Budget & Finance Committee Meeting

Summary

Meeting Overview

The Urban County Council - Budget & Finance Committee met on September 30, 2008, at 1:00 p.m. at Lexington-Fayette Urban County Government, with Dr. Stevens presiding. The committee addressed three agenda items during the session, hearing two informational presentations and deferring one matter for future consideration. The committee received four public comments and took no votes during the meeting. The session focused on financial and administrative matters, including a revenue report for August 2008 and an update on internal auditing action plan tracking, while discussion of UDAG utilization fees and projects was postponed to a later date.

Attendance

The following individuals were present at the meeting on September 30, 2008:

• Dr. Stevens
• Jim Gray
• Linda Gorton
• Chuck Ellinger
• Jay McCord
• Ed Lane
• Kevin Stinnett
• George Myers
• Andrea James
• Don Blevins

No absences or late arrivals were recorded.

Budget and Financial Actions

The meeting addressed a significant financial adjustment to address shortfalls in two key fund areas.

Working Capital Reserve Utilization

An amendment was approved to utilize $12,900,000 from the working capital reserve. These funds were designated to cover negative balances in both the health insurance fund and the risk management fund. This action provided necessary financial support to address deficits in these two critical operational areas.

Public Comment

Council members raised several concerns regarding financial transparency and budget processes during the meeting.

Transparency and Financial Oversight

Council Member Lane expressed concern about a $12.9 million working capital reserve that had remained on the balance sheet for eight years without council awareness. Lane characterized this as a lack of transparency and poor financial management 1:57:17.

Budget Process and Reserve Disclosure

Council Member Ellinger questioned why the working capital reserve was not disclosed during the budget process. Ellinger noted that the reserve was not budgeted and had not been brought to council attention despite its size and significance 1:23:52.

Health Insurance Fund Concerns

Council Member Myers raised concerns about the health insurance fund, specifically questioning whether partner agencies are subsidizing LFUCG employees through higher claims. Myers suggested that premiums may need to be adjusted, particularly given the upcoming open enrollment period 1:01:41.

Budget Documentation Recommendations

Council Member James recommended including all related ordinances in the budget document as an appendix for future reference. James emphasized the need for greater clarity on how funds are allocated 1:28:47.

Contested Items

Working Capital Reserve Disclosure

Council members engaged in heated discussion over the lack of transparency surrounding a $12.9 million working capital reserve that had operated for eight years without council awareness or an ordinance authorizing it. Council Member Lane criticized the administration for poor financial management and insufficient openness regarding this substantial fund. The core disagreement centered on how the reserve had been maintained without proper oversight or disclosure to the council, raising concerns about governance and accountability in the city's financial practices.

Health Insurance Fund and Partner Agency Premiums

The council was divided over how to structure health insurance premiums for partner agencies. The debate focused on whether partner agencies should pay higher premiums due to their higher claims compared to city employees. Council members expressed concerns about the fairness of such an arrangement and its potential impact on social service agencies that rely on the health insurance plan. Council Member Myers proposed an alternative approach, suggesting that partner agencies be moved off the health insurance plan entirely rather than charged differential rates. This proposal reflected disagreement about the best method to address the cost disparity while maintaining equitable treatment of partner organizations. The discussion resulted in a split vote, indicating that council members remained divided on the appropriate resolution.

Revenue Report for the Month of August, 2008

22:20

Commissioner Koch presented the August 2008 revenue report to the board. The report identified a $478,505 shortfall in total revenue when compared to August 2007 figures.

Key Findings

Commissioner Koch attributed the revenue variance primarily to timing issues. She noted that expenditures were higher than expected during the period due to the earlier encumbrance of funds.

Working Capital Reserve Discovery

A significant finding emerged during the review: a working capital reserve of $12.9 million was discovered. Commissioner Koch proposed using this reserve to address negative balances in two specific funds:

• Health insurance fund: $3.959 million deficit
• Risk management fund: $8.9 million deficit

Outcome

This agenda item was presented for informational purposes. The report provided the board with an overview of August 2008 revenue performance and highlighted the proposed allocation of the discovered working capital reserve to cover fund deficits.

Internal Auditing Action Plan Tracking Matrix

Bruce Sahli presented the Internal Auditing Action Plan Tracking Matrix, a tool designed to monitor audit findings, management responses, follow-up dates, and implementation status.

Presentation Overview

Sahli explained the tracking process and methodology. He noted that follow-up activities are conducted primarily through email correspondence. Field reviews are conducted selectively, limited to situations where identified issues are considered severe enough to warrant in-person verification.

Council Concerns

Council members raised several concerns during the discussion:

• Accountability: Members expressed concerns about ensuring proper accountability for audit findings and their resolution.
• Staffing: Questions were raised regarding staffing resources and capacity to conduct adequate follow-up activities.
• Formal Reporting: Council members indicated a need for more formal reporting mechanisms to keep the council informed of audit findings and their status.

Outcome

This agenda item was informational in nature, with no formal action taken. The presentation provided the council with visibility into the internal audit tracking process and identified areas where council members believed additional oversight or reporting procedures should be implemented.

UDAG Utilization Fees and Projects

1:36:03

Council Member Andrea James reported on efforts to establish a regular tracking mechanism for UDAG (Urban Development Action Grant) funds. She proposed implementing either a spreadsheet or email report system to monitor available funds and track expenditures on an ongoing basis.

James indicated that no further work was needed on this matter at the current time. However, she requested that Community Development provide regular updates going forward to maintain visibility into UDAG fund utilization.

The outcome of this discussion was deferred, allowing for the proposed tracking mechanism to be developed and implemented by Community Development staff.