Corrective Action Plan and Assessment—City of Blythe
| Subject | May 20, 2021 | September 23, 2021 |
|---|---|---|
| Low financial reserves | Partially Addressed | Partially Addressed |
| Need for additional sources of revenue | Pending | Pending |
| Lack of a long-term plan | Pending | Pending |
| Subject | May 20, 2021 | September 23, 2021 |
|---|---|---|
| Enterprise fund deficits | Pending | Will Not Implement |
| Unpaid golf course loan | Fully Addressed | Fully Addressed |
| Need for public safety resources | Partially Addressed | Partially Addressed |
| Unaddressed vacant buildings | Pending | Pending |
| Subject | May 20, 2021 | September 23, 2021 |
|---|---|---|
| Utility rate and services fees insufficient to cover costs | Pending | Pending |
| Poor oversight of city contracts | Pending | Partially Addressed |
| Lack of a permanent city manager | Will Not Implement | Will Not Implement |
Corrective Action Plan and Assessment—City of Blythe
May 20, 2021
View Blythe's Corrective Action Plan from May 20, 2021
The city of Blythe (Blythe) remains a high-risk local government agency. Blythe submitted its corrective action plan on May 20, 2021, in response to an audit report issued in March 2021 by the California State Auditor's Office, entitled City of Blythe: Inadequate Planning and Other Ineffective Management Practices Hinder Its Ability to Provide Needed Services to Its Residents (2020-802). After reviewing the corrective action plan, we prepared the following assessment of Blythe's action items to address the high-risk areas we identified. Many of the activities Blythe discusses in its plan are ongoing and will require further evaluation during future updates. We will review the city's progress in its next update, due in September 2021, and will again evaluate whether to continue to designate the city as high risk.
| Financial Stability | |
|---|---|
| California State Auditor's Assessment Status: Pending |
Blythe must continue to work to achieve long-term financial stability. In December 2019, the city implemented a reserve policy that set a goal of having three months' worth of operating funds in its reserves. Blythe closed out fiscal year 2019–20 with $804,000 in reserves, or a little more than one month of operating funds. Although the reserve policy is nonbinding, city management plans to continue allocating budget surpluses to its reserves and estimates the surplus at the end of fiscal year 2020–21 will provide the city with over two months of reserves. While two months' worth of reserves does meet the recommended reserve from the Government Finance Officers' Association, it still falls below the city's reserve policy.
As we identified in our audit, Blythe remains without a formal plan or process to identify future development opportunities that would attract businesses and increase city revenue. The city states in its corrective action plan that it has participated in some local development initiatives such as the Palo Verde Valley Economic Alliance, which serves to promote the region in which Blythe is located. Most recently, the city adopted recommendations from an outside consultant to establish a new economic development coalition with representatives from the city, school district, community college, and health care district. The new coalition was scheduled to begin meeting in June 2021. These two economic development initiatives notwithstanding, Blythe remains without a plan or process to attract businesses and increase revenue. Therefore, despite the city's continued efforts, much work remains to ensure successful economic development efforts going forward. Finally, Blythe notes in its corrective action plan that it will develop a five-year strategic plan by June 2022. As we describe in our audit report, the framework provided by a formal strategic plan will guide the city's budgetary decision making and address long-term needs to achieve financial stability. We look forward to reviewing the city's strategic plan during future updates. |
| Enterprise Fund Deficits and Unmet Infrastructure and Safety Needs | |
| California State Auditor's Assessment Status: Partially Addressed |
Although Blythe states in its corrective action plan that it intends to address the internal loans affecting its golf course, the city remains without a plan to address similar internal loans to the funds of its trash collection and lighting district enterprises. Further, the city does not agree with our recommendation to record these internal loans as transfers in future financial statements because it believes that these enterprises will generate revenue in the future to repay these loans. However, the debts in these funds have been accumulating for at least nine years and as discussed in our audit report on page 11, accounting standards indicate that cities should record internal loans that are made without expectation of repayment within a reasonable time period as transfers—because they are in effect subsidies, not loans. Further, the city has acknowledged that the golf course fund is unlikely to ever repay its loans and the lighting district fund is currently being subsidized by the general fund. While the city has stated its plan to repay the golf course fund with $40,000 annual payments from its general fund, it has yet to outline a plan or policy to address the debt incurred in the trash collection and lighting district funds. By not addressing these longstanding internal loans, Blythe continues to present misleading financial information by recording these transactions as loans even though they are unlikely to ever be repaid by their respective enterprises.
In addition to the loans mentioned above in which the city's golf course owes an internal city fund, the golf course also owed over $1,000,000 to the city's former redevelopment agency. However, following our audit, Blythe took action to repay the entirety of this loan. As a result of unanticipated revenues and cost savings, Blythe expected a $2,200,000 budget surplus for fiscal year 2020–21. At the recommendation of city staff, city council approved a budget amendment reallocating some of the expected budget surplus to repay the golf course loan thereby reducing the expected surplus to $1,100,000 for the year. Blythe completed payment on May 27, 2021, satisfying the associated recommendation from our audit. In response to our recommendations, Blythe took action to improve public safety services. The city met with the regional manager of the Commission on Peace Officer Standards and Training (POST) to revise the city's application for management consulting services for its police department. Blythe is still waiting on a response to its application. To further address our recommendation that Blythe remedy deficiencies in its fire department equipment, city staff have committed to drafting a vehicle and equipment replacement schedule to replace fire department fleet vehicles in accordance with industry standards. We look forward to reviewing the city's replacement schedule during future updates. While Blythe has paid off the golf course loan owed to the former redevelopment agency and reapplied for POST consulting services, the city has not fully implemented any other recommendations in this risk area and has therefore only partially addressed this overall category. |
| City Management | |
| California State Auditor's Assessment Status: Pending |
Blythe reports it is taking steps to address some of the city's management deficiencies, but dismissed our recommendation to hire a permanent city manager. The city states in its corrective action plan that it intends to present a policy to city council detailing how it will fund rate studies for service fees and utility rates to address areas where the city has previously undercharged for services. In the interim, Blythe has included funding in its fiscal year 2021–22 budget for utility rate studies on both its water and sewer funds.
Further, the city is working to implement new contract management practices and is in the final stages of updating its municipal code to correct a shortcoming in its contract management processes. The city's current financial system does not have the ability to track contracts as recommended, but the city plans to update its financial software as funding permits and in the meantime is working to update tracking spreadsheets staff use to include information such as term, cost, and any relevant special terms. Blythe's city council is considering an ordinance to update its municipal code to clearly identify the specific individual or group with the authority to initiate and amend city contracts. In addition, the city has drafted a new purchasing manual to comply with the municipal code changes and plans to distribute the manual to all city departments as a guide for standard purchasing practices and procedures. The updated municipal code and purchasing manual are scheduled to go into effect on July 8, 2021. While these are positive steps in the right direction, Blythe has yet to identify how it will handle expired or completed contracts to decrease the risk of fraud, waste, and improper payments. In regard to our recommendation that Blythe move to hire a permanent city manager, the city has stated in their corrective action plan that it does not agree with our recommendation and will only move to hire a permanent city manager when deemed appropriate by city council. While we acknowledge the city council's high opinion of the interim city manager and her depth of experience in the report on page 23, we are disappointed in the city's decision to maintain the status quo. We remain concerned that the current structure is not sustainable in the long term and we will continue to monitor this issue. |
Corrective Action Plan and Assessment—City of Blythe
September 23, 2021
View Blythe's Corrective Action Plan from September 23, 2021
The city of Blythe (Blythe) remains a high-risk local government entity. We reviewed the updated corrective action plan Blythe submitted in response to the audit report issued in March 2021 by the California State Auditor's Office, entitled City of Blythe: Inadequate Planning and Other Ineffective Management Practices Hinder Its Ability to Provide Needed Services to Its Residents (2020-802). Blythe submitted its original corrective action plan in May 2021 and submitted an update to its corrective action plan in September 2021. Many of the activities Blythe discusses in its plan are ongoing and will require further evaluation during future updates. We will review the city's progress in its next update, due in March 2021, and will again evaluate whether to continue to designate the city as high risk.
| Financial Stability | |
|---|---|
| California State Auditor's Assessment Status: Pending |
Blythe must continue to work to achieve long-term financial stability. In December 2019, the city implemented a reserve policy that set a goal of having three months' worth of operating funds in its reserves. The city's policy allocates a portion of any budget surplus to its reserves and in its prior corrective action plan, Blythe anticipated it would end fiscal year 2020–21 with more than two months of reserves. In this current plan, Blythe predicts that its audited financials will show that it ended the year with more than three months of reserves. Should Blythe achieve three months of reserves, the city will have met the Government Financial Officers' Association best practice of two months and the city's own policy of three. We will review the city's audited financial statements for fiscal year 2020–21 when they are available.
As we identified in our audit, Blythe also remains without a formal plan or process to identify future development opportunities that would attract businesses and increase city revenue. The city states in its corrective action plan that it has participated in some local development initiatives such as the Palo Verde Valley Economic Alliance, which serves to promote the region in which Blythe is located. Most recently, the city adopted recommendations from an outside consultant to establish a new economic development committee with representatives from the city, school district, community college, and health care district. The new committee had met twice since May 2021. These two economic development initiatives notwithstanding, Blythe remains without a plan or process to attract businesses and increase revenue. Therefore, despite the city's continued efforts, work remains to ensure successful economic development efforts going forward. Finally, Blythe notes in its corrective action plan that it will develop a long-term strategic plan by June 2022. As we describe in our audit report, the framework provided by a formal strategic plan will guide the city's budgetary decision making and address long-term needs to achieve financial stability. We look forward to reviewing the city's strategic plan during future updates. |
| Enterprise Fund Deficits and Unmet Infrastructure and Safety Needs | |
| California State Auditor's Assessment Status: Partially Addressed |
Although Blythe states in its corrective action plan that it intends to address the internal loans affecting its golf course, the city remains without a plan to address similar internal loans to the funds of its trash collection and lighting district enterprises. Further, the city does not agree with our recommendation to record these internal loans as transfers in future financial statements—and notes it will not do so—because it believes that these enterprises will generate revenue in the future to repay these loans. However, the debts in these funds have been accumulating for at least nine years and as discussed in our audit report on page 11, accounting standards indicate that cities should record internal loans that are made without expectation of repayment within a reasonable time period as transfers—because they are in effect subsidies, not loans. By not addressing these longstanding internal loans, Blythe continues to present misleading financial information by recording these transactions as loans even though they are unlikely to ever be repaid by their respective enterprises.
In addition to the loans mentioned above in which the city's golf course owes an internal city fund, the golf course also owed over $1,000,000 to the city's former redevelopment agency. However, following our audit, Blythe took action to repay the entirety of this loan. As a result of unanticipated revenues and cost savings, Blythe's city council approved a budget amendment in May 2021 reallocating a portion of an expected budget surplus to repay the golf course loan, satisfying the associated recommendation from our audit. In response to our recommendations, Blythe took action to improve public safety services. The city submitted an application to the Commission on Peace Officer Standards and Training (POST) for a POST organizational study. POST accepted the application and Blythe expects that POST will begin an organizational study of the Blythe Police Department in January 2022. Further, to address our recommendation that Blythe remedy deficiencies in its fire department equipment, city staff have committed to drafting a vehicle and equipment replacement schedule to replace fire department fleet vehicles in accordance with industry standards. We look forward to reviewing the city's replacement schedule once it has implemented this recommendation by developing a plan to schedule and fund replacement of its fire vehicles. Finally, Blythe has not yet implemented our recommendation to develop a long-term plan for replacing its fire equipment or our recommendation to secure funding for initiatives it could undertake to reduce the vacancy rate in the city. Therefore the city has only partially addressed this overall category. |
| City Management | |
| California State Auditor's Assessment Status: Partially Addressed |
Blythe reports it is taking steps to address some of the city's management deficiencies, but dismissed our recommendation to hire a permanent city manager. Blythe implemented one of our recommendations in this area by including in its June 2021 purchasing manual a policy that provides guidance for making changes to existing contracts and establishes the related roles, responsibilities, and approval authority for the city's designated representatives. Additionally, the city stated in its corrective action plan that it has included funding in its fiscal year 2021–22 budget for utility rate studies on both its water and sewer funds, and that it is prepared to address rates and fees every five years through rate studies. However, the city has not yet developed a written policy describing how often it will perform the activities going forward, as we recommended. The city asserts that its current financial system does not have the ability to track contracts in the ways we recommended, but the city plans to update its financial software as funding permits. In the meantime, the city is working to update the tracking spreadsheets staff currently use. Implementing our recommendations without the updates to its financial software will require the city to develop manual procedures to address the issues we raised in our March 2021 report. Specifically, it will need to develop written procedures for identifying the authority for each contract, for closing out expired contracts, and for the use of its tracking spreadsheets to ensure that they are used consistently and effectively to identify at least the total contract amounts, the contract dates and durations, and any relevant special terms to the contracts.
However, in regard to our recommendation that Blythe move to hire a permanent city manager, the city has stated in their original corrective action plan that it does not agree with our recommendation and will only move to hire a permanent city manager when deemed appropriate by city council. While we acknowledge the city council's high opinion of the interim city manager and her depth of experience in our audit the report, we are disappointed in the city's decision to maintain the status quo. We remain concerned that the city's current administrative structure is not sustainable in the long term and we will continue to monitor this issue. |