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Modoc County Fiscal Restoration ICS Update |
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Date: 01/25/10
The Incident Management Team continues to work together during regular department head meetings.
Operational Period Accomplishments 01/19/10-01/25/10 · The previously identified savings projection of $1.5 million will show Modoc County’s ability to successfully pay the debt services and assist in securing financing to restore the county treasury. · The short term financing, in the form of a line of credit, is still in process. · The 07-08 audit is now estimated to be completed by the end of February. To insure thoroughness and assist in constructing more sound procedures and policies, the time frame for the audit’s completion has been extended. At the completion of this process the steps necessary to complete the 08-09 audit will be streamlined. · The City and County continue to work together on topics to assist the County. At the last City Council meeting the City approved the 90 day special billing for water and sewer. The County has reimbursed the City 50% of the Educational Revenue Augmentation Fund (ERAF) monies. The County is expected to release the remaining 50% as funds become available.
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Frequently Asked Questions Updated 1/25/10
1. What factors led to the County’s cash deficit? There were many factors, but the bottom-line is that cash balances within the County Treasury were not reviewed and controlled over a period of nearly 10 years. Many counties use funds in the cash account to operate. They then replace these funds by the June 30th deadline. This was not done. The Hospital remained open saving lives and the county carried its negative balance. The Hospital has been able to repay some funds back to the county treasury while maintaining a positive operating balance
2. What steps has the County taken to resolve the issues, such as a. Budget cuts and cost savings - Cuts and areas of cost savings were done at the beginning of FY 09-10 to balance the current year budget including cash flows. Each week the Fiscal team (Assistant CAO, Auditor, Treasurer and Department Fiscal Staff) review and update funds coming in and funds going out to assure balance and savings.
b. New policies – Numerous policies and procedures have been put into place and will continue to be enacted including regular budget monitoring, warrant payable policies, prioritization and deferral of non-essential expenditures. The county financial audit will result in numerous additional policies and procedures in regards to accounting practices.
c. Financing – Both short term (in the form of a line of credit) and long term financing (in the form of bonds) are being procured to manage the county cash flow and remediation of deficit fund balances in the county treasury by June 30, 2010.
3. What is the County’s cash deficit? As of December 31st. the total negative cash balance in the county hospital operating fund was $ 12,629,436.
4. What happens if the treasury is not restored? If the treasury is not restored by the amount of unauthorized negative cash balances, then the County assumes a risk of insolvency or not being able to pay obligations such as payroll, vendor checks or any other payments for all county programs and services. There may be personal and professional liability assumed by elected officials and others due to violations of various statutes contained within government, penal , and possible other code sections of both the US and State of California.
5. Is the hospital putting money into the County treasury? Yes. Do they have a payment plan? Yes, to the extent that there is surplus cash at the end of every month.
6. It has been suggested that the County file for bankruptcy. What is your response to that? We do not believe bankruptcy is a viable option. The “debt” is not owed to outside lenders or creditors, but to the county treasury. Bankruptcy does not restore one cent to the county treasury or eliminate the requirement to finance the deficit. The bankruptcy process is very time consuming and expensive. If the county claimed bankruptcy, a trustee would be appointed by a bankruptcy judge to prioritize cash payments and would have the authority to usurp budgetary or fiscal governance decisions from the Board of Supervisors. This would take any and all local fiscal control away from the county. We have been able to identify 1.5 million in cuts and savings necessary to pay loan/bond service. Upon implementation of these budget modifications we are capable of meeting the obligation of long-term bond/loan repayment. The bottom line is that to avoid insolvency, we must have the total deficit restored to the treasury by June 30, 2010.
7. What is the next step? We are proceeding down several concurrent tracks: Ø Finalize the short term financing line of credit. Ø Expedite the county financial and single audits for FY 2007-8 and 2008-09. Ø Proceed with putting the long term financing (in the form of Bonds) in place by March, 2010 in order to restore funds within the county treasury. Ø Start the FY 2009-10 midyear budget reviews as well as start preparing the FY 2010-11 budgets with changes in place adequate to meet loan payment obligations. 8. What cuts are going to happen next? Additional cuts and adjustments to department budgets are being reviewed. Mid-year budget reviews will be aimed at ensuring that reserves are sufficient to support the financial and single audits for FY 07-08 as well as developing the plan for long term financing repayment. All departments are dedicated to assuring that they support bond repayment to the extent allowable under their funding restrictions.
9. How secure are the funds in the treasury, such as the schools account? Can funds be used in the event of an “emergency?” The school’s funds are in a separate school investment account that is linked to their checking account. Only the Modoc County Office of Education can draw checks on that checking account. In an “emergency” the county could borrow money from some depositors within the County Treasury within ‘dry period” loan procedures and policies established in the State Constitution. |