I would like to address a concern that I heard oftentimes on the campaign trail: transparency in government. Over the last couple months I have come to realize as a newly elected official that Missoula is extremely transparent when it comes to information, but it does present its own problems: navigation of all the information, and comprehending a complicated financial structure.
To that end, I volunteered to take an online course titled “Montana Municipal Officials Handbook” that provides a wealth of information for the newly elected. My fellow Ward 3 Councilwoman Gwen Jones and I partake in weekly conversations with other elected officials all across the State of Montana. It is obvious to all of us that there is no way any person could possibly be prepared to know it all on Day 1 in office, hence my reasoning for accelerating my learning curve.
One of the most important lessons I have learned so far is that as a Councilor I am limited in the scope of my work. Who would have thought? Just like at the federal and state levels, the local municipal level has three branches of government that checks and balances one another: executive, legislative and judicial. My role as a Councilor is primarily as a legislator whose responsibilities include financial oversight, but that is NOT one and the same as micro-managing competent department heads and staff accountants. That job is filled by the Chief Executive of Missoula, our Mayor. I liken it to my role as board member for the non-profits I have served. My fiduciary duty of accountability does not mean I dive into the weeds of every transaction that takes place…that is for the Executive Director to do.
The Administration and Finance Committee, of which I am the Chair, is charged with financial oversight and one specific task is reviewing claims, which is voted upon by Council early on in the agenda of Monday night meetings. This can be a bit daunting as a member of the public and/or for non-accountants, and so I would like to focus on the Claims Process.
First of all a definition of “claims” is in order. We all know that government is not omnipotent and capable of conjuring goods out of thin air. So imagine yourself in the private sector for a moment and you sell office supply goods, or you are a contractor of services. If the City buys your electrical controls or car parts, you expect to be paid, right? If the City negotiates a contract with you for excavating work on South Avenue you expect to be paid for work performed as well, right? Exactly. Those are considered accounts payable [AP] in the world of accounting, but we call them “claims”. So every Monday night City Council is presented with the claims submitted by the private and non-profit sectors that need to be paid in a timely fashion.
Prior to our Council meetings, I want to ensure we are paying for goods and services out of the correct fund. Following Generally Accepted Accounting Practices [GAAP] we organize our expenditures and revenues into seven funds (General, Special Revenue, Debt Service, Capital Projects, Enterprise, Internal Service, and Component Unit & Agency Funds). We cannot comingle money between funds; for example we cannot pay for playground equipment out of the Debt Service fund.
Follow me along by clicking here for the City’s agenda from the February 12th meeting. I first open the file “AP Memo over $1k+other claims” and examine it. When something sticks out at me – let’s use a recent payment to Boone Karlberg for legal service for the month of January for $16,824.43 – then I cross reference that to the “AP Invoices detailed claims”. Locating that particular claim is easy to do as they are alphabetical. I can see the invoice #, the description, the amount, and most importantly the series of digits that our finance department uses to code that particular entry. In this case it is: 5210.335.430590.350.000. Hmm, what does this mean? Well I pull out my handy dandy Chart of Accounts and cross-reference the codes to translate to:
5210 = Enterprise fund
.335 = Water Company department
.430590 = Public Works activity
.350 = Professional Services object
.000 = NO sub-object assigned
Now each department – whether Parks and Rec or Public Works has its own budget. Its department head is responsible for ensuring that the claims he or she submits to the Finance Department are within its budget. Staff accountants then double check that the claims are accurate before they are presented Finance Director, who in turn prepares them for Council. That process takes roughly two weeks from the moment the City receives the invoice to payment. Much longer than that, and that is seen as being slow to pay and that is not something our government should be doing.
So when Monday night rolls around, we are presented with a long list of claims totaling anywhere from $500,000 to $1,500,000. But here is something interesting worth remembering: claims are for work or services already provided. They are not a contract for future work. And that is why you should see a unanimous decision in favor of paying our claims to the citizens of Missoula. It is just best practices.
I certainly hope you walk away feeling like you built some comprehension of the magnitude of what it takes to be accountable for our fair City. Let me know if you have further questions.