Two Edmonds citizens have charged that the city’s financial practices are at best a labyrinth and at worst a vehicle for sheltering a missing $2 million.
Both women, Diane Buckshnis and Lora Petso, are currently running for positions on the Edmonds City Council.
In the eye of the storm is Lorenzo Hines Jr., interim city finance director. Hines has been in the position since August.
While Petso questions aspects of the finance department’s analysis of a proposed contract the city is considering, Buckshnis charges more than $2 million was missing from the 2008 Comprehensive Financial Report. She made her claim in a Sept. 9 e-mail to Hines.
In her claim, Buckshnis asserts that taking the $5.2 million of the general fund’s ending balance and deducting the $1.9 million emergency reserve would net an ending general fund balance of $3.2 million. With a starting estimated cash balance of $977,951, she concludes the budget is out of balance by $2.3 million.
“Basically she is confusing a balance sheet with an income statement,” Councilman Ron Wambolt told the Enterprise. Wambolt is chairman of the council’s finance committee.
Wambolt said the $5.2 million line item would be considered shareholders’ equity in the private sector, and the $977,951 would be considered working capital. In accepted governmental financial reporting, profit is termed as ending balance. “Either Diane wants to make an issue or she doesn’t understand,” he said.
Citizen sits in on state’s conference
Buckshnis met with Hines Sept. 22 to review her charges. Hines said Buckshnis assured him that she understood the city’s accounting system and what the numbers indicated. She also was invited by Mayor Gary Haakenson to participate in the state auditor’s exit conference Aug. 5. That audit was able to show that the $2 million-plus accounted in the emergency fund is reflected on the city’s books.
“Ms. Buckshnis is evaluating two different parts of the balance sheet that should not be interchangeable in government finance,” Hines told the Enterprise. “She is confusing the role of the Comprehensive Annual Financial Report and the role of the Executive Summary Current Forecast and is not acknowledging the relationship between fund balance and working capital.”
“Regarding the city’s income statement,” Hines said, “when actual beginning fund balance is compared to the final beginning fund balance, the actuals are $2.5 million higher. This is the result of the fiscally conservative policy of past financial leadership. Therefore, it is not surprising that the final budget number is lower than the actuals. Our profession dictates that it is better to err on the conservative side.”
“Building budgets is a process based on predicting actual activity with the best available data,” Hines said. “Given that it is based on estimates, there is always a chance that the actual activity will deviate from the estimated activity. What we strive to do is to limit the variance between the two in the most conservative manner possible. I would like to note that the $2.5 million only represents approximately 8.3 percent of the total actual general fund revenues for that period.”
Hines explained to the council Oct. 6 that the $5.2 million is made up of a number of reserves and that the city’s working capital is a subset of assets.
“The assets have to equal the liabilities plus the fund balance, termed ‘equity’ in private sector work,” he said. “If you are going to compare equity to a subset of assets, you will never get them to balance.”
Electioneering charged
“There have been accusations made over the last six months that are just not the case,” council President D.J. Wilson told the Enterprise. “Every year we are audited by Washington state. I feel confident that the state of Washington was able to review our books and accounts and we passed the audit. If someone is saying there is a conspiracy to hide money, that’s silly. In the middle of a campaign, people say things they usually wouldn’t say otherwise.”
At the Oct. 6 council meeting, Haakenson asked Buckshnis if she was a certified public accountant, held a state license or accreditation in accounting or had practiced finance in the governmental arena. She indicated that she did not.
During the mayor’s comments at that same meeting, Haakenson asked Buckshnis to refrain from claiming that there are millions of dollars unaccounted for or missing from the city budget in her campaign rhetoric.
“It is very frustrating for me to have my professional staff work the financial numbers, to have the state auditors sing our praises, only to have a city council candidate with fewer credentials than my staff continually say that our numbers are incorrect and insinuate that there is $2 million missing from city coffers,” Haakenson told the Enterprise.
Buckshnis isn’t satisfied.
“I still haven’t been able to get answers to my questions,” Buckshnis told the Enterprise. “I’m still trying to define net worth and try to reconcile cash and cash equivalence. To date the budget is still out of balance. I’m not trying to be negative, I’m just trying to find facts.”
“The problem is she doesn’t like the answer,” said Wambolt. “Basically, the message is not fitting in with her campaign message.”
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