Summarized Information Extracted from Budgets
The budget changes for the City of Sallisaw across the fiscal years 2023, 2024, and 2025 reveal shifts in both spending and revenue sources. This is a summarized version extracted and compared through the budgets published by Sallisaw intended for convenience. These tables do not appear in the budget books as shown. All comments and observations here are solely mine. I in no way intend to make claims—negative or positive—about Sallisaw’s financial position, whether fiducially cared for or unscrupulous uses of funds.
I am intending to point out several items that are difficult to discern from that budget books published annually. Any—ANY—municipality will have gaps in their financial controls. I have never worked or observed a commercial client, privately held firm, or governmental organization that has their financial controls without a weakness somewhere. The city of Sallisaw is no different from this.
The absence of a particular financial control is not an indictment of misbehavior from anyone, and the appearance of such an absence is most certainly not either. The possibility of such is warranted to be discussed and elevated for consideration. But even further, identifying possible weaknesses offers the opportunity to strengthen financial integrity.
Revenue Summary
| Revenue Source | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Total Revenue (General Fund) | $25,593,707 | $28,458,454 | $28,558,454 |
| Sales and Use Tax | $7,685,000 | $8,513,000 | $8,806,285 |
| Operating Transfers from SMA | $14,179,789 | $14,279,789 | $14,179,789 |
| Income from Fines & Permits | $220,450 | $245,059 | $282,000 |
| Interest/Miscellaneous Revenue | $1,099,200 | $1,198,930 | Estimated $1,099,200 |
| Balance Forward | $1,198,960 | $1,198,930 | $1,198,930 |
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- Total Revenue (General Fund):
- FY 2023: $25,295,386
- FY 2024: $26,105,840
- FY 2025: $28,558,454
- Primary Sources of Revenue:
- Gross Sales & Use Tax: $8,513,000 (Transferred out to Sallisaw Municipal Authority)
- One (1) Cent Sales Tax: $1,921,371
- Use Tax: $828,000
- Operating Transfer from Sallisaw Municipal Authority: $14,179,789
- Projected Balance Forward: $1,198,960
- Total Revenue (General Fund):
Expense Summary
Here’s a summary table reflecting major expenditures across fiscal years:
| Expense Category | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| Total Expenditures (General Fund) | $25,295,386 | $28,458,454 | $28,558,454 |
| Personnel Services | $10,466,609 | $10,983,000 | $11,500,000 |
| Supplies | $1,406,122 | $1,500,000 | $1,600,000 |
| Facilities | $1,100,300 | $1,200,000 | $1,300,000 |
| Equipment Maintenance | $837,900 | $900,000 | $1,000,000 |
| Professional Fees/Services | $1,579,140 | $1,600,000 | $1,700,000 |
| Sundry | $439,545 | $450,000 | $450,000 |
| Transfers Out | $9,351,566 | $10,000,000 | $10,500,000 |
Summary of Allocations to Various Funds
| Fund Name | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|
| General Fund | $25,295,386 | $26,105,840 | $28,558,454 |
| Sallisaw Municipal Authority | $39,176,382 | $42,501,963 | $42,501,963 |
| Capital Improvement Fund | $3,305,312 | $3,294,288 | $2,949,632 |
| Infrastructure Improvement Fund | $3,159,046 | $3,109,046 | $3,074,492 |
| Sallisaw Reserve Fund | $1,097,557 | $1,100,780 | $1,104,226 |
| Youth & Recreation Fund | $404,903 | $923,018 | $1,298,000 |
| Fire Department Fund | $160,856 | $179,157 | $190,000 |
| Police Department Fund | $30,340 | $41,587 | $45,000 |
| Meter Fund | $128,200 | $128,200 | $128,200 |
These summary tables provide a clearer picture of the financial outlines for the City of Sallisaw over the specified fiscal years, showing trends in revenues and expenditures as well as allocations to various funds.
What this means
Determining potential issues from the provided summaries requires analyzing discrepancies, unusual patterns, or inconsistencies in the financial data. I am not casting accusations, and these summaries do not necessarily indicate mischievous activity. Still, there remain a few areas that risk raising flags.
This section only intends to communicate what issues might occur and how they might be recognized.
These areas warrant examination for potential issues with any municipality. It is crucial for the City of Sallisaw to maintain transparent practices and thorough documentation around these funds to mitigate risks. I propose introducing a few ways to mitigate errors, or the appearance of such, through financial controls, some of which might still need to be implemented. I am still determining what controls are in place. That said, these are some watchpoints for us from a high-level look.
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- Budget Surges in Certain Funds: The Youth & Recreation Fund exhibits a notable increase from approximately $404,903 in FY 2023 to over $1.29 million by FY 2025. Such a dramatic increase could warrant scrutiny regarding the justification and allocation of those funds. Additionally, suppose there are no clear reasons (details) stated for this surge. If that should be the case, it may raise questions about the management of those funds, even if only innocently
- Stable Amounts in Key Funds: The Meter Fund remains stable at $128,200 across all years, which indicates consistency. However, the lack of growth in such a fund, especially amidst rising operational costs in other parts of the budget, might suggest that it is not being used effectively or that transfers may not accurately reflect the need for reserves.
- Significant Transfer Amounts: The projections show large amounts transferred from the General Fund, notably about $10 million in FY 2024 and FY 2025. High levels of inter-fund transfers may mask where expenses are incurred and could create avenues for misreporting if not carefully monitored.
- Dependency on Sales Tax and Transfers: There appears to be an ongoing dependency on sales tax and transfers, notably from the Sallisaw Municipal Authority to the General Fund. Should revenues from these sources decline or not meet projections, this could lead to financial instability or issues with funds to cover operational shortfalls. The budget must ensure that all funds remain self-sufficient or justified, especially during economic downturns.
- Lack of Detailed Justification in Initiatives: The summaries show extensive funding for new projects (e.g., aquatics pool, veteran center) with minimal detail on follow-up evaluations or project outcomes. Engaging in large capital projects without thorough reviews or community input could misallocate resources, heightening the risk of various issues if funds are not utilized as projected.
- Inconsistent Methodologies: Different budgeting methodologies, such as the modified accrual basis for governmental funds and accrual basis for proprietary funds, could lead to inconsistent financial reporting. If these methodologies are not transparently reported, they may obscure true financial performance and potential misuse of funds.
More about #6
The modified accrual basis for governmental funds and the accrual basis for proprietary funds represent two distinct approaches to accounting for revenues and expenditures in governmental finance.
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- Modified Accrual Basis for Governmental Funds: This basis recognizes revenues when they become measurable and available. Expenditures are generally recognized when the related liability is incurred. This approach is particularly suitable for governmental funds, as it focuses on the flow of current financial resources and emphasizes fiscal accountability by recognizing short-term revenue and expenditure patterns
- Accrual Basis for Proprietary Funds: In contrast, the accrual basis is used for proprietary funds, where revenues are recognized in the accounting period in which they are earned and become measurable, and expenses are recorded in the accounting period they are incurred. This method is akin to private sector accounting and reflects the complete economic resources of the entity, providing a more comprehensive view of financial health over time.
- The distinction between the modified accrual basis for governmental funds and the accrual basis for proprietary funds can present issues, such as errant or even misleading reporting. The core of the concern lies in the timing at which revenues and expenditures are recognized, which could create opportunities for misrepresentation of financial health.
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- Inconsistency in Reporting: Governmental funds authorize the recognition of revenues when they are measurable and available, focusing on short-term financial management. Conversely, proprietary funds recognize revenues when they are earned, thus reflecting a longer-term financial view. This inconsistency can lead to difficulties in financial oversight, as it could allow for the intentional misclassification of funds or misreporting of economic conditions.
- Potential for Manipulation: If project inappropriateness exists, such as large capital project expenditures recognized under certain conditions, there may be a temptation to delay recognizing liabilities or expenses in governmental funds to present a healthier financial outlook. For example, suppose a municipality is experiencing cash flow issues but would rather avoid recommending budget cuts or revenue increases. In that case, it might inflate available resources by not recognizing pending liabilities immediately, leading to a false sense of financial stability.
- Example Issue: An illustrative scenario could involve a leader (e.g., city manager) who knows that a significant expenditure for a new project, such as a public facility, is forthcoming. Using the modified accrual method, they could manipulate the timing of when certain expenses are recognized or deferred, thereby presenting the end-of-year budget favorably.If they delay reporting the costs until after the budget is approved (when it might be good for the overall numbers), this could lead to funds being earmarked for other purposes but used ultimately to cover costs that are only sometimes evident. Such actions could suggest fraudulent behavior, as the true financial condition of the city would be obscured by intentional manipulation of the timing of recorded expenses.The differences in these accounting methodologies can create vulnerabilities, allowing for misrepresentation that may serve to misleading activities when transparent practices are not enforced.
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To repeat the top of this page, these thoughts are soley mine. I am not an attorney. I am not a Certified Professional Accountant (CPA). The points I make here are not intended as an indictment, critisism, or celebration of our City’s financial position. This page does intend to point out possible areas to be watchful of.