SAN DIEGO (CN) – A finance audit of the California Coastal Commission’s money management released Friday shows the powerful agency lacks a centralized way for billing and collecting money, a problem it was advised to fix to address potential shortfalls in the future.
The 31-page audit report stems from the financial hole the commission found itself in earlier this summer when it received a $1.46 million general fund loan from the Department of Finance. The agency requested the loan so it could make its June payroll and pay rent and other expenses before the new fiscal year kicked in. Because the commission requested a significant loan and there were “difficulties” in getting reimbursement and expenditure information from the commission, the finance department requested the report.
It was the second such loan in two years, and was paid back before its October deadline.
The 2015-2016 budget for the agency – which is tasked with enforcing the Coastal Act – was $22.8 million. Finance officials’ “non-audit review” evaluated the commission’s fiscal management from July 1, 2015 to June 30, 2016.
The audit found a lack of communication between departments has a significant effect on the way money that flows in and out is managed. For example, the report notes commission staff learned of a potential cash flow shortage in Feburary 2016, but did not notify the Department of Finance until May 2016. Several commissioners also said they were unaware of any budget shortfalls until the loan was approved in June.
Many of the commission’s money woes hinge on its billing and collection practices, as reimbursements account for $2.7 million – 12 percent – of the commission’s annual budget. There were significant delays in collecting reimbursements from grant payments and work done for other governmental agencies, with invoices being sent out infrequently and by multiple staff members using different billing and collections methods, according to the audit.
“No unit is fully accountable for coordinating and ensuring timely billing and collections,” the report states.
There is no formal invoicing schedule or follow-up policies for ensuring invoices are paid, according to the audit. That lack of an invoicing schedule means about half of the commission’s $1.1 million in invoices remained open for more than 121 days.
Some payments were not received directly by the commission’s accounting staff, the report points out, delaying large reimbursement deposits. One notable example was a payment for nearly $80,000, which did not reach accounting staff until four months after it was received.
The report recommended centralizing billing and collections, developing a written procedure and schedule for invoicing and being more aggressive in following-up on collections to ensure they are paid timely.
In their response, commission staff agreed with most of the 11 recommendations made by finance officials. But the commission blamed some of its problems with the timely collection reimbursements on its “exceptionally tumultuous and challenging year.”
The response noted the controversial firing of former executive director Charles Lester and several staff retirements.
“Staffing constraints slowed down reimbursement contract completion and billing and exacerbated cash-flow issues at the end of the year, resulting in the need for a cash-flow loan,” the response stated.
Currently, four full-time and two part-time accounting employees work for the commission. But the commission believes additional staffing and funding are necessary for it to implement the Department of Finance’s recommendations.
“Due to the commission’s heavy dependence on reimbursement contracts and grants, it is very likely that some cash flow problems will continue to be an issue every June,” commission staff noted in recommending an ongoing year-end loan.
The commission’s plans for implementing the audit recommendations will be made public.