Purpose of Audit

The purpose of our budget review was to determine whether the significant revenue and expenditure projections in the City’s proposed budget for the 2014 fiscal year are reasonable.

Background

The City of Glen Cove, located in Nassau County, issued debt totaling $12.8 million to liquidate various accumulated fund deficits for the fiscal year ending December 31, 2006. Local Finance Law requires all local governments that have been authorized to issue obligations to fund operating deficits to submit their tentative budgets for the next fiscal year to the State Comptroller for review while the deficit obligations are outstanding.

Key Findings

The 2014 proposed budget contains significant financial risks that the City Council should consider when adopting the 2014 budget.

• The City continues to finance operating expenditures with debt when it should be funding such expenditures with operating revenues.
• The practice of supporting operating expenditures with unrealistic revenue estimates and one-shot revenues is not prudent.
• The City projects operating surpluses for the 2013 fiscal year for the general fund and the water fund. However, due to overstated revenue estimates, the golf and recreation fund is projecting a $93,308 operating deficit. The unassigned fund balances in these three funds are still expected to remain as deficits.
• The 2014 budget included estimated revenue of over $1 million from the sale of property that may not happen timely or as planned.

Key Recommendation

• Develop a viable financial plan that is sustainable for the long term, which gradually decreases the unassigned fund balance deficit, and is less reliant on the issuance of debt and one-time revenues to resolve systemic structural imbalances in its budget.