The news that the city books were plagued by a years-running, $3 million accounting error reached Mayor John Engen the day before he won reelection—a month and a half before it was disclosed to taxpayers.
Chief Administrative Officer Dale Bickell says he and Finance Director Leigh Griffing first outlined the problem to the mayor in a Nov. 6 meeting, after Griffing discovered it in late October. But it didn’t come to light publicly until a Dec. 20 presentation to City Council, by which point Bickell and Griffing could offer reassurances that the error would have only a small effect on city services.
Bickell blames the delay on the error’s complexity. “It took a long time to get the information together, because it spanned a number of years,” he says.
In a general sense, though, it isn’t hard to understand: Since 2013, the city didn’t realize it was robbing Peter to pay Paul for large capital purchases. Reimbursements for the purchases were sent to the wrong funds, making it appear that those accounts contained more revenue than they did.
No actual money was lost, but correcting the errors left five city accounts, including the $60 million general fund, short on ending fund balances, or rainy day funds. For years, the city had been working to build up reserves totalling 7 percent of the general fund, and anticipated that the balance was near its goal this summer. The actual figure is about $600,000, or just 1 percent, wiping out years of apparent progress.
Engen, in a memo he read to Council, wrote that the problem was discovered by finance staff during a reconciliation process for the city’s Capital Improvement Program accounts. Bickell and Griffing later described a rebuilding plan that involves delaying equipment replacement and vacancy savings.
The mayor’s political opponents tried to make hay out of another, less significant accounting error that arose during the municipal campaign. The 2018 budget resolution approved by Council omitted $25 million in approved spending, forcing councilmembers to re-vote on the budget—but not before Ward 4 candidate (now councilmember) Jesse Ramos used public comment to lambast the city for what he called an “Enron-level accounting error.”
Unlike the earlier error, this one comes with real budget ramifications. In a Dec. 26 interview with the Indy, Bickell provided more detail about potential hiring delays, saying that department heads each developed plans for potential savings after he met with them on Nov. 17 to explain the situation. Bickell points out five upcoming retirements in the police and fire departments whose replacements may be delayed as the city works to find an additional $1 million in savings in the current fiscal year.
The error began before Bickell or Griffing were in their current positions, but Bickell says the city could have caught the issue earlier if it had been conducting account reconciliations more frequently.
“It just hadn’t occurred on a timely basis for us,” he says.