Always Advocating Alan – Mid-Year Budget Adjustments and Audit Findings

| Opinion | August 8, 2019

How the leadership of an organization, or a governmental entity, manages the results of an issue raised or an audit finding speaks loudly. It is as if their actions provide a window to the organization’s soul, and the way they handle adversity opens a door for all to see.

I learned that lesson early. The majority of my work career occurred within the military aerospace arena, and as a department manager, I logged many hours reading and implementing defense acquisition regulations, federal acquisition regulations, military specifications, contracts and product requirement documents. Believe me, when I advise young engineers entering a similar endeavor,  I tell them to never take those kinds of documents home to read at night, unless they are looking to be put to sleep.

My responsibilities included validating my department’s procedures and work performance, and was being accomplished to the requirements set forth in those documents. In fact, it was our taxpayer dollars paying the bills; and spending those resources properly was, and should always be, mandatory. During that time, it would have been nice if the world trusted I was doing the right thing; but it was never the case. With almost 50 simultaneous contracts regularly in work, it seemed like the world was full of auditors, as my departments were regularly subjected to a barrage of government, customer and company audits.

I had a choice. I could struggle through each audit event by continually defending our methodology, or I could implement documentation techniques which did not put an extra burden on my employees, preserved our company’s intellectual property and was clear enough for outside auditors to understand. Next, we included a periodic set of our department’s own internal audits, and discontinued preparing for outsiders looking in. In that way, we were able to use outside audits to validate the effectiveness of our business practices, and by taking effective corrective action we brought outside audit findings down to an insignificant level.

Now by sharing my perspective on dealing with audits, I trust you will have an understanding as to why I am dismayed at the City of Santa Clarita’s response to the Open Space and Parkland’s Financial Accountability and Audit Panel’s concerns over the $2 million transfer of funds from the Open Space District, to “cover a shortfall in the facilities fund.”  By voting not to approve the report describing the transfer, the panel put in place what amounts to an “audit finding.” City staff could have responded by indicating they would look into the matter and provide an answer by a certain date, but instead they pushed back by trying to bully the panel into approving the report. While Communications Manager Carrie Lujan  indicated “the panel’s action changes nothing,” what it does do, is show the community how the city operates.


In last week’s Gazette article by Lee Barnathan, Councilmembers joined in the conversation.  Councilmember Smyth indicated “the shortfall comes from the city using facilities fund money,” and “the city finalized the land purchase for the center in 2017.”  But, the Signal reported the council purchased the land in 2014 for $4.7 million, and when I checked the facilities fund balance in this year’s budget, the balance is north of $70 million. So where is the shortfall? Was it a shortfall in the amount appropriated for the purchase, and if so, why did the December 12, 2017 mid-year budget adjustment call the action a “funding swap?” Wouldn’t it be more appropriate for staff to put the shortfall in front of the council and request approval of an additional appropriation?

Even more significant is Mayor McLean’s comments as she is quoted saying, “I’m assuming that all this was looked at before the decision was made to go ahead and use the money to build the active park at the Community Center.” She went on to indicate, “when we receive information that an action is OK to take, we go by what our staff puts forth. As far as I know, this was all done the way it was supposed to be done, and until something different comes up, that’s what we go by”.

So, let me get a clear understanding of what our Mayor’s position is. The Santa Clarita City Council just goes by what the staff presents, assuming they did the right thing? Then who is watching the store? It is the City Council’s responsibility to keep staff on the straight and narrow, not just assume everything is OK.

There are council meetings where hundreds of pages of information are presented for approval, usually with a good number on the consent calendar, meaning the staff does not even intend to present a report about them, and the council will most likely not even speak to them. One of the best examples is when the staff presents the 250-page yearly budget for approval. They provides an overview, and if you look at the document itself, the majority of the information is presented at such a high level it is impossible to grasp if the budget is balanced or not. One notable exception is the description of the Capital Improvement Program. Each planned project is shown separately with the ability to show five years of financial planning, including any unfunded monetary requirements. But in actual practice, only the amount supposedly expended in previous years and the amount planned for the current year are included. A separate sheet reveals unfunded amounts per project.

For the past several years I have gone before the City Council when the yearly budget is being placed before them for approval and asked for an explanation of how the information included shows actual and accurate capital improvement project planning. As I have not received an explanation, this year out of frustration I went further and challenged the City Council Members to present the capital improvement planning process to the Canyon Country Advisory Committee.  None of them have accepted the invitation. Perhaps, they all use our Mayor’s method of “assuming that all this was looked at before the decision was made to go ahead,” and “we go by what our staff puts forth.”

From my perspective, it is sad this issue popped up in connection with the Canyon Country Community Center. Our local residents are very supportive of this project; in fact, even before it is built, removal of a hideous billboard has made a drastic aesthetic improvement of the intersection. Unfortunately, this situation has greater implications than related to just this project’s financial transparency. It shows how our city is managed, how audit findings are handled and most importantly how corrective action is implemented.

Councilmember Smyth indicated Ken Striplin, Santa Clarita’s City Manager, and Joe Montes, City Attorney, will meet with the Financial Accountability and Audit Panel before August 26 to “provide clarity.”

I’m hoping the City takes some positive action to prevent recurrence of this situation and goes further than just moving some financial allocations between funds… but we will just have to wait and see.

No Tags


About Alan Ferdman

Leave a Reply

Doug’s Rant – Video Edition

  • WatchDoug’s Rant June 22
  • WatchDoug’s Rant June 15