AR 020706 2005-06 Mid-Year Financial Report

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CITY OF COLTON ITEM #22 AGENDA REPORT FOR THE CITY COUNCIL MEETING OF FEBRUARY 7, 2006 To: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: DILU DE ALWIS, FINANCE DIRECTOR W SUBJECT: 2005-06 MID -YEAR FINANCIAL REPORT DATE: JANUARY 26, 2006 BACKGROUND The City of Colton operates under an annual budget cycle with the current budget being approved by the City Council on June 21, 2005. While the budget is both an authoritative document and an effective planning tool, it is subject to variations in actual fiscal results. Because of this, many local governments (including Colton) typically prepare a "mid -year" financial report along with recommended budget adjustments to be approved by the City Council. DISCUSSION/ANALYSIS The purpose of this report is to primarily focus upon the City of Colton's financial progress through December 31, 2005, and to discuss adjustments needed in various departments in the General Fund, and the Childcare Fund. Due to a delay in posting all required transactions for the Redevelopment Agency (Agency), there wasn't sufficient time to include any mid -year requests in this report. Any changes for the Agency will be brought before the board at a later meeting. In addition to the budget adjustments, there will also be a discussion relative to some organizational changes that staff is recommending for Council approval. Additionally due to the operational issues relative to the new utility billing system, not all revenues have been recorded for the Enterprise Funds and no adjustments are being presented to the City Council at this time. Any changes that may be needed to either of these funds, those changes will be presented to the Utility Commission and then brought before the City Council at a later date. It is often difficult to assess a local government's fiscal performance related to revenues, because they are extremely cyclical and do not follow a straight-line pattern. Revenues during the last one- half of the fiscal year are proportionately much greater than those received during the first one-half. Expenses also tend to follow a similar pattern, but the variations are not as great. As a result, local governments need to have adequate cash on hand during the first one-half of each year to help cover expenses until the revenues "catch-up" in the last one-half of the year. In order to adequately assess fiscal performance at mid -year, staff analyzed various data. Most notably, a comparison to prior year results through December 3155 is made to determine how we are "tracking" given historical cyclical norms. Another obvious analytical mechanism involves comparison of the current year (2005-06) projected revenue amounts per the budget to actual prior year (2004-05) results.