Let me start off by saying that I’m not an accountant. I didn’t even stay at a Holiday Inn Express last night. The totality of my accounting experience has been sitting in a federal courthouse for six months listening to accountants explain the massive fraud at HealthSouth.
So how is it then that it took the mayor’s office three months longer to figure out the city had a deficit than it could have known from reading this column in July?
Let’s review.
The city of Birmingham ended its 2009 fiscal year in June. At that time, the mayor’s office predicted to the city council that the city would finish the year with a $13 million surplus. But some folks on the council’s side of the hall weren’t so sure. The council’s budget officer and budget analyst generated reports from the city’s accounting system.
There was nothing terribly complicated about what they did. It was a simple matter of money in minus money out — the equivalent of balancing the city’s checkbook. Unfortunately the checkbook didn’t balance. The records showed the city had spent $26 million more in 2009 than it had taken in.
When pushed repeatedly on the issue, the mayor’s office was adamant — it stood by its claim of a $13 million surplus. Mayor Larry Langford personally blasted the council’s analyst, Doug Turner, for misleading the council.
If you followed the budget battle in another newspaper, you might have thought this quarrel between the mayor’s office and the council was a difference of opinion, or the result of bad communication. The two sides just need to talk to each other, the Birmingham News editorials said.
Only it doesn’t matter if both sides are talking if one side is lying and the other is telling the truth. What matters is that someone figures out which side is right before someone runs the whole enterprise off a cliff.
One side — the council and its analysts — could easily show its math on paper. Its assertion that the city was in fact running a deficit wasn’t only based on facts, it was based on numbers provided by the Finance Department’s accounting system.
The other side — Langord and Finance Director Steve Sayler — based their arguments in shifting numbers and projections that had no apparent basis in reality. When the council’s analyst asked where all this missing money would come from, Sayler told the council that there were still revenues outstanding that the city wouldn’t receive for another couple of months.
But those funds never materialized. To the contrary, the city’s books reflected more expenditures, not revenues. When the council’s budget officer ran the numbers again in August, the report showed the 2009 deficit had grown from $26 million to $29 million.
The mayor’s office blasted the New World accounting software, because what’s a computer good for if it won’t lie for you?
When the Birmingham News finally woke up and started asking questions, the Finance Department claimed to have other documents that showed everything was OK, because in the Langford administration, somehow having two sets of books excuses everything.
Then the city refused to share those documents with the News, because to Langford’s administration, “public document” means “top secret.”
Finally, at the Administration, Budget and Finance Committee meeting Monday, Langford released the “real” financial reports to the council in an effort to clear everything up. The mayor’s office’s own documents revealed that the council’s numbers had been right all along and the supposed $13 million surplus was a bunch of baloney.
Here is what I wrote in this column about this subject three weeks ago: “The city’s fund balance (the budgeting term for “savings”) as of June 30, 2008, was $117 million. That’s a hard number supported by the city’s audited financial report. During the 2009 fiscal year, the city spent $28.7 million more than it had in revenue. So $117 million minus $28.7 million equals $89 million.”
It turns out my numbers were off. According to the numbers released by the mayor’s office Monday, the city’s beginning balance was $117.5 million (not $117 million), the city spent $28.6 million more than it took in (not $28.7 million), to leave the city with $88.9 million in savings (not $89 million). Remember, I said I wasn’t an accountant.
The trouble, though, is that the finance director, Sayler, is an accountant. And until this week, his official position had been that the city ended 2009 with a $13 million surplus, not a $28.7 million deficit. I was off by $100 thousand, but the city’s top accountant was off by $41.7 million.
Don’t believe for a minute this was an honest mistake. Sayler and Langford had access to the same numbers the council had. As I said earlier, it was their numbers that the council analysts used to reach their conclusions. The $13 million claim was meant to cower the council and confuse the public. It was confabulated to give Langford more opportunity to spend taxpayer dollars before he goes on trial for public corruption in October.
The $13 million surplus was a lie.
During the lifespan of that lie, two important things happened.
First, the city passed a budget. While the council had the right numbers all along, it didn’t have the backbone to stand up to the mayor. As a result, the current budget has the city headed toward another deficit for fiscal year 2010.
Second, the city refinanced variable rate demand warrants with fixed rate debt. While there was a good reason for this switch, the city went to market while making inaccurate projections about its financial outlook.
As I said, I’m not an accountant. I’m not a lawyer either, but as a layman, that looks a lot like fraud.
War on Dumb is a column about political culture. Write to kyle@bhamweekly.com
So how is it then that it took the mayor’s office three months longer to figure out the city had a deficit than it could have known from reading this column in July?
Let’s review.
The city of Birmingham ended its 2009 fiscal year in June. At that time, the mayor’s office predicted to the city council that the city would finish the year with a $13 million surplus. But some folks on the council’s side of the hall weren’t so sure. The council’s budget officer and budget analyst generated reports from the city’s accounting system.
There was nothing terribly complicated about what they did. It was a simple matter of money in minus money out — the equivalent of balancing the city’s checkbook. Unfortunately the checkbook didn’t balance. The records showed the city had spent $26 million more in 2009 than it had taken in.
When pushed repeatedly on the issue, the mayor’s office was adamant — it stood by its claim of a $13 million surplus. Mayor Larry Langford personally blasted the council’s analyst, Doug Turner, for misleading the council.
If you followed the budget battle in another newspaper, you might have thought this quarrel between the mayor’s office and the council was a difference of opinion, or the result of bad communication. The two sides just need to talk to each other, the Birmingham News editorials said.
Only it doesn’t matter if both sides are talking if one side is lying and the other is telling the truth. What matters is that someone figures out which side is right before someone runs the whole enterprise off a cliff.
One side — the council and its analysts — could easily show its math on paper. Its assertion that the city was in fact running a deficit wasn’t only based on facts, it was based on numbers provided by the Finance Department’s accounting system.
The other side — Langord and Finance Director Steve Sayler — based their arguments in shifting numbers and projections that had no apparent basis in reality. When the council’s analyst asked where all this missing money would come from, Sayler told the council that there were still revenues outstanding that the city wouldn’t receive for another couple of months.
But those funds never materialized. To the contrary, the city’s books reflected more expenditures, not revenues. When the council’s budget officer ran the numbers again in August, the report showed the 2009 deficit had grown from $26 million to $29 million.
The mayor’s office blasted the New World accounting software, because what’s a computer good for if it won’t lie for you?
When the Birmingham News finally woke up and started asking questions, the Finance Department claimed to have other documents that showed everything was OK, because in the Langford administration, somehow having two sets of books excuses everything.
Then the city refused to share those documents with the News, because to Langford’s administration, “public document” means “top secret.”
Finally, at the Administration, Budget and Finance Committee meeting Monday, Langford released the “real” financial reports to the council in an effort to clear everything up. The mayor’s office’s own documents revealed that the council’s numbers had been right all along and the supposed $13 million surplus was a bunch of baloney.
Here is what I wrote in this column about this subject three weeks ago: “The city’s fund balance (the budgeting term for “savings”) as of June 30, 2008, was $117 million. That’s a hard number supported by the city’s audited financial report. During the 2009 fiscal year, the city spent $28.7 million more than it had in revenue. So $117 million minus $28.7 million equals $89 million.”
It turns out my numbers were off. According to the numbers released by the mayor’s office Monday, the city’s beginning balance was $117.5 million (not $117 million), the city spent $28.6 million more than it took in (not $28.7 million), to leave the city with $88.9 million in savings (not $89 million). Remember, I said I wasn’t an accountant.
The trouble, though, is that the finance director, Sayler, is an accountant. And until this week, his official position had been that the city ended 2009 with a $13 million surplus, not a $28.7 million deficit. I was off by $100 thousand, but the city’s top accountant was off by $41.7 million.
Don’t believe for a minute this was an honest mistake. Sayler and Langford had access to the same numbers the council had. As I said earlier, it was their numbers that the council analysts used to reach their conclusions. The $13 million claim was meant to cower the council and confuse the public. It was confabulated to give Langford more opportunity to spend taxpayer dollars before he goes on trial for public corruption in October.
The $13 million surplus was a lie.
During the lifespan of that lie, two important things happened.
First, the city passed a budget. While the council had the right numbers all along, it didn’t have the backbone to stand up to the mayor. As a result, the current budget has the city headed toward another deficit for fiscal year 2010.
Second, the city refinanced variable rate demand warrants with fixed rate debt. While there was a good reason for this switch, the city went to market while making inaccurate projections about its financial outlook.
As I said, I’m not an accountant. I’m not a lawyer either, but as a layman, that looks a lot like fraud.
War on Dumb is a column about political culture. Write to kyle@bhamweekly.com
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