FINANCE DEPARTMENT
Annual Report 2001
Annual Report Table of Contents
To see larger versions of all charts below, please click on table.
GOALS/PURPOSE
The primary purpose of the Finance Department is to carry out the various financial activities of the City of Morgantown, its many departments, and affiliated agencies in compliance with various Federal, State, and City regulations and laws. These activities include revenue collection, procurement, disbursement processing, payroll, budgeting and monitoring budget compliance, investment management, fixed asset accounting, cash management, insurance and risk management, general accounting and financial reporting. In fulfilling its various tasks, the Finance Department continually strives to operate in an efficient and professional manner that will enhance public confidence in City management, its employees, and its elected officials.
CURRENT PROGRAMS / SERVICES
The Finance Department is constantly striving to improve both the efficiency and the effectiveness with which it renders its service to its users - City management, City departments and agencies, and, most importantly, the citizens of Morgantown. The following sections detail the operation of the Department's main activities.
Revenue Collection
As illustrated in the following charts, the major components of General Fund revenues are taxes and service fees. The larger sources of tax revenue are business & occupation (B&O) tax and property taxes. The largest source of service fees is fire service fees.
Business & Occupation Tax Administration
B & O tax revenue made up approximately 55.47% of General Fund revenue in fiscal year 2001. Budgeted B & O tax for fiscal year 2002 is estimated to be 52.51% of total revenue. Of the budgeted amount of $7,277,000, $1,200,000 is expected in fiscal year 2001 from four major WVU construction projects currently underway, with the total anticipated revenue from these projects estimated to be $2.9 million. As of November 30, 2001, approximately $1.6 million has been collected on these four projects and transferred to the Capital Escrow Fund. Two additional major projects in the Wharf District, a hotel and conference center, will also be tracked separately, with the revenue generated being transferred to the Capital Escrow Fund.
The administration of this tax requires coordination with the various project managers, contractors, and subcontractors. Finance Department staff also utilizes internal records such as building permits, license applications, and fire service fee records to ensure that all taxpayers are informed of the tax, are receiving the necessary reporting forms, and are filing and paying the tax in a timely manner.
B & O revenue has shown steady growth over the past several years as depicted in the preceding graph:
It should be noted that the 8.04% decrease in budgeted revenues for fiscal 2002 is based on the original budget estimate done in March of the preceding year before actual revenues for the current year were known. This budgeted amount will undoubtedly be revised upward.
Understanding the composition of the City's major tax source is critical in forecasting future revenues, especially in these uncertain economic times. The following graph depicts the growth in selected categories of B&O revenue since fiscal year 1997. As you can see, while contracting revenue accounts for a substantial portion of the overall growth in B&O revenue, other areas such as service, retail, and rental have shown steady growth as well. The second chart illustrates the composition of the City's B&O tax revenue for fiscal year 2001. It is important to note that, while total contracting accounted for 27% of the total B&O revenue in fiscal year 2001, retail was a close second at 26%.
Fire Service Fee Administration
Fire service fees are assessed on all structures situated in the City of Morgantown. The current rate of assessment is 4.75 cents per square foot and 3 cents per square foot on all floors over three stories. Fire service fees are solely used to support the operations of the Fire Department and total approximately 70% of the Morgantown Fire Department's current operating budget.
Fire service fees are billed by Finance Department staff annually at the beginning of July for the current fiscal year of July 1 through June 30. A discount of 5% is given on the portion of the fees received by August 15. For fiscal year 2002, 66.5% of the fire service fees billed on July 1, 2001, of $1,582,544 were collected by the discount date, with a discount of approximately $57,086 taken. The Finance Department staff has had much success in the timely collection of fire service fees, reporting an uncollected rate of 2.4% and 2.9% as of June 30, 2001 and 2000, respectively.
Procurement, Accounts Payable, and Disbursement Processing
The Finance Department maintains a purchase order system for all purchases by the various City Departments, the Airport, and Parking Authority. All requests to purchase must be submitted by the various department heads to Finance, where the expenditure is reviewed and budget compliance is verified before approval is given. During the year ending June 30, 2001, approximately 2,242 purchase orders were processed by Finance Department staff. For all expenditures over $10,000, formal bids must be obtained following procedures established by the Finance Director.
The Finance Department staff issues approximately 3,400 accounts payable checks per year. Checks are run every two weeks to pay all invoices received during the previous two-week period, so that all invoices are paid in full within two weeks of receipt by the Finance Department. The following chart depicts General Fund expenditures by functional classification for the fiscal year ended June 30, 2001:
As can be seen by the following chart illustrating General Fund expenditures by object classification, personnel costs comprise 58% of the total budget, with contributions at 26%. However, it should be noted that 88% of total contributions were made to other City funds and agencies.
Payroll
Personnel costs shown above include gross payroll, payroll taxes, health insurance, and retirement expense. Finance Department staff processes bi-weekly payroll disbursements, either in the form of checks or direct deposits, for 202 full-time and 25 part-time employees. In addition, the Department also processes monthly payroll disbursements for 176 retirees and surviving spouses of the Employee's, Policemen's, and Firemen's Pension Funds.
In addition to processing the various payrolls, Finance Department staff must keep track of accrued leave, determine pension payouts, prepare quarterly and annual payroll tax reports, compile reports for the actuarial valuations of the three pension funds, and assist in the administration of the various employee benefits.
RESOURCES
Finance Department Staff
The most valuable resource of the Finance Department is its dedicated and experienced staff. The staff consists of the Finance Director, Assistant Finance Director, and five accounting clerks. The five accounting clerks are each responsible for a particular functional area, i.e., licensing and B & O taxes, accounts payable, payroll, fire service fees, and cash receipts. While each staff member is considered the "expert" in his or her area of responsibility, other Finance Department staff members are cross-trained to ensure that Department operations will continue to run smoothly regardless of personnel absences or changes.
Computer System
The Finance Department utilizes an IBM AS/400, along with New World Systems (NWS) accounting software for general ledger, accounts payable and procurement, business licensing, revenue accounting and accounts receivable, fire service fees, and payroll.
Over the past three years, the Finance Department has added seven personal computers, two of them with the capability of being used as workstations with the AS/400. Each staff member now has a PC available, and many tasks formerly done manually have been computerized using various spreadsheet and word processing programs.
The Finance Department was informed by NWS and IBM that the Department will need to upgrade the AS/400, as IBM will be discontinuing support on the current system, and NWS will be discontinuing maintenance on systems running the current operating system software. With that in mind, the Finance Department staff has been examining other software options and operating systems, as well as NWS's proposed system upgrade. The Finance Department is using this "imposed" upgrade as an opportunity to effect operating enhancements with whichever system is selected, such as remote accessibility by City department heads and the automation of certain tasks currently being done manually. A final decision on the upgrade or replacement issue will be made by year end.
REVIEW OF THE PAST YEAR
Office Renovations
Perhaps the biggest change in the Finance Department this year was the renovation of its office space. The work was entirely done by the City's own work force from various Public Works departments, and Finance Department staff is very appreciative of their fine work. Renovations included building a separate office for the Finance Director, which freed an office on the second floor of City Hall previously used by the Director, and turning an unused back room into a conference area and payroll office. These changes also freed space in the rest of the office, thereby enhancing each staff member's workspace in terms of both size and functionality.
Provision of Accounting Services to Affiliates
The Finance Department took on the management and oversight of the accounting system for the Board of Parks and Recreation Commissioners (BOPARC) at the request of its Board. This began with the Finance Director reviewing BOPARC's current accounting system and making recommendations for improvements, which were then implemented by BOPARC management. In addition, BOPARC went on the City's accounting system on July 1, 2001, utilizing the City's AS/400 and NWS software for general ledger, accounts payable, and revenue accounting. It is expected that BOPARC will convert its payroll to the City's system on January 1, 2002. To effect these changes, BOPARC's accounting clerk has moved from BOPARC's administrative offices to the Finance Department.
At the request of its Board of Directors, Finance Department staff also took over the responsibility for Main Street Morgantown's payroll and accounts payable systems, which had previously been contracted to an outside firm. This change is expected to result in cost savings to Main Street Morgantown and enhance the financial reporting and informational needs of the organization, which has proven to be so vital to Morgantown's downtown economic base.
With the Municipal Airport's buyout of the FBO operations at the end of last year, the Finance Department assumed the extra accounting duties involved with that endeavor as well. This included recording daily deposit summaries, the monthly reconciliation of cash and accounts receivable, accounts payable, payroll, and the preparation on monthly financial statements.
Fixed Asset System
One of the more significant changes brought about by the Government Accounting Standards Board (GASB) Statement 34, which established a new reporting model for governmental entities, is the requirement for governmental funds to not only report the cost of fixed assets, but also to report fixed asset depreciation. The traditional reporting model required that the cost of fixed assets of governmental funds be reported in a separate "General Fixed Asset Account Group (GFAAG)," but this requirement did not include infrastructure assets. Enterprise funds, such as Airport and Parking Authority, have always been required to report and depreciate fixed assets, including infrastructure, so the impact of GASB 34 on these funds will not be as significant.
The City of Morgantown, unlike many other municipalities, has complied for some time with the GFAAG requirement, so that the main focus for the Finance Department has been to set up the depreciation system for these assets. To accomplish this task, the Finance Department utilized the services of an intern from WVU's Public Administration program. The intern's project was to set up the fixed asset depreciation system, using the existing fixed asset listing, on the NWS software package that, while installed on the computer system, had never been used. The intern also developed a "User's Guide" that Department staff will be able to reference as they begin to utilize the fixed asset system. The internship program proved to be a very positive and beneficial experience for both the intern and Department staff.
Training and Staff Development
The Finance Director attended the Government Finance Officers Association (GFOA) annual meeting in Philadelphia. The theme of the conference was "Ringing in the Digital Revolution,"
and several seminars dealt with the implementation and management of "e-government' issues, as it relates to the finance function. Other timely issues addressed included a variety GASB 34 topics and performance budgeting initiatives. Finance Department staff is also actively involved in the WV GFOA and participates in its semi-annual meetings. Much useful and practical information is presented by outside speakers from both the private sector and governmental agencies at these meetings, and important networking with other municipalities throughout the State is facilitated.
Two staff members attended a training seminar in Fairmont on "Customer Communication" presented by a trainer from the State Auditor's Office, and they came back with new and useful insight on dealing with "customers" as well as co-workers. Finance Department staff members also attended an informational seminar presented by the U.S. Postal Service in Clarksburg dealing with procedures for the safe handling of mail.
The Finance Director was a presenter for the "Local Government Leadership Academy" held by the Institute of Public Affairs at WVU. The Director presented the seminar, "Financial Management" to various leaders in local government, including county commissioners, city managers, mayors, recorders, and council members. The Director also participated in a three member panel that presented "What on Earth is GASB 34, and Why Should You Care?" at the "2001 Environmental Training Institute for Small Communities" held at WVU and co-sponsored by the National Environmental Training Center for Small Communities and the National Drinking Water Clearinghouse. The panel discussed GASB 34 implementation issues for small communities and included a representative from GASB. The Director found these opportunities to be very rewarding as the presenters in such seminars often learn as much, if not more, than the participants, and the contacts made can be very beneficial in future City matters.
During the current year, the WV Municipal League formed its "Tax Committee" to study and make recommendations to State leaders on tax and revenue issues facing municipalities in West Virginia, and the City's Finance Director was honored to be a member of this committee. This committee submitted several recommendations to the WV Tax Department as a result of the Tax Department's request for comments on its proposal to revise the existing 1992 B&O regulations. Additionally, the committee studied the tax structure of cities in neighboring states, which was then used to help formulate its recommendations to State legislative leaders and the Governor regarding proposed changes in tax legislation affecting cities, with flexibility cited as being the most important attribute of any proposed legislation.
FORECAST FOR THE COMING YEAR
The coming year promises to be filled with some important new challenges and opportunities for the Finance Department.
Implementation of GASB 34
The traditional financial reporting model for governments has emphasized fiscal accountability and focuses on compliance issues in the raising and spending of public funds in the short-term, usually for one budget year. The new financial reporting model adds the dimension of operational accountability, requiring a government to demonstrate the extent to which it has met its operating objectives, and whether it can continue to do so in the future. The City of Morgantown will be required to implement GASB 34 starting with the fiscal year ending June 30, 2003.
One of the more significant features of the new financial reporting model is the government-wide financial statements, presented on a full accrual basis. Current reporting of governmental
activities is done on a modified accrual basis with a short-term focus based on near-term inflows
and outflows. However, the government-wide financial statements will provide a long-term prospective and will include fixed assets, related depreciation, and long-term debt. The government-wide financial statements are intended to present the governmental entity in a manner comparable to that of a consolidated, private sector business enterprise.
A major outcome of this new long-term focus is the requirement for infrastructure reporting. In addition to its regular fixed assets, the City will be required to capitalize and depreciate infrastructure assets such as roads, bridges, sidewalks, etc. This is also a requirement for retroactive reporting, but this can be limited to infrastructure assets acquired after June 30, 1980. The retroactive reporting of infrastructure is not required for Morgantown until the fiscal year ending June 30, 2007, but prospective reporting of infrastructure will be required when the City implements GASB 34 in fiscal year 2003.
Finance Department staff has been coordinating its implementation efforts for GASB 34 with its auditors and is confident that it will be in full compliance with GASB 34 requirements for the fiscal year ending June 30, 2003.
Other Plans for the Coming Year
- Proceed with the computer system upgrade or replacement
- Revise business license and tax handbook, along with application forms
- Seek internship opportunities with WVU and other schools to assist in various projects
- Improve collection of delinquent B&O tax accounts and improve the assessment process
- Continue staff training and development initiatives
- Utilize the City's web site to distribute tax information and forms
- Explore opportunities to enhance service to taxpayers and citizens, utilizing various technological advances such as Internet tax filing and acceptance of debit and/or credit cards
SUMMARY
It is clear that the role of the Finance Department in City administration goes beyond that of merely accounting for and reporting on City funds. The Finance Department staff continually seeks to be of assistance to City management and other City departments and agencies in reaching their goals through proper financial management and planning. Furthermore, the Finance Department is often the main contact many citizens have with City government, and staff members in Finance are committed to making the citizens' experience with the City a positive one by continually emphasizing professionalism and customer service. Finally, Finance Department staff recognizes that Morgantown City government does not operate in isolation and will, therefore, continually strive to enhance its networking with other local governments, State officials, and various professional organizations.
