"Understandability of the accounting is a significant problem."

COLUMBIA, Mo 6/13/14 (Analysis) -- Comments from two Columbia Water and Light officials -- a citizen board member and a salaried administrator -- are raising more questions about accounting at the city-owned utility giant. 

The poorly-defined quality of Water and Light accounting reminds of poorly-defined downtown C-2 zoning, which has proven a bonanza to developers. 

Regarding a Heart Beat story citing "unrestricted funds" in the city's Comprehensive Annual Financial Report (CAFR), "I do not know why the term 'unrestricted' is used," said Utility Financial Manager Jim Windsor, who suggested our publication ask the city's Finance Department, which he advised "is responsible for putting together the CAFR."   

Challenging our use of the term "slush fund" for nearly $74 million in so-called "unrestricted funds" on the utility's books (photos above and below; click for larger), Windsor's comments marked the second time in recent months a utility official expressed ignorance about the most important financial document at City Hall.  

"I have not seen the CAFR.   I need to look at it," Water and Light Advisory Board member Dick Parker emailed this publication in February, after a story about the utility's lack of a policy for financial emergencies.   "Understandability of the accounting is a significant problem," Parker added.     

Unlike the annual Budget, the CAFR accounts for every penny city government holds in every conceivable way:  as roads, bridges, buildings, vehicles, land, computers, investments -- and cold, hard cash.   Those pennies add up to nearly $1.4 billion in Columbia, with roughly $380,000,000 in cash and liquid investments.  

Before Tad Johnsen replaced Kraig Kahler as Water and Light director, the utility had an "ad hoc" policy regarding cash reserves, Parker told the Heart Beat. 

"Tad's comment to Ian that we did not have a reserve policy is accurate,"  Parker explained, referencing a conversation Johnsen had with Fourth Ward City Councilman Ian Thomas at a December Council meeting.   "Tad had taken on the job of officially defining the reserve which had been ignored by previous managers." 

Windsor's comments reflect the utility's ongoing struggle to account for surplus cash, despite a City Charter mandate that utility surpluses be applied to rate reductions and the city's General Fund, which pays for firefighters and police.  

Of the $74 million in unrestricted funds,  "about $28 million was actual cash (or marketable securities) that could be used in an emergency; to fund needed capital projects; or to defer rate changes," Windsor said. 

But when was the last time City Hall "deferred" a utility rate hike? 

Windsor's subsequent accounting of the utility's unrestricted funds also deviates from the CAFR.  "$16 million has already been appropriated to specific capital projects," he said.  "And $3.2 million in customer deposits are held and eventually returned to customers." 

But the CAFR accounts for customer deposits and capital project monies as "restricted" -- not unrestricted -- funds. 

A statement city staff provided the Water and Light Advisory Board in April deviates even farther from the CAFR.  "As of the end of April 2014, there was just under $16 million available in cash and marketable securities," Windsor told the Heart Beat.   "In my opinion...that amount is at the low range of where the utilities should be for cash reserves."

But should "opinion" substitute for policy, especially now, when the Opus and TIF controversies have made utility funding Columbia's number one priority?

-- Mike Martin

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