The District needs to adjust its 2019 Budgeted Appropriation from $16,336,346 of expenditures to $17,120,156. (Exhibit A). This is an increase of $783,810 of expenditures partially offset by increased revenues of $344,382. This results in a deficit in the previously balanced 2019 budget of ($439,428), which will reduce the unreserved fund balance at the end of 2019. As of June 30, 2019, the Unreserved Fund Balance is $4,218,755.

Highlights:

• Grant information for the following was not yet available during the 2019 Budget development:

  • Kresge Grant revenue and expenditures of $111,537. Revenue will cover 100% of the non-overhead expenditures. Funds to pay for expenditures must be appropriated.

  • North Sound Accountable Community of Health revenue of $253,860 and non-labor expenditures of $9,000. The non-labor funds must be appropriated. The balance of the grant funds of $244,860 will be expended on labor provided by existing District staff (Exhibit B).

  • New Rural Communities Opioid Response (Planning) grant was awarded in May of 2019. For the 2019 budget, this adds $116,667 of revenue and non-labor expenditures of $30,000. The non-labor funds must be appropriated. The balance of the grant funds of $81,667 will be expended on labor provided by existing District staff.

• Leave payouts, severance and other termination payouts totaling $421,762 related to retirements, layoffs budgeted in 2019 and unexpected voluntary terminations of the Health Officer and Administrator. The cost of these payouts can be covered by moving funds from the Compensated Absences Reserve to Unserved Funds if the Board so directs; however, the expenditures themselves are paid through the normal operations and must be appropriated.

• Net savings related the Director of Administration serving as the District’s Interim Administrator, estimated at $95,000 for six months.

• Finance Program adjustments:

  • Unbudgeted cost for financial software upgrade originally scheduled and budgeted for October – December 2018 but delayed to January 2019 of $50,000. 

  • $20,000 to upgrade to existing model used to perform complex calculations to determine the District’s annual indirect rate that used to recover overhead costs when billing grants.

  • $20,000 to purchase Dynamic Budgets budgeting software to be integrated with the existing financial system to eliminate budgeting by spreadsheet and improve processes. A full discussion of Dynamic Budgets is shown in Exhibit C.

• EnvisionConnect software costs of $139,000 for the Environmental Health Division were not fully budgeted in 2019 because the vendor failed to bill the District for a number of years. Negotiation with the vendor resulted in a significant savings to the District over the next five years. The funds for amounts due to the vendor, Accela, need to be appropriated for 2019.

• Increase Investment Interest revenue by $107,268 based on 2018 and 2019 YTD actuals.

• Environmental Health Division fees were over budgeted by approximately $244,950 for 2019 based on 2018 and 2019 YTD actuals. This revenue reduction is partially offset by leaving open an EHS position that is vacant due to retirement and adjusting another EHS position FTE from .75 to 1.0 FTE for a net labor savings of $50,746.

• Legal fees for the District are significantly under budgeted in 2019. An additional $50,000 needs to be appropriated.

• $40,000 placeholder Moss Adams for Performance Audit requested by the Board during 2019 budget development (Exhibit D).

• Other expenditure adjustments detailed in Exhibit A totaling $38,257 must be appropriated.

• As noted in Exhibit A, there are other pending adjustments that may be needed:

  • Health Officer & Administrator recruitment of approximately $75,000. 

  • During discussion with State Auditor’s staff, the HVAC upgrade project may not qualify as a capital project under Generally Accepted Accounting Principles (GAAP), so the funds for this project may need to be moved from the approved capital budget to the operating budget to be appropriated.

Consistent with Resolution 11-36 (12/13/11) and SHD’s Division of Responsibilities, the Board of Health has authority over the Health District budget.

MOVE TO approve the 2019 budget amendments.