City continues to struggle with cash flow issues

The July 2014 financial statement for the city of Cairo continues to show that some city bank accounts were overdrawn as of July 31 and the chairman of the city council’s finance committee pledged this week “to stay on top” of the cash flow issues until they are solved.
Last month, the city withdrew $1.2 million from its reserves to cover over $1.2 million in accounts payable checks that had not been distributed to vendors who do business with the city.
Checks processed weekly between June 4 and July 23 were held due to a lack of cash flow.
It was not until the end of July before the city council was made aware of the situation and unanimously authorized the withdrawal of cash from the city’s competitive municipal trust account with the Municipal Electric Authority of Georgia and the distribution of the checks.
Even with the injection of cash last month, Finance Committee Chairman James H. (Jimmy) Douglas noted Monday night that at the end of July the city’s cash position was a positive $539,502.52 but general fund accounts payable checking account was overdrawn $648,630.05 at July 31 and the payroll checking account was overdrawn $162,632.02 at the end of last month.
On July 1 the accounts payable account was overdrawn $1,033,814.58 and the payroll account showed a deficit of $145,934.16 on July 1.
While some accounts were overdrawn as of July 31,  the city does have cash in reserves. After withdrawing $1.2 million last month the city still had $7,980,587.26 in the municipal competitive trust account through the end of July.
This is not the first time the city has had to borrow from its reserves to cover operating expenses.
In December, the council approved drawing down $1 million from its municipal competitive trust account with the Municipal Electric Authority of Georgia to cover operating expenses until ad valorem tax revenues began to be deposited.
The city paid back the million dollars to its reserve account with MEAG shortly after the first of the year when ad valorem taxes were collected. City officials are now saying that the city should have paid back the loan to itself over time.
Chairman Douglas questioned why Finance Director Miriam Faircloth did not make transfers into accounts before writing checks that would overdraw the accounts on the monthly financial statements.
Ms. Faircloth said that often times her office does not know how much money to transfer into the payroll account for example until the next day, which could be the first day of a new month. She also said that the timing of transfers and deposits are a factor.
“We’re not going to have what happened last month happen again. There is no reason for it,” Chairman Douglas said.
During the council meeting following the finance committee meeting to review the July financial statement, Douglas said, “The one thing the finance committee is committed to do and that is to stay on top of these cash flow issues until at which time they get resolved.”
Douglas pointed out apparent errors in the July financial report and requested City Manager Chris Addleton and the finance director to investigate and report back to the council.
The finance committee chairman questioned the $114,751.11 “profit” reported for CNS cable in July. Officials say a bill owed to the South Georgia Governmental Services Authority, which manages CNS operations, was not received in July and will be reflected on the August financial statement.
Douglas also questioned $395,983.99 balance of accounts receivable for the landfill fund and $373,029.90 in accounts payable for the landfill. Faircloth said later a keying error was to blame for the discrepancies in the July financial statement.
City Manager Addleton also noted that Grady County was behind in disbursing Special Purpose Local Option Sales tax revenue to the city.
Addleton told the finance committee that the city has only received one check from the county for the new SPLOST that went into effect early this year and runs through 2020.
“We’re due a considerable amount then,” Chairman Douglas commented.
Addleton said the city is owed an estimated $225,000 for the three months collections outstanding.
On Tuesday, Grady County Administrator Carlos Tobar acknowledged that the disbursement for April 2014 collections was not paid to the city until July 19 in the amount of $74,347.35.
Tobar said that a check for May and June collections would be disbursed to the city this week.
“We’re working our way through this and trying to get caught up,” Tobar said.
According to Tobar the state has not transferred the sales tax collections for July as of Tuesday, but once it is received he would have the money disbursed to the city.
At the finance committee meeting Monday, Douglas also pressed Addleton to produce monthly reports on the gallons of water pumped versus the gallons of water sold to utilities customers.
“This committee and the entire council need to know where we are at so what happened last month doesn’t happen again. We need to know going in, not after we get there,” Douglas told Addleton.
Douglas also reminded the city manager, “You’ve got to accumulate a lot of cash between now and December to be able to make the bond payments at the end of the year.”
City officials say the biggest draw on cash flow is the bond payments for the CNS Cable and the combined utility bonds as well as the increased environmental cost on electricity that the city is behind on recovering.
The CNS bonds will be paid off in 2017 and the combined utility bonds will be paid off in 2024.
The city is paying just over $900,000 annually in principal and interest on the CNS bonds and approximately $1 million annually for the combined utility bonds.
The city is now also collecting from utility ratepayers the additional costs of environmental compliance which are the result of federal regulations. Half of the new environmental compliance cost recovery fee per kilowatt hour went into effect in April and the other half will be added to monthly bills next April. Addleton says the new environmental fee will generate approximately $1.1 million in new revenue during the 2014-2015 fiscal year.