City financial audit delayed

The City Council met on Tuesday and approved an extension of the city's financial audit.Photo credit: Bill Hall

An external audit of the city’s finances has been delayed to resolve issues surrounding how deficit numbers should be categorized.

The Chico City Council voted unanimously on Feb. 4 to approve an extension of up to six weeks. The audit findings will be presented to the council no later than March 18.

Large deficits were set aside in enterprise funds n previous audits, which allowed the city to report certain services separately from all the other revenues and expenses included in the general fund.

The auditors, an outside accounting firm, are recommending that the enterprise fund deficits be rolled into the general fund, which would mean any existing general fund reserves would be depleted.

The city’s recently approved 10-year deficit-reduction plan to pay down $1.5 million annually would also be impacted, said Chris Constantin, administrative services director.

“A more proper presentation for the public is that the general fund is truly underwater and that, in fact, you would end up not having a reserve at all,” Constantin said.

Two of the auditors used by the city over the last seven years have indicated that it is appropriate to keep the funds separate and a change to that would have a far-reaching impact, said Frank Fields, accounting manager .

“Bottom line is, it’s pretty tough if we have a general fund showing a negative $5 million,” Fields said.

City staff have sent an inquiry to the Governmental Accounting Standards Board, which oversees accounting standards for local governments, for direction on the most appropriate way to report the fund deficits.

The response will take 10-14 days and will help determine how the city will come to an agreement with the auditors on how to present its financial reporting, Constantin said.

The city council also took action on the following items on Tuesday:

· An appropriation of $25,000 from the emergency reserve was approved to pay toward professional labor negotiations. This is in addition to $80,000 that was approved last September. The city has nine labor groups and negotiations remain to be completed for four of these.

· An appeal of the Bidwell Park and Playground Commission’s denial of Stott Advertising’s request to remove a tree at 1944 Park Ave. was upheld. The local advertising company claims the tree is obstructing the view of its billboards.

· A proposal was approved to convert metered parallel parking to unmetered diagonal parking on Flume Street between Second and Seventh streets.

· The conversion of parking space into bicycle parking in front of the Naked Lounge on Second Street was approved. The space will be able to accommodate up to 12 bicycles.

Bill Hall can be reached at [email protected] or @thebillhall on Twitter.