Report 2020-804 All Recommendation Responses

Report 2020-804: City of Lindsay: It Must Take Substantial Action to Address Its Financial Problems and Its Inadequate Management Practices (Release Date: August 2021)

Recommendation #1 To: Lindsay, City of

To address the $6.3 million it improperly transferred to its general fund, Lindsay should, by February 2022, re-establish the loans to its restricted funds, and develop and implement a plan to fully repay those funds.

6-Month Agency Response

On February 22, 2022, the Lindsay City Council approved the City of Lindsay Formal Repayment Plan FY 2022-2023 with accompanying amortization terms and schedules via Resolution 22-09 (Exhibit I).

The City wishes to note that there exists no legal finding that 1) the applicable transfers resulted in taxpayers being charged more than the reasonable cost of service, or 2) the transfers came from rate revenue.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

The City will address the $6.3 million in funds referenced and present formal repayment schedules to the Lindsay City Council by February 2022.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #2 To: Lindsay, City of

To make prudent investments from federal funding to address its highest needs, Lindsay should develop a plan by November 2021 for how it will effectively use all American Rescue Plan funds.

1-Year Agency Response

On Tuesday, April 26, 2022, the Lindsay City Council approved Resolution 22-17, A Resolution Approving the City of Lindsay Spending Plan for the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Established by the American Rescue Plan Act of 2021 (ARPA). Resolution 22-17 included Exhibit A detailing the City's intent to claim the standard allowance for lost public sector revenue of up to $10 million and identifies priority projects for immediate funding.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

On or before April 30, 2022, the City will present an ARPA Project Expenditure Report for approval to the Lindsay City Council.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The City will present an American Rescue Plan Act Project Expenditure Report for approval to the Lindsay City Council according to the current federal deadline.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #3 To: Lindsay, City of

To ensure that its transfers of utility funds to the streets program comply with state law, Lindsay should perform a study to determine the appropriate level of funding from its utility fund for that program by August 2022 and update that study every three to five years.

1-Year Agency Response

Response: The City agrees with this recommendation.

Corrective Action: On November 9, 2021, the Lindsay City Council authorized

staff to award a contract for the City of Lindsay Street Fund Impact Study to

Provost and Pritchard Consulting Group.

Provost & Pritchard's proposal dated October 15, 2021, was incorporated into the

existing task order "Financial Analysis of Water and Sewer Rates and Reports"

approved by the Lindsay City Council on October 13, 2020. Provost & Pritchard's

proposal provided an updated cost analysis for providing utility services and

determined the cost these services bear on city streets.

On August 23, 2022, a summary of Provost & Pritchard's comprehensive financial

analysis was presented to the Lindsay City Council (Exhibit A). City staff plans to

hold a public hearing to consider the adoption of a new citywide fee schedule,

establishing and amending municipal fees and charges for various municipal

services, and repealing all other resolutions relative to municipal fees and charges

thereto.

Estimated Completion: August 2022.

Responsible Staff: City Management, Finance Department, City Services.

Status: Complete.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

On November 9, 2021, the Lindsay City Council authorized staff to award a contract for the City of Lindsay Street Fund Impact Study to Provost and Pritchard Consulting Group.

Provost & Pritchard's proposal dated October 15, 2021 (Exhibit A) will be incorporated into the existing task order "Financial Analysis of Water and Sewer Rates and Reports" (Exhibit B) approved by the Lindsay City Council on October 13, 2020. Provost & Pritchard's proposal will provide an updated cost analysis for providing utility services and determine the cost these services bear on city streets. Action for rate changes remains with the Lindsay City Council.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The Lindsay City Council approved a contract for a Financial Analysis of Water and Sewer Rates on October 13, 2020. On November 9, 2021, the Lindsay City Council authorized staff to award a contract for the City of Lindsay Street Fund Impact Study by amending the water and sewer rate contract. This study will provide an updated cost analysis for providing utility services and determine the cost these services bear on city streets.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #4 To: Lindsay, City of

To ensure that it maintains adequate balances in its enterprise funds for significant purchases or capital expenditures, Lindsay should develop and implement a plan by June 2022 to build and maintain these balances.

1-Year Agency Response

On June 28, 2022, the Lindsay City Council approved the City of Lindsay Adopting a Fiscal Sustainability and Financial Improvement Plan for the Water, Sewer, and Wellness Center Enterprise Funds through Resolution 22-41. The Plan represents an outline for a collaborative process that considers future scenarios and will help the City navigate fiscal challenges and on-going operations from a purely financial standpoint. The Plan will require policy creation, spending discipline, renewed cost-sharing negotiations, and careful prioritization of City programs. It will also be useful for decision makers and help to mitigate future fiscal challenges, encourage a long-term approach and direction, and be a useful tool for communications with internal and external stakeholders.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

On October 13, 2020, the Lindsay City Council approved the task order "Financial Analysis of Water and Sewer Rates and Reports" (Exhibit B) to perform a financial analysis of the water and sewer utility rates. The study underway is being conducted in a manner adhering to generally accepted rate design criteria including all requirements of Proposition 218 in the case where there is subsequent action taken to pursue public utility rate changes as a result of the study.

On July 27, 2021, in accordance with Proposition 218, the Lindsay City Council approved a rate increase for solid waste refuse services (Resolution 21-38), and the levy and collection of annual sewer charges (Resolution 21-35), annual solid waste refuse charges (Resolution 21-36), and delinquent sewer, refuse, and water fees and charges for the period ending June 30, 2021 (Resolution 21-37) on property tax rolls for the fiscal year 2021-2022. These changes were in large part motivated by the City's need to address the financial instability of its enterprise funds.

On October 12, 2021, the Lindsay City Council approved the City of Lindsay Reserve Policy (Exhibit C). The reserve policy formalizes on-going practices of staff to build reserves and directly addresses the reserve levels of the General Fund and Water and Sewer Enterprise Funds by establishing reserve categories and hierarchical reserve levels for each. This policy will be reviewed every three years at a minimum by the City Manager and Finance Director, or sooner, if warranted by internal or external changes.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

60-Day Agency Response

On October 13, 2020, the Lindsay City Council approved a financial analysis of its water and sewer utility rates. The study is being conducted in a manner adhering to generally accepted rate design criteria including all requirements of Proposition 218.

On July 27, 2021, in accordance with Proposition 218, the Lindsay City Council approved a rate increase for solid waste refuse services (Resolution 21-38), and the levy and collection of annual sewer charges (Resolution 21-35), annual solid waste refuse charges (Resolution 21-36), and delinquent sewer, refuse, and water fees and charges for the period ending June 30, 2021 (Resolution 21-37) on property tax rolls for the fiscal year 2021-2022. These changes were in large part motivated by the City's need to address the financial instability of its enterprise funds.

On October 12, 2021, the Lindsay City Council approved the City of Lindsay Reserve Policy. The reserve policy formalizes on-going practices of staff to build reserves and directly addresses the reserve levels of the General Fund and Water and Sewer Enterprise Funds by establishing reserve categories and hierarchical reserve levels for each. This policy will be reviewed every three years at a minimum by the City Manager and Finance Director, or sooner, if warranted by internal or external changes.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #5 To: Lindsay, City of

To ensure that the rates and fees it charges are appropriate to cover the cost of the related services, by August 2022 Lindsay should determine its cost to provide each of the services for which it charges a fee or rate and, as necessary, improve its accounting records to identify these costs. For any fees or rates that do not cover the costs of their related services, consider increasing those fees or rates, including a phased approach for large increases. For any fees or rates that are above the cost to provide the related service, consider reducing those fees or rates.

Annual Follow-Up Agency Response From December 2022

On March 21, 2022, City Staff and Willdan Financial Services began evaluating the City's current fee structure and charges and conducted a comprehensive analysis and study of the City's activities and services, the costs of providing those services and activities, the beneficiaries of those services, and the revenues produced by those paying fees and charges for such services and activities. The results and findings of said analysis and cost allocation study are detailed in the attached final reports issued by Willdan. The proposed fee schedule within the User Fee Study Report represent the reasonable costs incurred by the City in providing the listed services and activities. The report does not include any fee recommendations that exceed the City's cost of providing those related services and activities.

Staff brought forward Resolution 22-65 for adoption by the Lindsay City Council on December 13, 2022, to ensure the revenues produced by user fees are sufficient to defray the cost of providing such services and do not exceed the estimated reasonable cost of providing such services. It is important to emphasize that any user fees that are set to less than 100% cost recovery are subsidies that must be covered by another revenue source, and in most instances by the General Fund. The City Council approved the new city-wide fee schedule on December 13, 2022.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

Response: The City partially agrees with this recommendation.

Corrective Action: The City requested a partial extension and proposed the

following timeline.

By August 2022:

- Complete a water rate study and make a recommendation to the Lindsay

City Council

- Complete a sewer rate study and make a recommendation to the Lindsay

City Council.

- Complete an internal review of miscellaneous departmental fees as staff

resources allow.

- Issue a Request for Proposals (RFP) that would provide for a study of all

outstanding fees yet to be reviewed.

By February 2023:

- Present individual recommendations to the Lindsay City Council to either

increase, decrease, or maintain fees based on the RFP results.

By August 23, 2022, the City requested a partial extension and did not receive

confirmation from the State Auditor on whether the extension was granted or not.

The City has procured a financial analysis of water and sewer rates through

Provost & Pritchard whose findings are attached to this report as Exhibit B &

Exhibit C. City staff has worked diligently to evaluate and review miscellaneous

departmental fees and issued a Request for Proposals (RFP) that would provide a

study of all citywide fees.

On February 22, 2022, the contract for a Full Cost Allocation Plan, Comprehensive

Citywide User Fee Study, and Impact Fee Analysis was awarded to Willdan

Financial Services.

On August 23, 2022, City staff presented the fee tables based on Willdan Financial

Services' study and analysis (Exhibit D). City staff plans to hold a public hearing

to consider the adoption of a new citywide fee schedule, establishing and amending

municipal fees and charges for various municipal services, and repealing all other

resolutions relative to municipal fees and charges thereto.

Estimated Completion: August 2022.

Responsible Staff: City Management, Finance Department, City Services,

Recreation Department, Public Safety Department.

Status: Complete.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

We recognize that the city of Lindsay has taken steps toward implementing our recommendation. However, as the city stated in its response, it plans to propose to the city council updated fees and charges for adoption in early 2023. Until it does so, we will continue to report this recommendation as not fully implemented.

6-Month Agency Response

The City requests a partial extension and proposes the following timeline.

By August 2022:

- Complete a water rate study and make a recommendation to the Lindsay City Council

- Complete a sewer rate study and make a recommendation to the Lindsay City Council.

- Complete an internal review of miscellaneous departmental fees as staff resources allow.

- Issue a Request for Proposals (RFP) that would provide for a study of all outstanding fees yet to be reviewed.

- Establish new accounting lines so as to better identify how much revenue is received from each fee or rate.

By February 2023:

- Present individual recommendations to the Lindsay City Council to either increase, decrease, or maintain fees based on the RFP results.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The city plans to conduct the following actions by August 2022:

Complete a water rate study and make a recommendation to the Lindsay City Council

Complete a sewer rate study and make a recommendation to the Lindsay City Council.

Complete an internal review of miscellaneous departmental fees as staff resources allow.

Issue a Request for Proposals (RFP) that would provide for a study of all outstanding fees yet to be reviewed.

Establish new accounting lines so as to better identify how much revenue is received from each fee or rate.

The city also plans to present individual recommendations to the Lindsay City Council to either increase, decrease, or maintain fees based on the RFP results by February 2023.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #6 To: Lindsay, City of

To ensure that the rates and fees it charges are appropriate to cover the cost of the related services, by August 2022 Lindsay should improve its accounting records so as to identify how much revenue it receives from each fee or rate.

Annual Follow-Up Agency Response From October 2022

The city has improved accounting records to identify costs for services provided. It has also improved accounting records to identify how much revenue we receive from each fee or rate.

As part of our efforts to meet this recommendation, the finance team changed receipt procedures to allow the system to capture service descriptions more accurately. This change is a solution we are able to implement until the City's financial position positively advances to where we are able to afford a new accounting software.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

1-Year Agency Response

State Auditor Recommendation 6: To ensure that the rates and fees it charges are

appropriate to cover the cost of the related services, by August 2022 Lindsay

should do the following:

- Improve its accounting records so as to identify how much revenue it

receives from each fee or rate.

Response: The City agrees with this recommendation.

Corrective Action: By August 2022, the City's Finance Department will establish

new accounting lines so as to better identify how much revenue is received from

each fee or rate.

On August 23, 2022, City staff presented the fee tables based on Willdan Financial

Services' study and analysis (Exhibit D). New accounting lines will serve to better

identify how much revenue is received from each fee or rate pending the adoption

of a new Citywide fee schedule. These accounting lines would be based on the

results of the full Cost Allocation Plan, Comprehensive Citywide User Fee Study,

and Analysis by Willdan Financial.

City staff plans to hold a public hearing to consider the adoption of a new citywide

fee schedule, establishing and amending municipal fees and charges for various

municipal services, and repealing all other resolutions relative to municipal fees

and charges thereto.

Estimated Completion: August 2022.

Responsible Staff: Finance Department.

Status: Complete.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

The city explained that it is still establishing its accounting records. Until it does so, we will continue to report this recommendation as not fully implemented.

6-Month Agency Response

By August 2022, the City's Finance Department will establish new accounting lines so as to better identify how much revenue is received from each fee or rate.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The city plans to establish new accounting lines so as to better identify how much revenue is received from each fee or rate.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #7 To: Lindsay, City of

Lindsay should adopt a policy for long-range financial planning by February 2022 that, at a minimum, identifies the forecast period for the plan, the funds it will include, efforts the city will make to increase revenues and decrease expenditures, and the frequency with which the finance director and the city manager will review the plan and propose any updates to the city council.

6-Month Agency Response

On February 22, 2022, the Lindsay City Council approved the City of Lindsay Fiscal Sustainability and Financial Administration Improvement Plan via Resolution 22-10 which includes a policy for long-term financial planning (Exhibit I).

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

The city plans to provide a policy for long-term financial planning to the Lindsay City Council for approval on or before February 2022.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #8 To: Lindsay, City of

City management should develop, and the city council should formally adopt, a long-term financial plan by August 2022 that aligns with best practices published by the GFOA.

6-Month Agency Response

On February 22, 2022, the Lindsay City Council approved the City of Lindsay Fiscal Sustainability and Financial Administration Improvement Plan via Resolution 22-10 (Exhibit I). The plan aligns with best practices published by the Government Finance Officers Association (GFOA).

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

In July 2021, the City procured memberships in the Government Finance Officers Association (GFOA) to aid in the creation of a long-term financial plan. The city plans to present a long-term financial plan that aligns with GFOA best practices to the Lindsay City Council on or before August 2022.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #9 To: Lindsay, City of

Lindsay should include in that financial plan a discussion of how it will reduce its pension and OPEB liabilities. As part of that plan, the city should consider requiring current employees to begin contributing to the future cost of their retirement health care benefits.

1-Year Agency Response

On February 22, 2022, the Lindsay City Council approved the City of Lindsay

Formal Repayment Plan FY 2022-2023. The Formal Repayment Plan will record

the advances to and from previously vacated at their originally vacated amounts.

While the total amount remains unchanged, the amortization terms and schedules

have been modified to allow the City to begin making annual payments based on

priority beginning in Fiscal Year 2022-2023.

On June 28, 2022, the Lindsay City Council approved the City of Lindsay

Adopting a Fiscal Sustainability and Financial Improvement Plan for the Water,

Sewer, and Wellness Center Enterprise Funds through Resolution 22-41. The Plan

represents an outline for a collaborative process that considers future scenarios and

will help the City navigate fiscal challenges and on-going operations from a purely

financial standpoint. The Plan will require policy creation, spending discipline,

renewed cost-sharing negotiations, and careful prioritization of City programs. It

will also be useful for decision makers and help to mitigate future fiscal

challenges, encourage a long-term approach and direction, and be a useful tool for

communications with internal and external stakeholders.

Additionally, the City plans to review and execute new memorandums of

understanding with all bargaining units in the 2022 calendar year that will include

discussion and negotiation of increased contributions.

Following negotiations with bargaining units, the City will update the City of

Lindsay Fiscal Sustainability and Financial Administration Improvement Plan

approved via Resolution 22-10 to reflect its pension and OPEB liabilities and

increased contributions (Exhibit E).

Estimated Completion: August 2022.

Responsible Staff: City Management, Finance Department.

Status: Complete.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

On October 12, 2021, the Lindsay City Council approved the City of Lindsay Reserve Policy (Exhibit C). The reserve policy provides guidelines for Unfunded Liability Reserves that include pension and OPEB liabilities.

On December 14, 2021, the Lindsay City Council approved Resolution 21-51, Authorizing the City Manager to Execute an Agreement with the California Public Employees Retirement System's California Employers' Pension Prefunding Trust Program to Establish a Section 115 Trust and Delegating Authority to the City Manager and the Director of Finance to Request Disbursements from the Section 115 Trust (Exhibit J).

Additionally, the City plans to review and execute new memorandums of understanding with all bargaining units in the 2022 calendar year that will include discussion and negotiation of increased contributions.

Following negotiations with bargaining units, the City will update the City of Lindsay Fiscal Sustainability and Financial Administration Improvement Plan approved via Resolution 22-10 (Exhibit I) to reflect its pension and OPEB liabilities and increased contributions.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

60-Day Agency Response

On October 12, 2021, the Lindsay City Council approved the addition of a City of Lindsay Reserve Policy to its finance and accounting policies. The reserve policy provides guidelines for Unfunded Liability Reserves that include pension and OPEB liabilities.

Additionally, the City is exploring the establishment of a Section 115 Trust and plans to review and execute new memorandums of understanding with all bargaining units in the 2022 calendar year that will include discussion and negotiation of increased contributions.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #10 To: Lindsay, City of

To ensure that Lindsay's public safety model still meets the city's needs, Lindsay should evaluate the effectiveness of using a combined police and fire department by August 2022 and make any necessary changes.

6-Month Agency Response

On February 8, 2022, the Interim Chief of Police presented to the City Council a presentation titled "Lindsay Department of Public Safety: Reorganization Proposal" along with a document titled "Fire Analysis and Recommendations" (jointly included as Exhibit F) which outline the City's commitment to separate police and fire personnel as soon as financial resources allow.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

Lindsay has evaluated its combined police and fire department and determined that separate personnel are more appropriate. As budget resources allow, it plans to implement this change.

60-Day Agency Response

The City is committed to a return to separate police and fire personnel as soon as financial resources allow.

California State Auditor's Assessment of 60-Day Status: Pending

The city's commitment has not been formalized by the city council. City staff explained that they expect the city council to formalize these separate positions in January 2022. Until the city does so, we will continue to report this recommendation as not fully implemented.

Recommendation #11 To: Lindsay, City of

To ensure that Lindsay's public safety model still meets the city's needs, Lindsay should ensure that all public safety officers receive any necessary training within six months of employment beginning August 2022, including any public safety officers who are expected to respond to fires or emergencies.

1-Year Agency Response

Response: The City partially agrees with this recommendation.

Corrective Action: In October 2021, the City hired a full-time Fire Lieutenant

responsible for providing in-house training to Public Safety personnel. The Fire

Lieutenant is also tasked with conducting an analysis of a volunteer firefighter

program as outlined in the job description for this position.

On June 14, 2022, the Lindsay City Council adopted Resolution 22-33, adopting

the Fiscal Year 2022-2023 operating budget. The adopted budget forecasts

expenditures dedicated solely to the Fire Department. The budget summary is

attached hereto as Exhibit F.

By August 1, 2022, two (2) Fire Apparatus Engineers dedicated solely to fire

response were hired. By September 1, 2022, it is expected that four (4) Volunteer

Firefighter's will be hired. Job descriptions for these two positions are hereto

attached as Exhibit G.

On August 19, 2022, the Director of Public Safety Rick Carrillo issued a

Memorandum summarizing the department's efforts to ensure public safety

officers and fire personnel responsible for fire response received or will receive

adequate training (Exhibit H). Public Safety staff training certifications are

attached hereto as Exhibit I.

By September 5, 2022, the City expects to have a self-sufficient Fire Department

with 24 hour fire response. A training matrix for both Fire Apparatus Engineers

and Volunteer Firefighters are hereto attached as Exhibit J.

Estimated Completion: August 2022.

Responsible Staff: City Management, Finance Department, Public Safety

Department.

Status: Complete.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

In October 2021, the City hired a full-time Fire Lieutenant responsible for providing in-house training to Public Safety personnel. The Fire Lieutenant is also tasked with conducting an analysis of a volunteer firefighter program as outlined in the job description for this position (Exhibit G).

California State Auditor's Assessment of 6-Month Status: Partially Implemented

60-Day Agency Response

In October 2021, the City hired a full-time Fire Lieutenant responsible for providing in-house training to Public Safety personnel. The Fire Lieutenant is also tasked with conducting an analysis of a volunteer firefighter program.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #12 To: Lindsay, City of

To ensure that its fire vehicles meet industry standards and its police vehicles are replaced in a timely manner, by November 2021 Lindsay should develop a sufficiently detailed public safety capital improvement plan that provides for the replacement of those vehicles.

60-Day Agency Response

On November 9, 2021, the Lindsay City Council approved the City of Lindsay Fleet Management and Replacement Policy. The primary objective of this policy is to control the overall cost of operating and maintaining the City of Lindsay's fleet of vehicles and equipment, to maintain vehicles and equipment in a manner that extends their useful life, to control the growth in size of the fleet, to standardize the composition of the fleet and to accurately budget for maintenance and replacement costs.

A complete listing of the vehicles assigned to the City Services and Public Safety Departments is maintained and updated by department heads or their designees and provided to the Finance Department and City Manager on an annual basis or as needed.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

All Recommendations in 2020-804

Agency responses received are posted verbatim.