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  • Writer's pictureTricia Babischkin

Why don't we have updated financials?

Beginning with the very first time I spoke to Mr. Berman, I heard a talking point being spun that the financials were late and the board could make no decisions because they didn't have up to date financials. At that meeting it was the first weekend of June and I couldn't find that the end of year financials were ever presented to the board prior to the first meeting in June -- which meant that Mr. Berman was in fact wrong, at that moment the financials were not late.

During that chat with Mr. Berman, I asked why the person who is tasked with the financials and was under pressure to get them done had been prioritized to make COVID signs for Village Hall (during a time that it was not publicly announced that the Village Hall was once again open to the public) and not have the front desk person make those signs? Mr. Berman informed me that in CAO's last village, the financials were done by a part time employee and so it would seem reasonable that this role could do more with her full time status.

The problem with this information was that Prairie Grove, CAO's Smith last Village Manager job where she was terminated in a 7-0 vote by the board, is smaller than Lakewood and does not own it's own business, the municipal golf course. Alas, that piece of information was missing from Mr. Berman's explanation of the Business Analyst role.

In our last meeting we got May's end of month financials. Again we heard a chorus of "they're late; they're late." I've been asking for months why our Finance Director is not responsible for preparing the financials as it was done prior to CAO Smith's hiring and she was specifically paid more to take on this role. I've had no answer.

Since I was pulling a bunch of data recently from our financial reports, I took a few minutes to note the date the report was available to the board -- since May of 2016. Here's what I found:

So, given that we don't ALWAYS have a meeting every other week, I looked at the date of the board packet versus the last day of the month. Most often, the end of month financials average 45 days after the end of the month. In weeks, we see nearly 40% of the financials were presented 8 weeks after the month they reported on closed. ONLY once in 4 years of reporting I looked at was it greater than 12 weeks late -- and yes, that was this most recent set. And note -- these are counted as days, not week days or even work days -- this is based on actual days since the month closed.

Where it gets more interesting is that a CPA did the work prior to CAO Smith's hiring. His average was 44 days after the end of a month the board would have the financials in their packet. If we exclude May 2020 from when our Business Analyst took over the financials, her average was a full 3 days faster at 41 days. If we include May, she's EXACTLY the same average as our former CPA. I also feel I need to point out that of the 10 times that the financials have been more than 10 weeks from the end of the month, it has only happened TWICE within the period our Business Analyst has been doing the work.

But wait -- it's still a problem that the last financials were VERY late, right. Yes, right. Except, I think we really need to fully understand why. In order to close the books and prepare the financials, there's much more to do that just simply push a button on some accounting software.

Every two weeks, there is payroll for the village. So, figure that in any given four week block (a single month) of time, she has 20 days (if there are no holidays, she takes none of her well earned 6 weeks of vacation off, 3 personal days or sick time -- because she's been with us for 23.5 years, and the are no new grand babies born a month early), she loses two days to run payroll each cycle for all village employees including the golf course staff. This leaves 16 days a month to do the following, and this would just be to close the month prior:

  1. Prepare the monthly IMRF monthly reports

  2. Reconcile the State ePay system for the utility bills and permit fees

  3. Reconcile the online payments from GolfNow, the booking engine for RedTail -- because of COVID they started doing pre-pay online, which now must be downloaded and reconciled

  4. Balance every bank statement

  5. Balance the debit card usage for every department

  6. Balance RedTail Pro Shop Inventory - ensure that the pro shop stock on hand is beginning of the month inventory less sales plus orders arrived

  7. Balance RedTail Food & Beverage Inventory - Same as above with the Food and Beverage Inventory

  8. RedTail monthly sales and tax reporting, she manually enters this daily from one system through Excel and then manually into our antique accounting system -- because the two systems don't talk to each other

  9. Wait to confirm Accounts Payable checks are completed before entering anything into the general ledger

  10. Manually entering every journal entry into the general ledger

  11. Then, MANUALLY enter the numbers from the system into the format of our financials (as the only system produced report is the Revenue and Expenditures Report)

If we assume that each of these steps takes an average 6 hours each (balancing ePay is about 3 hours; but journal entries are at least 8 hours), so averaging this out -- to close a single month is 60 hours of work (step 9 is a wait step, just shows that she's dependent on others getting their work done to get hers started). Add the 32 hours of payroll work, this leaves only 68 hours a month to do every other thing that is assigned to our Business Analyst.

What that? Well, remember she's also basically the HR department. So, she's responsible for setting up every new employee into the Paylocity system, deal with issues of clocking in, vacation time, various other things that HR would deal with. In normal times, the seasonal RedTail employees are processed in March, well before the end of the year. However, this year, with COVID, the new employees were not processed until the golf course could re-open in May -- at the same time that the end of the fiscal year was happening. So, let's say that on average, general personal items including hiring, form processing, drug test follow-up, etc. averages 32 hours a month (more at the beginning of the spring and even more lately with the high turnover and recent events in our village).

So, now she has about 36 hours to do all the jobs that don't occur monthly but need to get done, like recently she's had to deal with TWO insurance claims for the barn break-ins and there's the time for the annual audit that has eaten into her time. But also, since this spring, she's also had to add the budget into the system -- the same budget that doesn't really add, so that wasn't a simple data entry job. Also, there's audit support too -- she's been on point to pull all the needed documentation for the auditors.

One of the things I've learned is that this administration has been consolidating jobs in an effort to save money. At one time the Utility Clerk and the Accounts Payable roles were two people. This meant that one of them (the Accounts Payable) could be a back-up and additional support for our Business Analyst.

So, when COVID and the incident on May 4th, delayed April's year end financials and then there was a journal entry for the sale of the travel center property was not entered, the April financials weren't approved until July 28th. She can't close May until April's financials were approved. So, with the first meeting in July canceled; May couldn't have even started to close until after 7/28. So, if every month takes 60 hours to close a single month, there is currently 180 hours of work to get caught up -- in just month end work.

Is there help in sight? Nope, apparently our CAO thinks this is a good time to install the new system which is set to begin 10/1. Great a system that might make the work easier and integrate the systems -- but we will be transitioning unclosed months (that's double entry once in the old and then again in the new). And that new system requires training -- how many hours will that take away from closing the months?

A great manager would have never allowed a single employee's plate to get this overfilled. She would have seen that there is a single point of failure that holds vital information from the board to be able to do their jobs effectively -- and hired a back-up long ago so they would have been trained to help. Additionally, she would have divided the duties of finance from the HR duties and ensured that there was a trained back-up for every role in Village Hall.

A good manager would pitch in to help an employee who is behind catch up. But this would require that our CAO be able to do any of the items on this list. Do not ever forget that this work, once the responsibility of the CPA, is in the CAO's job description in our code. Or barring the CAO being able to help; shouldn't our trained Treasurer be qualified to pitch in?

An average manager would re-prioritize the employee's plate to free them up a bit to catch-up. But those COVID signs were so much more important than April's financials.

A bad infective manager would set about to write up that employee effectively for taking time off to see her grandson.

Yes, the financials are behind. Our short-sighted management's answer was to get a part-time temp to help out -- want to guess who will have to train this person? How many of the few hours left in a month will she have to train this person?

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