June 3, 2020 Staff Report 4.2 Report of Expenditures and Revenues Through Quarter 3, 2019-20

Analysis 

Background

After the end of each quarter in a fiscal year, staff reports to the Budget Committee and the full Commission regarding the level of expenditures and revenues through that time period. This report discusses the expenditures and revenues through the end of the third quarter of Fiscal Year 2019-20.

A spreadsheet is attached, for Commissioners’ information. A report and data were provided to members of the Budget Committee in May.

Overall

Expenditures through the third quarter of the fiscal year totaled $536,973, about 70 percent of the Adopted Budget of $762,295. A little more than 100 percent of the projected revenues for the year has been received. Details are provided in the narrative below.

Expenditures: Salaries and Benefits

Of the budgeted $612,630 for salaries and benefits, approximately 68 percent, or $414,661, has been expended through the third quarter. All accounts are below the 75 percent of budget level, with the exception of expenditures for Health Insurance (Account 50301) and HRA (Account 50304). According to County budget staff, the level of expenditure largely reflects that, when the County developed the 2019-20 salary/benefits numbers that were included in the LAFCO budget, some factors – such as the level of pay increases that might be offered as well as benefit changes - were not finalized (the County Board of Supervisors typically approves the budget after LAFCO does); changes to individual budgets were not made after budget adoption.

The 92 percent level expenditure in Health Insurance ($25,000 compared to the almost $30,000 budget) reflects a staff member’s determination, at mid-year, to receive health benefits instead of continuing a previous waiver; funding for this had not been previously included in the adopted budget. The HRA (Health Retirement Account) reflects a higher allocation of costs for County employees hired after 2009, in accordance with the Public Employees’ Pension Reform Act (PEPRA); this affects two staff members. Staff expects that, by year-end, both these accounts will be over-expended.

Expenditures: Services and Supplies

Through the third quarter, almost 82 percent, or $122,312, of the Services and Supplies budget of $149,665 was expended. The greater-than-budgeted expenditures are found, primarily, in four accounts, and explanations are found below. Staff expects that Services and Supplies overall costs to exceed the Adopted Budget by year-end.  

• Account 51249 (Professional Services): $14,706 has been expended, compared to the $10,000 budget. Typically this account is used to cover the cost of the State Board of Equalization’s processing of changes of organization or reorganization; the fee is determined by acreage. Applicants, whether individuals or public agencies, pay LAFCO and, upon Commission approval of proposals, LAFCO pays the State. Earlier in this fiscal year, payments were made for prior reorganizations, particularly two fire district reorganizations (Roseland and Geyserville). The account is also used for other professional services. Through the third quarter, other expenditures included Spanish translation of notices of hearing for Commission proceedings for Glen Ellen FPD and Sonoma County Fire District reorganizations and the facilitator’s fee for the Commission’s Strategic Planning Workshop in February. Expenditures associated with the fire district reorganizations will be reimbursed.
• Account 51301 (Legal Notices): Just over $7,000 has been expended in this account compared to the $5,000 budgeted. The majority of the cost reflects notices of hearing published in local newspapers for reorganizations, as required by state law (when less than 100 percent of owners and voters provided their written consent). This year, these notices were for both Commission and protest proceedings associated with fire district reorganizations; costs will be reimbursed.
• Account 51911 (Postage): Almost $5,000 has been expended through Quarter 3, compared to the $1,500 budget. The overage reflects the cost of mailing notices of protest hearings to owners in territories proposed to be annexed to the Glen Ellen Fire Protection District and Sonoma County Fire District. The applicant agencies pay the cost, with the reimbursement accruing to a revenue account.
• Account 51915 (Printing): The expenditure of just over $4,900, substantially higher than the $500 budgeted, reflects the cost of an outside vendor’s printing notices of protest hearing in  English and Spanish for both the Glen Ellen FPD and Sonoma County FD reorganizations as well as the cost of materials and stuffing envelopes. As indicated above, the applicant agencies reimburse LAFCO for the costs.
• Account 52091 (Memberships): The expenditure reflects the total cost of membership dues for CALAFCO for the current year. It is paid once, at the beginning of the fiscal year.

Revenues  

Commission operations are funded by agency apportionments, interest from invested cash and processing fees, which are not budgeted, but are tracked through the year. One hundred percent of agency apportionments, or $699,295, had been received by the conclusion of the third quarter. Interest from invested cash approximated $16,000 double the conservatively budgeted amount, with much of the accrual due to the substantial Fund Balance that the Commission has maintained.

Fee revenue was just more than $51,700, with $15,000 received during the third quarter as deposits from two fire districts for reorganizations. Staff tracks our time against the deposits when they are received and, at the conclusion of process, charges an applicant agency the additional cost amount or refunds that portion of the deposit not spent. By the end of this fiscal year, staff expects fee revenues to increase due to receipt of several applications, although some portion of one or both deposits might be refunded upon final accounting, thus reducing the overall level of fees.

Fund Balance

At the end of Fiscal Year 2018-19/beginning of Fiscal Year 2019-20, the Commission’s Fund Balance approached $487,700. With deductions for what was anticipated to be needed to balance expenditures this year ($55,000) and funds for consultant studies ($170,000), approximately $262,700 was considered to be “available” for use at the Commission’s discretion.

The level of revenues received by year-end will be substantial. Staff’s analysis, to date, has determined, however, that it might not be sufficient, on its own, to balance actual expenditures. As a result, staff will consider recommending that the Commission approve a small budget adjustment, i.e., transferring some funds from the Fund Balance. Staff will include such an item on the July 1 meeting agenda, if necessary, before the current-year financial records are closed.

Even with such a transfer and anticipated contribution of Fund Balance monies to defray agency apportionments in the upcoming fiscal year, the Commission’s Fund Balance will remain robust and healthy, which, staff believes, will serve the Commission well in the next several years as our funding agencies are likely to deal with fiscal impacts due to COVID-19.

Recommendation 

Staff recommends that the Commission review, consider, and accept the report of expenditures and revenues through the third quarter of Fiscal Year 2019-20.

Alternate Recommendation 

None

Attachments

1. Sonoma LAFCO Expenditures and Revenue through Quarter 3, Fiscal Year 2019-20.