Granite Shoals gets answers to 2023 financial problems
Granite Shoals Finance Director Kevin Rule gives a presentation to the City Council on the financials of fiscal year 2022-23. The city went $1.5 million over budget that year, and some thought the money was lost. However, Rule was able to account for every penny. Staff photo by Dakota Morrissiey
New Granite Shoals Finance Director Kevin Rule determined the city was $1.5 million over budget last year. The good news is he was was able to account for where the money was spent and is implementing new procedures to prevent the same mistakes from happening again.
His findings shed light on Granite Shoals’ 2022-23 finances, which caused weeks of infighting among city leadership last budget season. Ultimately, a mayor and a city councilor resigned in protest of how the former city manager managed municipal money.
At the heart of the issue was that hundreds of thousands of dollars were not allocated properly and spending was not tracked effectively. That led to a series of unbalanced proposed budgets and Granite Shoals nearly missing its state-mandated budget submission deadline.
“(The city) went over (budget) by one million and five hundred and seventy-two thousand dollars (in fiscal year 2022-23),” Rule told the council during a presentation on June 11. “Going forward, this will not happen. We should never have this issue again.”
He explained that the city budgeted for $10.25 million in expenses last year but ended up spending $11.82 million.
“Nothing nefarious happened or anything,” Rule told DailyTrib.com after the June 11 council meeting.
He said the city went over budget due to a lack of proper planning and documentation rather than overspending.
Most of the $1.5 million difference between the budgeted expenditures and actual expenditures can be traced back to $1.2 million that was withdrawn from the city’s TexPool investment account and moved into the utility fund to pay for large-scale construction in the city’s water supply system in the summer of 2023. This transaction was not budgeted in fiscal year 2022-23, so it came out as an unaccounted-for expense.
Granite Shoals also spent about $300,000 more than budgeted on its solid waste fund, $120,000 on its restricted parks fund, and $90,000 on its hotel occupancy tax fund.
Some funds came in under budget, like the general fund, which was underspent by $459,000, and the streets fund, which was $291,000 under.
According to Rule, these types of discrepancies are normal in a city budget, but they are typically tracked throughout the year and amendments are made to the budget so accurate numbers are available when a city sets its budget for the coming year.
He promised the council he would provide monthly finance reports and balance the city’s books on a monthly basis to keep the numbers as up to date as possible so accurate budgets could be quickly developed.
Balancing a city’s funds is known as “reconciliation” in accounting terms, and this was one of the key concerns of city leadership in fiscal year 2022-23. Former City Manager Peggy Smith did not reconcile the city’s funds from the time she was appointed interim city manager in June 2022 until the 2022-23 budget season rolled around in August 2023.
At the time, Smith stated she was “very short-handed” and unable to devote adequate time to the city’s finances. She was also criticized for not hiring a finance director, which she had the sole power to do, throughout her tenure as interim city manager and city manager, which lasted from June 2022 through January 2024.
Smith was unable to produce a balanced budget for the council or answer direct questions about discrepancies between funds.
“My question to (Smith) is: How do we know the fund balances being reflected are accurate? I could be wrong, but, out of an abundance of caution, we’d like to get another set of eyes on (the budget),” said former City Councilor Kevin Flack in an August 2023 interview with DailyTrib.com.
Several emergency meetings were held and an outside consultant was hired to help straighten out the books as the city rushed to meet the state’s Sept. 29, 2023, deadline to submit its budget.
Granite Shoals did manage to get a budget submitted in time with the help of the consultant, but former Mayor Kiel Arnone and Councilor Flack expressed extreme concern over how Smith had handled the city’s finances during her tenure.
They both publicly resigned in October 2023 in protest after the majority of the council chose to put Smith on a professional improvement plan rather than fire her for the fiscal fiasco.
Rule said he was confident in his ability to set the city’s finances on the right course going forward.
“I don’t know what happened because I wasn’t here,” he told DailyTrib.com. “All I can say is that with the changes we are putting into place now, and the reports that council will be getting in the future and the timeliness of those reports to council, this will never happen again.”
Granite Shoals will hold its first budget workshop of the year on Thursday, June 20, to begin preparing the fiscal year 2024-25 budget.