LYNNWOOD — The city of Lynnwood has changed the way it does business.
Lynnwood has begun using a new financial model for bookkeeping that mirrors what private businesses use and should make it easier for the City Council and residents to find answers to their questions about how the city is spending its money.
The changes were proposed by the Governmental Accounting Standards Board, which guides public agencies on their accounting practices.
The board has no actual authority, but its approval of a city’s record-keeping process can help or hurt cities trying to sell bonds, get loans or win lawsuits.
Lynnwood last month was the only city in Snohomish County to be commended by the national board for making the change before it was required to do so. Cities with budgets of $10 million to $100 million nationwide are expected to make the switch in their 2003 annual reports.
Larger public agencies, including the city of Everett, have already made the change, and smaller ones will be expected to change their 2004 annual reports.
The new system “provides you, for the first time, some opportunity to make some judgment on efficiency and effectiveness,” said Tom Allen, chairman of the national government accounting board.
“In the past, you’d only look at the city’s bottom line — what are their net assets — did they balance the budget?” Allen added. “But how did they balance the budget? What is by borrowing money and deferring payments?”
Mike Bailey, Lynnwood’s finance director, said the new process should help people see where the city’s money goes.
The city’s 2002 annual report featured, for the first time, the new system, which breaks down every source of income for the city and shows how it was spent.
The difference from before is that cities have always looked at each of their accounts connected with each account’s funding source, whether it was paid with utility taxes, golf-course fees, the gas tax or sales tax.
Now, all of those accounts will be added together to show the city’s economic situation as a whole, providing a bottom line that accurately represents where the city stands financially.
“My suspicion is it probably would result in more questions,” Bailey said. “Because people would want to know about one aspect to another. We can tell you how the gas tax got used, how the hotel-motel tax got used.”
The City Council is also using the new report to see how the previous year’s budget compared with what actually happened.
Bailey — who has worked in public finance for 21 years — said this is the biggest shift in government accounting he’s seen.
“This is a monumental change, and it was subject to heated debates,” he said. “It’s a significant event in our niche industry.”
Bailey said making the city’s money easier for people to track is important.
“It’s all about accountability and transparency in government,” he said. “There’s stewardship involved in protecting public funds, and that’s what this is all about.”
Victor Balta is a reporter for the Herald in Everett.
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