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12 - Mid-Year Budget Update ITEM NO. 12 Costa Mesa Sanitary District &an Independent Special District Memorandum To: Board of Directors From: Scott Carroll, General Manager Via: Wendy H. Davis,Interim Finance Manager Date: February 25, 2014 Subject:Mid-YearBudget Update – FY 2013-14 Summary This report serves as a summary of the District’s spending at the mid-year point as well as staff’s best estimate of projected balances for the year-ended June 30, 2014. Staff Recommendation That the Board of Directors receive and file this report. Analysis Based on the spending trends through December 31. 2013, staff is projecting minor savings in both the Solid Waste and Liquid WasteFunds. As of December 31, 2013, a total of 45.4% of theSolid Wastebudget for the 2013-2014 fiscal year has been expended. At this time, staff anticipates abudgetarysavings in both Personnel and Special Programs. The Solid Waste Fund is projectedto have a year-end $36,235 budget surplus balance of . A total of19.8% of the Liquid Waste Fund has been expended as of December 31, 2013. The percent expended as of December 31, 2013 is under staff’s estimates due to contracted work in progress but unbilled. Staff anticipatesabudgetary savingsin Personnel costs due to vacancies, which is offset by greaterthan normal expensesin some of the M&O accounts.The Liquid Waste Fund is expected to have a year-end $62,544 balance of . Protecting our communitys health and the environment by providi www.cmsdca.gov Board of Directors February 25, 2014 Page 2 of 2 Please see the attached report for amore detailedanalysis. Strategic Plan Element & Goal This item supports achieving the objective and strategy of Strategic Element No. 7.0, Finance, which states: “Objective: To ensure the short and long-term fiscal health of the District. Strategy: The District will forecast and plan revenue and expenditures and maintain appropriate reserves and investment to provide financial resources to fund current and planned operations and projects.” Legal Review Not applicable. Environmental Review Subject activity is exempt from the requirements of the California Environmental Quality Act (CEQA) (Public Resources Code Section 21000 et. seq.). Section 15300.4 of CEQA allows an agency while establishing its own procedures “to list those specific activities which fall within each of the exempt classes”, and the District has adopted “CEQA Guidelines and Implementing Procedures” that state on page 6 “”Projects” doesnot include …. C. Continuing administrative or maintenance activities.” Financial Review See attached report. Public Notice Process Copies of this report are on file and will be included with the entire agenda packet for the February25, 2014Board of Directors regular meeting at District Headquarters and on District website. Alternative Actions 1.Refer the matter back to staff for additional information. Attachments A:FY 2013-14 Quarterly Budget Expenditure Analysis COSTA MESA SANITARY DISTRICT Mid-Year Budget Review Fiscal Year 2013-14 EXECUTIVE SUMMARY Attachedisthe mid-year budget analysis ofthe Solidand Liquid WasteFundsoperating budgets for fiscal year(FY) 2013-14. This analysis uses the “Amended Budget”,which consists of the adopted budget plus any prior year carryover appropriations,as well as budget adjustments approved through December 31, 2013.The projections in this analysisare based on “Run-Rate” calculationsunitizing historical trends for some accounts,while others are based on known or anticipatedspendingby staff. The Costa Mesa Sanitary District (District) Solid Waste and Liquid Waste Fundsare both Enterprise Funds.These funds are operated as independent business ventures sharing one Board of Directors. Some expenses of the District are charged entirelyto aspecific fund,while other expenses maybe allocated to both funds based on a percentage. For example, the costs associated with the District’s Board of Directors will be split between the funds equally. However, the cost of the trash pickup will be charged only to the Solid Waste Fund. Based on the attached Expenditure Analysis,both the Solid Waste and Liquid Waste Funds are projected to have a minor budget surplusat June 30, 2014 as describedbelow: SOLIDWASTEFUND The annual operating budget for the Solid Waste fund is $5,386,565.The total year-to-date expenses are$2,449,292,and staff estimates thetotalyear-end balance will be $5,350,330resulting in a projected surplus of $36,235. This projected surplus results primarily fromunexpended funds in the Special Programs. The following sections are intended to provide a summary of the more significant budget to actual changes anticipated by staff at year-end: PERSONNEL The District currently has three vacant positions, the Finance Manager, the Permit Technician and a part-time Maintenance Worker. All three of these positions provideservices to both funds.Therefore, only a portion of their costs are charged to the Solid Waste Fund. The projected expenses for FY 2013-14assume that these positionswill remain vacant until the end of the fiscal year, thus creating a substantial savings in the salary and benefit accounts. Additionally,the District is realizing a savings in its “PERS Employee”account due tocostswhich werepreviously paid by the District,are now required to bepaid by the employee for all new hires.The total projected savings in Personnel costs atJune 30, 2014is $72,135. M & O The M & O accounts are projected to exceed the amended budget by $80,400. The following is a summary ofexpenses not included in the amended budget that are causing thevariance: Professional Services –This account is estimated to be over budget by $7,767due to the BHI Consulting contract for teambuilding exercises, consultantservicesto perform the PERS actuarial required to be completed by June 30,2014,and the contract for the CMSD internet App. Fiscal Services –Theprojected overage in this accountof $28,000is the result of the vacant Finance Managerduties,which are being contracted to CBIZ.These expenses are offset by the budget surplus in salaries and benefits. COSTA MESA SANITARY DISTRICT Mid-Year Budget Review Fiscal Year 2013-14 ContractServices –Theprojected overage in this account of $9,800 is the result of the vacant Permit Technician duties,which are being contracted to Wildan and Associates. These expenses are offset by the budget savings in thesalary and benefits accounts. Community Outreach –This account is projected to exceed the amended budget by $20,023,due to unanticipated expensesfor outreach for the organics recycling program. Board meetings and Town Hall meetings were held at rented offsite locations to accommodate an audience andnecessitated the hiring of audio and video services. In addition, automated phone messages were used to notify the public of the Town Hall and Board meeting dates and locations. The quarterly newsletter was budgetedat 35% to the Solid WasteFund.However, it was determined that a more appropriate allocation is 50%,which equates to an increase in expensesto this Fund of $7,000.Additionally, Infosend was contracted to develop an organics program water bill insert. The Board approved advertising and booth sponsorships for Costa Mesa Community Run. Professional Development/Training –This account isestimated to be over budget by $6,810 primarily due to the Occupational Safety Training Systems (OSTS)contract for safety consulting. SPECIAL PROGRAMS The Household Hazardous Waste collection program, the Anti-Scavenging program and the Telephone Book Recycling program are projected to come in substantially under budget,resulting in a budget surplus of $44,500 even after reprogramming resources toward the new Battery Recycling Collection program. CAPITAL OUTLAY The capital outlay budget of $1,500 has been fully expended on the exterior maintenance at the District Headquarters. COSTA MESA SANITARY DISTRICT Mid-Year Budget Review Fiscal Year 2013-14 LIQUID WASTE FUND The annual operating budget for the Liquid Waste fund is$9,296,469. The total year-to-date expenses are $1,845,895.Staff estimates the total year-end balance to be $9,233,925,for a projected surplus of $62,544. This projected surplus is being generated primarily from unexpended funds in Personnel, offsetby cost overruns in M & 0. The following sections are intended to provide a summary of the more significant budget to actual changes anticipated by staff at year-end: PERSONNEL The District currently has three vacant positions, the Finance Manager, the Permit Technician and a part-time Maintenance Worker. All three of these positions provide services to both funds.Therefore, only a portion of their costs are charged to the LiquidWaste Fund. The projected expensesfor FY 2013-14assume that these positions will remain vacant until the end of the fiscal year, thus creating a substantial savings in the salary and benefit accounts. Additionally, the District is realizing a savings in its “PERS Employee” account due to costs which were previously paid bythe District,are now required to be paid by the employee for all new hires. The total projected savings in Personnel costs atJune 30, 2014is $134,800. M & O The M & O accounts are projected to exceed the amended budget by $72,256. The following is a summary of expenses not included in the amended budget that are causing the variance: Professional Services –Included in this account is the BHI Consulting contract for teambuilding exercises, consultant services to perform the PERS actuarial required to be completed by June 30, 2014,and the contract for the CMSD internet App.The $40,000 internal parcel audit is not anticipated to be started this fiscal year,which is keeping this account on target. Fiscal Services –The projected overage in this accountof $52,000is the result of the vacant Finance Managerduties,which are being contracted to CBIZ. These expenses are offset by the budget surplus in salaries and benefits. Contract Services –The projected overageof $25,200in this account is theresult of the vacant Permit Technician duties,which are being contracted to Wildan and Associates. These expenses are offset by the budget savings in the salary and benefits accounts. Sewer Maintenance Claims –The $30,000 overage in this account is for claims for damage caused by manholes was not budgeted and not covered by the District’s insurance. Community Outreach –This account is projected to exceed the amended budgeted amount due to unanticipated expenses for outreach. Board meetings and Town Hall meetings were held at rented offsite locations to accommodate an audience and necessitated the hiring of audio and video services. In addition, automated phone messages were used to notify the public of Town Hall and Board meeting dates and locations.The quarterly newsletter was budgetedat 65%to theLiquidWasteFund.However,it was determined that a more appropriate allocation is 50%,which represents a decrease in expensesto this fund of $7,000. The Board approved the advertising and booth sponsorships for Costa Mesa Community Run. COSTA MESA SANITARY DISTRICT Mid-Year Budget Review Fiscal Year 2013-14 Pump Station Maintenance –The training provided by JIMNIto District staff to assume the ongoing maintenance of the pump station’s electrical systems is projected tocausethis account to exceed the amended budgetby $30,000. Televising Sewer Lines –This activity has beenunbudgetedin the current and prior fiscal years.Staff is projecting that this accountwill exceed the adopted budget of $5,000 by $23,000. MiscSewer Work –This activity is projected to be under budget by $85,767 based on the prior fiscal year’sactual and year to date expenses. Small Tools/Equipment –Theunanticipated need to purchase gas monitoring equipment for Sewer staff was not budgeted,resulting in this account exceeding the budget by $4,000. Professional Development/Training –The estimated $8,520 over budget in this account is mainly the result of the Occupational Safety Training Systems (OSTS)contractfor safety consulting. CAPITAL OUTLAY The capital outlay budget of $372,475is projected to befully expendedby June 30, 2014. The capital equipment outlay as of December 31, 2013 included thepurchase of a Utility Crane Truck, Smart Covers, Manhole rings and covers. CAPITAL IMPROVEMENT PROJECTS The status of the capital improvement projects is as follows. All projects are expected to be fully expended. AdoptedApprovedBudgetAmendedTotalAvailable BudgetFY 12-13AdjustmentBudgetExpenses Balance FY13-14Carryoversas of 12/31/13FY13-14as of 12/31/13as of 12/31/13 Westside Pump Stn Abandonment #101$400,000$1,741,625$-$2,141,625$41,581$2,100,044 Seismic Refurbish #193-34,175-34,17520,23813,937 Pump Stn Emergency Equipmt #196-1,030,899-1,030,8994,7641,026,135 System Wide Swr Recon Ph 3 #197-670,000-670,000233,956436,044 PICA Analysis #198-176,185-176,1852,557173,628 Force Main Upgrades #200850,000-180,8681,030,8686,1281,024,740 Replace Equipment at Pump Stn #201260,000--260,000-260,000 Elden Pump Stn Valve/Repipe #202150,000--150,0008,299141,701 Generator at District Yard #203150,000--150,0002,310147,690 $5,643,752 $1,810,000$3,652,884$180,868$319,833$5,323,919