City of Presidio receives clean bill of financial health

PRESIDIO — On Monday, Presidio city council celebrated another positive audit, marking an upward trend in the city’s financial history. Preston Singleton, a certified public accountant from the firm Singleton, Clark & Company, came all the way from Cedar Park to present his findings to city officials. With a few caveats and recommendations, he was pleased to report that the city had been in good shape in fiscal years 2020 and 2021. 

An audit basically works like a credit score, affecting whether or not the city can receive grants and loans for emergencies and special projects. From 2013 to 2018, the City of Presidio received a series of adverse audits — the lowest score an auditor can give. The audits reflected bad bookkeeping practices and allegations that the city had not been paying its FICA payroll taxes.

Presidio’s finance specialist, Malynda Richardson, discovered just how dire the city’s financial straits were in 2019, when she attempted to apply for grants to buy the city a new ambulance in her previous role as EMS director. The city’s inability to provide adequate financial documentation would end up costing Richardson the grant — and bungle a few subsequent attempts to buy a new ambulance. 

The drama crescendoed in early 2021, when both the city’s previous auditor, Doak Painter, and city administrator, Joe Portillo, quit, leaving the city a few years behind on audits. The city hired Singleton, a new auditor, in the fall, as well as Brad Newton, a new city administrator. (Newton has since been fired and a new administrator has not been selected to fill his role.)

Singleton helped the city to catch up on the backlog, and as of December, the city was finally up to date. “The audit today is being presented within nine months of the fiscal year, which is timely,” he said to open Monday night’s presentation. “That’s very good to be able to say that the city is back on track for a regular audit schedule.” 

He summed up a few of the issues that had come back in the last audit report, delivered to city council in December. “By the time all that was reported in December, the year 2021 was already overdue, so the finance department wouldn’t have had time to implement all those recommendations,” he explained. “So the approach we took for the fiscal year 21 audit was not to re-report all those issues, even though many of them will most likely still come up in 2021.”

The most serious criticism Singleton had offered to the council back in December were weaknesses identified in the area of bank reconciliations, which ensure that payments have been processed and that balances are accurately recorded. “It looks like bank reconciliations were not really being done effectively,” he said. “It really is a big problem because your accounting is not guaranteed to be accurate.” 

That was one of the issues he chose to skim over in his latest presentation to City Council, satisfied that city staff was taking active measures to keep cleaner books — a process that can take awhile to show up in audits, which rely on months-old financial data. 

One worrying aspect of the latest audit was that the city’s revenues came in about $500,000 under budget, meaning that the city had planned to take in more money than it actually did. The city’s primary moneymakers are its water, wastewater, and landfill services, though grants can also be factored into the city’s revenue; the general fund, which rakes in tax money, operates city services that generally operate at a loss, like the city pool. “The expenditure section shows that the budget was overspent by about $200,000,” he said. “That’s a swing in the wrong direction. The general fund actually needed something like a rescue bailout.” 

That “bailout” came in the form of revenue from the landfill, and the city closed out the year with a $0 balance in its general fund. “That’s not exactly a normal scenario, because there were no financial reserves. There’s no financial cushion. The best practice for government entities is to try to have your general fund balance equivalent to two or three months of general funds expenditures.”

Singleton offered the disclaimer that there wasn’t a lot of time to “change course” in Fiscal Year 2022, but that the city could implement new policies in time for 2023. “Staff is already working on that budget,” Mayor John Ferguson assured him. 

The water fund was another area where the city will need to make adjustments: the account looked flush on paper, but Singleton reminded the Council that that was because of a one-time grant the city had received from the federal government for infrastructure improvements. Cesar Leyva, head of the Presidio Water & Sewer Department, explained that that money had gone to building a new water tank and expanding the city’s water services to previously underserved areas along Highway 67. 

The landfill seemed to be the entity keeping the city in the black. “It appears that the landfill has been a cash cow for the city,” Singleton said. “That’s the saving grace for the other funds. I’m hoping to sound the alarm for you guys as you set your budget for next year, because the time might come that the landfill can’t sustain [other funds] anymore.” 

Councilman John Razo agreed. “Every department should sustain itself,” he said. “We’re working on it, and we need to put a lot of our focus on it.” 

Finance director Malynda Richardson explained that water rates had been re-negotiated in the past year and had finally gone into effect in the last month. The city had not increased its water rates in five years to keep pace with inflation, but city officials finally reached a compromise that would allow rates to go up without hurting older Presidians on fixed incomes who were not the city’s major water users. “We’re only gonna see a few months of that impact in this fiscal year,” she explained. “We’ll have a much better idea of what that looks like in June or July.”

Mayor Ferguson pointed out another area of shortfall on the budget: something called “intergovernmental revenues.” Richardson explained that intergovernmental revenues are funds the city expects to receive from other governmental agencies, like money for the library from the state or funds from the county for miscellaneous projects. “You should never budget for grants,” Singleton advised. 

Other than a few suggestions, Singleton was happy to offer the city a positive financial report. “We’ve really been trying to reign things in,” Mayor Ferguson said. “This is a great audit for us to see, and really reflects positively on city staff.”