, right. But what you are and what you all have gone ahead to do then is suggest that this working capital fund be allocated into the risk management and health insurance fund. That's right. Right? Okay. All right. But, okay, maybe this is a later conversation or a sidebar or something else, but a better understanding of why there, if that has not been a critical need before. Well, I would argue that it has been a critical need, that the risk management fund has accumulated over several years. Well, I don't mean critical need, then. I mean one that we have been really focused on and alert to, perhaps, is a better way of phrasing it. Let me say in defense of what has happened to this point is that the reports that we have always shared with you and I assumed has always been shared with the council are budget reports. These things don't show up on a budget report. Thus the need, I think, to go to also a balance sheet. And a balance sheet, you might have seen the working capital on there and said, what is this? And quite frankly, last year I would have said, you know, that's a reserve that we have to have on our balance sheet because I assumed because it was there that we had to have it. Right. But had you not taken me at my word and pushed a little bit, we would have found it then. But I think bringing the balance sheet to the committee will bring another view of the financial situation of the government that you haven't typically reviewed. Right. It gets all the funds on the table. And let me add, this is just the general fund. There are negative balances that will need to be made up in all the other funds because we have an allocation process. Health insurance is paid by all the funds who have employees working out of that fund. So we have an allocation. So there will be exposure to other funds, including the sewer fund. I'm sorry, Council Member Blevins is not here, but there will be transfers needed to come from those other funds to make up the total amount of money. that's needed. Okay, so right now, as we are today, the rainy day fund, what's its balance around $10 million? About $13 million. So the two together, $26 million, we've roughly got then 10% of the budget, a little bit less than 10% of our budget, effectively today, presently, in a cash balance equivalent of a rainy day fund if something dramatic hit. And just to add to what Kina had said as far as the risk management fund, the auditors have asked each year's my understanding about why we have not funded the negative fund balance in that fund. In addition to the bond rating agencies, it comes up in conversation, why do you have this negative fund balance? I think it is a very prudent thing to look at funding, especially since we'll be taking our 08 fund. They didn't know that we had, if the rating agencies or the auditors or whoever didn't realize what the working capital fund represented, then, I mean, if they, let me put it this way, if they did know what that represented, then their anxiety over the unfunded values in risk management and health insurance might be lessened. That's true. But for the rating agency, they would have no way of knowing to raise that as an issue because we could easily have an ordinance that says that we have to do this, and the rating agency would honor that. So they have no way of knowing just by looking at our balance sheet that it was something that was reserved without an ordinance behind it. Right. Now, auditors know. Thank you, Kena. Thank you, Dr. Clark. It's been my observation, too, that suspenders are sometimes more elastic than belts. Mr. Ellinger. Thank you, Dr. Stephens. I don't want to belittle or belabor this point, but I just did it. And I'm always glad we have more money than less. So, you know, that's a positive that we got almost $13 million. You are bringing some other liabilities here that we're going to have to offset with that. But is this something that we should have known about? If you're taking $2.4 million out this past year for 2008, would we have known about that? I mean, when we're starting to balance our budget, we're looking at layoffs. We're looking at other things that with employees, we couldn't give them the world at work, and now we're coming back and we're having money that is $2.4 million that we're adding to a fund that would have had $10.5 million in it. Is that something that we should have known about or should have been told about? Well, if we'd known about it, we would have told you about it, but we didn't know about it until we got ready to do the audit. So I brought it to you as soon as it was brought to my attention. This is not something we've been sitting on. We did not. Is it in the budget itself? It is not budgeted, no. So there's not a line item that we can find anywhere? No. But if we have a fund flow statement, a balance sheet, then we... If you had a balance sheet, you would have seen that there was a working capital fund. Yes, it's in the... You have a copy of our 2007 audit. If you look at the balance sheet in our 2007 audit, it shows a reserve for working capital. So from that perspective, we would have known where that is. Well, I had it, but just like me, I mean, me not knowing is a whole lot worse than you not knowing. But, I mean, I assumed if it was, I mean, it's been there for, I've read all of the audits for the past four years, I guess, and I just assumed that there was an ordinance behind it. And you say there's no gas fee requirements now for this? No, sir. So we're not going to be penalized by using this? No, sir. In fact, we're going to go to market to try to sell our bonds in a much stronger position than we would have gone had this not been the case. Because if that working capital fund weren't sitting there, we'd be going to market with an almost $9 million deficit in our risk management fund and a $4 million deficit in our health insurance fund, and that's not a great way to try to sell bonds. I mean, we are going to be much stronger to wipe these negative balances off our balance sheet when they start doing the financial analysis to decide what the rating is going to be on the bonds that we're going to try to sell. So, you know, I'm sorry I didn't know about it and I didn't bring it to you sooner, but the fact of the matter is we're stronger because of it. And the calculation, again, could you go through how we came up with the 2.4? It's the accrued, basically the accrued, the big three revenues on payroll, business license, and insurance, and minus the accrued payroll. So it's taking out of reason. We had a kind of a procedure to do to make this number, but we really didn't have an ordinance backing up telling us to do this. Right. When did the contingency fund come into existence? Well, Council Member Lane did that. It's, what, three years old now? We had one prior to that. No, we didn't. We never had one prior to that? That was the first time we ever had a rainy day fund? I'll get you that answer. I just worked on the financial notes. I know we beefed it up three years ago, but we had something prior to that. We just didn't have it by ordinance. That's right. Okay. This committee drafted it. Right, I know. I think it was important. But until then, we had some money in that, because I know when I came on before three years ago, it was there. Okay, thank you. Thank you. Two more have questions, and I have several questions to ask. Mr. Myers. Thank you, Mr. Chair. Commissioner, when you give us the report, you said that you could start reporting out monthly on the health insurance fund. Can you segregate out the partner agencies in that report? Or at least can you do it? I think I can. The problem is going to be there's going to be some lag time, because on the claims side, we get that from our third-party administrator. So there will be a lag. I'm not sure how long the lag is, but I know that we get it that way. I'm not sure how often and what the lag time is, but we'll add that. Okay, so you're going to bring back an initial report when you come and report to the full council on that fund, and you'll segregate it out? to that point, whatever point in time you do that, and then monthly going forward, you'll give us the separation. Can you do the same thing on the risk management fund? Yes, sir. Okay, and then you're going to bring a report to the full council on that one as soon as you get that together as well? Yes, sir. Thank you. I'm sorry, I'm making notes so I don't forget anything. Okay. Okay, Mrs. James. Thank you, Mr. Stevens. Commissioner, if a couple of things that have come to mind based on our discussion today is that I think it might be I'm asking if there's a possibility to include all related ordinances related to the budget in one document. So for future reference, say the World at Work ordinance, any ordinances that require certain allocations or appropriations, if we can give reference to those ordinances where appropriate in our budget document. Can we do that? I think the budget ordinance refers to the other ordinances, but we'll double check. Okay. Thank you. Maybe even as an appendix included in that document for future reference. And also, I'm with Council Member Myers on the health insurance fund. I do think it's important for us to see that separate amount from partner agency or outside agency versus internal. And one of the things I'm a bit concerned about, I think you said very, very quickly, that we may have to look at or it could be a possibility that premium increases would come. And I'm not sure that I feel comfortable asking for premium increases where maybe we're basing that on a system that maybe is flawed. So if we see that we're over a certain amount in claims or over what we projected we'd be in claims, If we look at increasing premiums to justify making up for that difference when maybe it's the way that we're doing it and who we're including in that pool is really what's causing the difference of the dollar amount. Do you understand what I'm saying? I do. And when I bring this to you, I'll bring you sufficient information for you to make that determination. I think, again, it's how far the council is going to be willing to go with some of the partner agencies. But it is the system, and it is the way we're doing things now. Okay. I just don't want the council members to kind of see the negative number and think, oh, we've got to increase fees. We've got to increase the premium when that might not be the real answer. That's true. And we implemented a lot of things with this last health insurance plan that were meant to save us a considerable amount of money. And what this reflects, I mean, this number does not – let me think about this. This number only reflects a half a year of that experience. So the other half year carries into 2009. So we might not be in a negative $4 million position in 2009 because of the changes that we made, but we only picked up six months of it in 2008. Okay. But we'll look at all that at plan year versus fiscal year and get it back to you. Okay. And also I think it may be good at some point to – I mean, we're having this conversation today about the working capital reserve and how it's been in there and been budgeted. But I think somehow officially we need to put that somewhere as we have discussion about budgeting, because if all new people came into government, which I guess has happened before a lot of new people come into government, and they see that allocation, how will we know that they won't repeat the same mistakes that this administration and this council has done to just continue to put that money in there? So somehow we've got to have like a red alert or something that says, okay, don't put this money in here automatically just because you saw it as a line item in the previous budget. I think the transparent way to deal with this is for the council to be reviewing the balance sheet. And I think that's probably where we dropped the ball. We've been looking at budget reports. This is not something that would show up in a budget. It shouldn't show up in a budget because it's about accruals and you don't deal with accruals in the budget. So the balance sheet is the place, and if we can start looking at that on a regular basis, monthly may be too much for the balance sheet, but maybe on a quarterly or even semi-annually. You know, for FY07, we never really, we didn't take an opportunity to even present it because it was so late and all that. But we're going to be timely, in fact, ahead of schedule in 08. I mean, for the 08 audit. So how do all of those budget sheets translate to that final budget document that we're looking at to make budget decisions? So when we get the big, thick, binded copy that's a mayor's proposed budget, how will all those balance sheets translate in that document for us to know what's really been going on? Give me an opportunity to bring you something to look at, because it's very difficult to explain without something even in front of me. I'd hate to say something. Let me take a stab at it, and if it's not what you want, we'll go back to the drawing board on the report and make sure that you have every piece of information that you need to make good financial decisions. Okay. Thanks for answering. Thank you. The red light here goes on and off. I think it's on now. Can you hear? I can hear you. Yes, sir. I thank you for bringing this information to us. It is kind of found money. And I know that I'm not sure why some items are accrued and some are in the budget. For example, our economic contingency fund is a budget item. Everybody in the county knows about that item and how this can slip by under a different system. I'm not sure. I'd like that explanation sometime. Also, perhaps not now. And when you bring this report to us. My other question is, do we need a resolution or an ordinance to kill this thing? I don't think so. I mean, it's past practice, and that's all. I mean, it has its roots in past practice, as do hundreds of other things that we do around here in government every day. I mean, they have their roots in past practice. I don't see any – I mean, if it makes you – Well, you know, I wonder what else is lurking out there. Well, I would agree with you. I mean, I hope there's nothing else lurking. On our balance sheet, there isn't. That I can tell you. Mary has been through the balance sheet with a fine-tooth comb. Well, that gives me a lot more confidence. Do you want to say something? I was just going to say, I can guarantee you that this was the only number that in 07 that I just followed the work papers. Everything else, we had to rebuild pretty much from scratch. and it's kind of funny that this had, you know, the supporting document showing from 2003 forward how it was calculated and, you know, shame on me for just following it and not asking the question in 07. No, we thank you for doing it now and it's nice when you find a sock to have something in it. I'm glad we found a positive fund balance instead of a negative one. Okay, thank you. Did you have another question, Ms. James? No, I'm just moving on to the next item. Please. Okay, thank you, Dr. Stevens. Kena is at the mic, and I just wanted to give an update. Some committee members have been saying, why is UDAC still on the agenda? Why do we need to talk about it? I thought we settled it. What came forward previously was an ask for a use of some of the UDAC funding for the streetscape committee, or for the streetscape design. And I just only put this into committee so that we would know or to make the request to Commissioner Coe and her group to ask for some type of report out so we can have a regular report out of how much of the UDAG funds still remain and how it's been expended. So Keena and I have spoken, and we're working on a spreadsheet which is not prepared today, and I don't expect it to be prepared today, but some type of spreadsheet which just says how much funds are available, how much have been expended, what projects they're working on, that sort of thing. So it's just to ask. It doesn't even have to be a formal presentation to the budget and finance, but just a report that maybe comes by e-mail even just on a regular reporting basis as the UDAG funds are expended until we get that down to zero. So you would like a current and future regular reports on the status of the UDAG accounts? I think that would be appropriate. And similar to what we're talking about about these funds that are there, it kind of, as we're talking about the health insurance fund and things such as this working capital fund, And similar things. So as we're expending it, we just have a tracking, what's going on. If we need to tap into that, Budget and Finance Committee could be that venue where folks could come in and say, have a project, I'd like to utilize the UDAG funding and work with community development to get those funds appropriated. Would you like for us to continue this and ask the community development to come next month so they can elaborate a little bit on it? I don't think that would be necessary unless you think it is. The spreadsheet, Kena, will be working with community development to make that happen. I would suggest that we get that spreadsheet. If anyone has questions, maybe to contact community development directly, if necessary, to bring it to the full committee, but otherwise just kind of on an as-needed basis, as inquiry basis. I think initially, at least when these things are presented, there might be some questions regarding various items in the list about what's going on. So we can always ask them to come. Yes, we can ask as needed. Kina, do you have any questions as far as the headings? We've talked a little bit about it. We'll talk some more as I get some more information. Okay. Thank you, Dr. Stevens. That's all I have on that. Is there any further business? Hearing or seeing none, we are adjourned. Thank you.