CSMFO Magazine July 2017

CSMFO C A L I F O R N I A

S O C I E T Y

O F

M U N I C I P A L

F I N A N C E

O F F I C E R S

M A G A Z I N E

JULY 2017 #15

CSMFO President-Elect Margaret Moggia reveals the 2018 CSMFO Annual Conference theme on page 12.

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3 CSMFO MAGAZINE JULY 2017

Piper Jaffray is committed to California municipal finance CONFERENCE EDITION

For more information, contact the following representatives from our California public finance team: Mark Adler Managing Director 310 297-6010 mark.j.adler@pjc.com

Tom Innis Managing Director 415 616-1635 thomas.p.innis@pjc.com

Katie Koster Managing Director 949 494-6110 katherine.a.koster@pjc.com

Dennis McGuire Managing Director 916 361-6520 dennis.j.mcguire@pjc.com

Russell Reyes Managing Director 310 297-6014 russell.c.reyes@pjc.com

Victor Ume-Ukeje Managing Director 415 616-1662 victor.e.ume-ukeje@pjc.com

Tony Rapista Vice President 310 297-6031 anthony.l.rapista@pjc.com

Renee Vancho Vice President 949 494-6115 renee.n.vancho@pjc.com

California municipal finance banking offices are located in Los Angeles, Orange County, Sacramento and San Francisco 4 Since 1895. Member SIPC and NYSE. Š 2017 Piper Jaffray & Co. 3/17 CM-17-0240

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CSMFO

CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS

M A G A Z I N E JULY 2017 #15

2017-18 Board of Directors President Drew Corbett, City of San Mateo President-Elect Margaret Moggia, West Basin MWD Past President John Adams, City of Thousand Oaks Scott Catlett, City of Yorba Linda Jimmy Forbis, City of Gilroy Steve Heide, Chino Valley Independent Fire District Brent Mason, City of San Bernadino Karan Reid, City of Concord Jennifer Wakeman, City of Lafayette

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Executive Director Melissa Dixon, MBA, CAE Editorial Designer & Photographer David Blue Garrison Cover Photographer David Blue Garrison Editors Joan Michaels Aguilar, City of Dixon Marcus Pimentel, City of Santa Cruz Additional Photography Pexels, Pixabay and Stocksnap The California Society of Municipal Finance Officers is the statewide organization serving all California municipal finance professionals. We promote excellence in financial management through innovation, continuing education and the professional development of our members. CSMFO members are deeply involved in the key issues facing local agencies. We value honesty and integrity, and adhere to the highest standards of ethical conduct.

Thank you to all the authors in this issue for sharing with us their time and expertise. If you have an idea for a future article, please contact Melissa Dixon at the CSMFO office at melissa.dixon@staff.csmfo.org.

For more information on CSMFO or this Magazine, please contact the CSMFO office at 916.231.2137 or visit the website at www.csmfo.org.

The views and opinions expressed in these articles are those of the authors and do not necessarily reflect the official policy or position of CSMFO.

CONTENTS JULY 2017 #15 FEATURES

Building a 21st Century Workforce P.

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Finding & Keeping Employees in A Sizzling Job Market P.

P.

19

The New Normal

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Once You Get MAD, Your Life Will Never be the Same P.

New GASB Reporting Model

P.

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Ideas to Maximize TOT Revenues PART 2

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P.

Gas Tax: What You Need to Know to Survive an Audit P.

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The Next Generation of Economic Development P.

Navigating the Minefield of Cannabis Politics P.

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Statement of Auditing Standards 130

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P.

37

Job Opportunities

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P.

44

INSIDE CSMFO President Drew Corbett’s Letter P.

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Spotlight on Ivan Chand P.

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Executive Director Letter P.

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Conference in the Mile-High City P.

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The 2018 CSMFO Conference P.

12

Heard on the Floor

P.

36

The Host Committee Accepts The Mission P.

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Announcing Quick Hits

Focus on the CSMFO Orange County Chapter P.

P.

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PRESIDENT’S LETTER Drew Corbett

CSMFO On The Road Since taking over as President at the annual conference in Sacramento this past February, I have been on the road a

lot representing our organization. In the last issue of the magazine, I filled our membership in on my travels to Oregon for the OGFOA Spring Conference. Since then, I have been to Newport Beach, Denver, and back to Sacramento. Here’s what I have been up to: April 26-28 Newport Beach, CA I made my way down to Newport Beach in late April to attend the California Municipal Treasurers Association (CMTA) annual conference. I arrived on Wednesday morning to be there for the opening general session and ran into more than a few familiar faces, including CSMFO President-Elect Margaret Moggia, who happened to be presiding over the conference as CMTA’s President, and Past President John Adams.

The conference started off great, with State Treasurer John Chiang providing the opening keynote, and was fantastic through the Friday close. Like our conference, it was a combination of high-quality general session content, various breakout session opportunities, and great networking, not to mention a number of great exhibitors and sponsors who helped to make it all possible. I had the chance to address the CMTA membership on behalf of CSMFO at the Thursday lunch session and focused my remarks on leveraging our overlapping membership to continue collaborating on events and initiatives for the benefit of both CSMFO and CMTA. To that end, I look forward to working with CMTA’s incoming President, Rudy Livingston, to continue that conversation.

May 19-23 Denver, CO I arrived in Denver on Friday afternoon for the Government Finance Officers Association (GFOA) annual conference.

While the official conference didn’t actually start until Sunday afternoon, I had plenty to do to keep me busy until then. In addition to being CSMFO President, I am also a member of a GFOA standing committee (Committee on Retirement and Benefits Administration, or CORBA). On Saturday morning, we had one of our two annual in-person meetings to review and discuss the advisories that we had been working on this spring. After lunch, I left the CORBA meeting to serve as one of the co-instructors for a pre-conference session on managing small teams. On Sunday, I had one more session for which I was a presenter, which was focused on career development and planning your next career move, before I could enjoy the conference as an attendee and prepare for CSMFO’s reception later that evening.

Our “A Nightcap with CSMFO” event, which was held at the Hyatt Hotel on the 27th floor, was a huge success. With an amazing view of Denver and a unique late-evening start time, conference attendees from California packed Peakes Lounge for dessert, cocktails, socializing, and networking. Invitations to this event went out not only to CSMFO members, but also to any conference attendee from California. I had the chance to speak with a number of non-CSMFO members from California during the evening, including a large contingent from the City of Los Angeles, and hopefully was able to convince a few to join CSMFO. To support that effort, I co-wrote a letter with Membership Benefits Chair Ernie Reyna to send to all non-CSMFO members who attended the reception to tout the benefits of being a CSMFO member and encourage them to consider joining us.

And finally, this event would not have been possible without the efforts of our Past President, John Adams. While the responsibility for planning the CSMFO reception at the GFOA conference falls on the President, John took on a lot of the planning and due diligence for this event and was a tremendous help to me in ensuring we had a well-planned and well-attended event. Overall, I think the event was a tremendous success and will hopefully serve to bring in some new members our organization.

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CGI Advantage360® May 26 League of California Cities in Sacramento I made it a full two days in the office after the GFOA conference before I headed to Sacramento for a day to meet with the League of California Cities new Executive Director, Carolyn Coleman. Along with our fiscal policy advisor, Michael Coleman, I got to spend an hour with Carolyn discussing our respective organizations and how we can be of benefit to one other. With the League focused on advocacy and CSMFO predominantly focused on training on education, the two organizations provide comprehensive coverage on all of the key issues we face in our professional lives. With a greater emphasis on coordination between the two organizations, I believe we can be of even better service to our membership.

I also had the chance to meet with Meghan McKelvey, the League’s Policy Analyst, and we discussed our respective organization’s initiatives and how we can work together to best meet our members’ interests.

As you can see, it’s been a busy spring for me. As much as I have enjoyed being out on the road representing our organization, it’s definitely hard to be out of the office so much.

I am looking forward to a travel-free summer to get caught up on things and get prepared for my next wave of travel on behalf of CSMFO. This includes heading to Washington in September for the Washington Finance Officers Association conference, attending CSMFO strategic planning in Riverside in October, and visiting Alaska in November for the Alaska Government Finance Officers Association conference.

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cgi.com/cgiadvantage360 CSMFO MAGAZINE JULY 2017

EXECUTIVE DIRECTOR’S LETTER Melissa Dixon

Super Cool Things at D23 One of the perks, for me, of owning

an association management company is holding many events at the Disneyland Resorts. Smith Moore & Associates is holding three client events with Disney in just July and August alone. As a Disney fan, this makes me very happy. But what it also does is provide Disney a justification for inviting me to super cool things. For instance, I was recently a guest of the Disneyland Resort for the D23 Expo, at the Anaheim Convention Center July 14-16. (For those of you who don’t know, D23 is the Comic-Con for Disney fans. This is where all the announcements are made for upcoming movies and theme park renovations, it’s where new merchandise is revealed and where stars of Disney movies and TV, as well as Disney Legends collect, comingle and collaborate to create an unforgettable fan experience. I regret that I was only able to attend the Expo on Friday, as I had to get back home to perform in my community choir concert on Saturday night. But I had a fantastic time for the 20 or so hours I was there, and thought I’d share some of it with you all.

Thursday night we were treated to dinner in a new private event venue inside Disneyland, in Tomorrowland. For those of you who remember the Starcade, near Space Mountain, all the arcade games have been cleared out and it is now an expansive space that will seat a dinner for approximately 200.

The evening was themed around Walt—the man who started it all. We had an appetizer version of Walt’s chili, inspirational posters of Walt and his famous quotes, pictures with Oswald the Rabbit and as Steamboat Willie, and a miniature replica of Carthay Circle Theater, which premiered Snow White and the Seven Dwarfs, Walt’s (and the world’s!) first featurelength animated film, in 1937. We were fortunate enough to watch a presentation by Stacia, a Disney animator who has worked at Disney for over 30 years. Stacia provided us a history lesson on Walt, 10

while sketching some of his more famous classic characters. It was pretty amazing to watch, as she rarely paid attention to what she was drawing yet each one came out perfect! After her presentation we each had the opportunity to have her draw for us a sketch of our choosing. I got Sorcerer Mickey!

After the dinner we walked over to Main Street to a reserved viewing area, and got to see the iconic Main Street electrical parade and the fireworks show. It was a pretty special night!

Friday started with breakfast at the Paradise Pier Hotel (have you ever had oatmeal brulee? Incredible!), where we got to take pictures with Donald Duck. Then we rode over to the Anaheim Convention Center for D23! The first stop was the Disney Legends ceremony, where eleven (11) new Legends were inducted. I had no idea what to expect, and I was blown away. Each inductee shared a story that was funny or personal and all were inspirational. For those of you who haven’t heard me diatribe about why I love Disney, this two-hour session would tell you all you need to know. Disney is a company that applauds originality. That pushes boundaries. That worships fun and always—ALWAYS—exceeds expectations. Here are some of my favorite moments from that ceremony: Oprah Winfrey told us she had dinner the night before at Steakhouse 55, inside the Disneyland Hotel. She talked to her server, Steve, and found out he had worked there for 42 years. And she said “Forty-two years! Steve, that’s a lifetime! What’s made you stay so long!” and he responded “I just feel like this is the best place for me to be me.”

And she agreed with him, and said she felt exactly the same way about the Walt Disney Company.

Manuel Gonzales was one of Disney’s original animators. His son told a story about his dad saving up his money to buy a new car—a 1938 yellow Packard. Unbeknownst to Manny, Walt owned a 1937 Packard…also in yellow. When his dad drove up that first day, the guard thought it was Walt and directed him to a parking space. Walt’s parking space. Manny parks, goes up to his office and is there maybe ten minutes when the guard rushes in, breathless, telling him he has to come move his car. He races down to do just that and sees Walt standing there, waiting for his parking space. He expects to get a verbal lashing but Walt just laughed and quipped, “I think I’m paying my animators too much.”

In the Carrie Fisher tribute video, they showed a clip of an interview where she said hiding something or running from it only increases its power over you. She said, “Say your weak things in a strong voice.”

Mark Hamill told a story about Disney “lifting the veil” when he was a kid and showing him how things were made.

That it wasn’t just magic, that cartoons were drawn and actors voices recorded and that was actually someone’s job. And he thought what an amazing thing it would be, to

said that as long as there is imagination left in the world, Disneyland will never be finished. He said that changing Disneyland, updating it, was the way to stay true to Walt’s vision and honor his legacy. He also said that you didn’t tell Walt “No.” That if you did, he would go out and find someone else who would tell him “Yes.” So you had to learn to think creatively and just figure out how to do whatever it was he wanted done.

He said, “Technology doesn’t drive the story, the story drives the technology.”

get up every morning and go to work as the voice of Donald Duck; and so that’s what he set his sights on.

He thanked the Walt Disney Company for showing him that when he wished upon a star, his dreams really could come true. (He also commented that if Carrie Fisher were there with us, she would have flipped him off at least twice.)

Garry Marshall’s son and daughter accepted his posthumous award on his behalf. The son said that Garry took them to Disneyland a lot when they were kids, but he never really rode the rides. He liked benches, and Disneyland had a lot of benches.

He would sit on the benches and watch people, and write jokes and scripts. When he finally got to work at the Disney studio, they gave him a bench with his name on it. His son reminded the audience of where Walt Disney had the idea for Disneyland, which was sitting on a bench in Griffith Park. He said, “Walt and my father would want you to sit on benches and daydream. You might just change the world.”

I could get caught up in how inspiring I found all these stories, about how this culture of the company is exactly what I want to build in my own firm, but then this message would take up the entire Magazine. So let’s proceed with the day.

We went to lunch at Morton’s Steakhouse, and then afterward attended a panel session on the making of Pirates of the Caribbean (the ride), celebrating its 50-year anniversary. One of the questions asked of the panelists was about the somewhat controversial change coming up, wherein Disney was replacing the famous “Auction” scene with one that doesn’t elude to women being property. The audience reacted to that, booing at the planned renovation as, even though misogynistic, the scene is much beloved. Disney Legend Marty Sklar, who personally worked with Walt, had the best response. He said that from day one, Disneyland has been changing, evolving. That Walt

Dinner Friday night was held in a new private event venue in California Adventure, the Disney Theater in the Hollywood Backlot. Where the Starcade was very retro/classic Disney, this Theater was ultra modern. We were served an array of foods showcased at the recent Food and Wine Festival (the mac and cheese was to die for, not to mention the cauliflower tacos! Who knew?). After dinner we viewed World of Color while sitting at some high tables and having dessert and sparkling wine, and then we went on the new Guardians of the Galaxy: Mission Breakout! I’m afraid of heights and am not a fan of elevators or drop rides, but I had to go on it because, well, YOLO, right? It was, it turns out, less frightening than Tower of Terror had been. We got to listen to We Want The Funk as the elevator bounced us up and down along the length of the tower. I kept my head buried and my eyes closed unless we were stopped for one of the fun videos, and my legs were shaky when the ride was done. But I did it!

That was the end of the group activities for the night, but my husband I went over to Disneyland and stayed until it closed. As it was so late the crowds were minimal, and we walked onto Pirates, Haunted Mansion (twice), and the Jungle Cruise. (We were the only two on the boat for the Jungle Cruise…it was awesome! We had our own private tour!)

As I said, we left the next morning—so we missed the Disney parks announcements. I did, however, eagerly watch the internet for updates and can share that Disney is turning Paradise Pier—the section of California Adventure with California Screamin’ and Mickey’s Fun Wheel—into Pixar Pier. The release date on that is 2018, which should mean that most of the renovations will be cosmetic. It’ll be fun to see what they come up, and how they rebrand the rides to be Pixar-appropriate!

Also, for you Star Wars fans, the new Star Wars land, which will be open in 2019, has an official name—Star Wars: Galaxy’s Edge.

This was a really long message this month, but hopefully you all enjoyed hearing about my escapades through the Happiest Place on Earth!

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INSIDE CSMFO

The 2018 CSMFO Conference MISSION: POSSIBLE

Written By Margaret Moggia

How do you capture and convey a meaningful theme in just a few words? Words that focus on

Margaret Moggia, CSMFO President-Elect

our conference location in Riverside or words that inspire our finance profession on the challenges and opportunities that each of us face as we go about our daily professional and personal lives?

I’m proud to announce the 2018 theme and the logo (thank you David!) – a theme that extends beyond the 4 days next February for the annual conference but for the full year.

Each of us plays a critical role in completing the mission of our city, special district or county perhaps through a strategic business plan or performance goal setting. What is great about our profession is the willingness to support one another. We do so by collaborating with our co-workers and peers by sharing resources, inquiring on the CSMFO list serve or connecting with our vendors who can help us identify the solution. Through this collaboration, we may even create (innovate) something new.

I encourage you to take advantage of the wonderful CSMFO training and webinars offered throughout the year to learn something new or gain insight on a better way to handle your situation. Let’s not forget our mentors or coaches, who are also there to collaborate, innovate and achieve with you.

In the end, we should remain focused on achieving our goals and tasks that ensure that our entity is able to achieve its mission. I love to hear more from you on what your entity is doing to make your mission POSSIBLE. How does this theme also fit your personal life mission?

Whether it is late at night or an early morning start, we are dedicated finance professionals who are present to see the job gets done. We strive to add value to the organization and truly meet the need of being a public servant.

For some it may be completing the staff report or presentation to our governing board, for others it may be ensuring the routine and daily tasks are being completed timely and accurately, and yet others it may be preparing an analysis that addresses an issue and then communicating the solution. For some, it is all the above.

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What goals are you trying to achieve? Is it completing a certification or higher education? Perhaps it is to find the new job that challenges you? Through conversations, you and your peers can collaborate to set the path to achieve these personal goals. Be there to mentor and motivate others who are looking to seize the opportunity.

For me, I recently completed my California Treasury Certificate through CMTA. What better way to complete it than strongly encourage my coworker to complete it with me. I am certainly glad we did. I feel more confident and just proud that I was able to get through the material and then take (and pass) the test.

Finally, CSMFO has its own mission The California Society of Municipal Finance Officers serves all government finance professionals through innovation, collaboration, continuing education and professional development.

Last year, our current Board President, Drew Corbett, led the CSMFO leadership along with Neil Kupchin to review our mission, and document our values and guiding principles. As we developed the 2017 Strategic Business Plan, we discussed our strengths and weaknesses along with the opportunities to continue to deliver to our membership for the next 60 years.

That resonated with me.

CSMFO is focused on the how, what, where and why to prepare our members and our next generation to be ready to collaborate, innovate, and achieve to deliver our Mission: Possible.

Margaret Moggia CSMFO President-Elect

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M0R. F. T. DNLD

YOUR MISSION, SHOULD YOU CHOOSE TO ACCEPT IT....

TOP SECRET

Send us your best spy-themed photo for a chance to be featured in the CSMFO Magazine or to win two tickets to the 2018 Presidents Dinner. submit to: melissa.dixon@staff.csmfo.org

NO. 2018, CSMFO D.C.B3TT3R

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NO. 2018, CSMFO

M0R. F. T. DNLD

NO. 2018, CSMFO

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INSIDE CSMFO

The Host Committee Accepts The Mission Your Host Committee is hard at work planning and putting together another spectacular CSMFO Conference for 2018.

The Committee was recently locked in a room at a secret location in Riverside. A 1970s tape recorder was the only thing in the room. Once the door lock ‘clicked’ into place, the tape began to play… “Good Morning, Host Committee. Your members are expecting another fun, exciting and valuable Conference in 2018. A challenging task, indeed. Your mission, should you choose to accept it, is to construct a great event that provides CSMFO members with the opportunity to Collaborate, Innovate and Achieve. This tape will self-destruct in five seconds.

Good Luck, Jim”. We had no idea who Jim was and much to our chagrin the tape did not self-destruct. We decided to accept the CIA “mission” anyway. We were well on our way to “Mission:Possible”!

C – Collaborate: We have designed and planned numerous opportunities for you to Collaborate and help grow your career and increase your knowledge. Plenty of networking opportunities, both on a state and local chapter level, will be available to all attendees. This peer-to-peer interaction always proves to be a fulfilling and friendly learning experience. Make sure to take full advantage of these great activities!

I – Innovate: What you learn from interactions with other finance professionals in combination with the ever-valuable keynote speakers and industry-specific sessions will give you the tools to head back home with a full and complete Innovation toolbox. Innovation and hard work are the keys to success and our goal is to help you leverage your already strong work ethic with innovative problem-solving solutions.

A – Achieve: Working hard with our Program Committee partners, the Host Committee’s end goal is to put together the most valuable conference that a government finance professional can attend. It’s our job to put together a program that allows you to Achieve your professional goals. We’re up to the task and have drafted an exciting blueprint with an innovative Conference schedule with components that are

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relevant to what you encounter on a day-to-day basis.

All of this is in addition to the excitement of our organization “taking over” a beautiful and revitalized Downtown Riverside.

We have great hotels lined up that are all within easy walking distance of the sessions. And since Downtown Riverside is chocked full of quaint shops and restaurants, you have the chance to casually browse, shop and dine in one of the crown jewels of the Inland Empire. Finally, and to save the best for last, the Committee is putting the finishing touches on the hallmark Thursday evening event. We can’t let the rabbit out of the hat quite yet, but rest assured that Thursday night will prove to be a globe-trotting “mission” that will be worldly in nature and put us all in the “inn” crowd.

Stay tuned for further updates as the Conference schedule and program is finalized. Be sure to save the dates February 20 through February 23, and plan on joining us in Riverside.

The Conference, with all of the planned activities, strong learning opportunities and valuable networking events, is sure to provide you with all you need to make 2018 “Mission: Possible”.

FEATURED ARTICLE

Building a 21st Century Workforce Written By Patrick Ibarra

Every day in the United States, 10,000 people turn 65. And according to the Patrick Ibarra, The Mejorando Group

Pew Research Center, millennials now outnumber baby boomers in the workplace, 76 million to 75 million, while millennials will make up 75 percent of the workforce just 10 years from now.

As a result of the rapidly aging workforce, government organizations -- small and large, rural and urban -are experiencing a brain drain that is placing their organizations at a critical juncture: The need for experienced and seasoned employees has never been greater, while those are the very workers who are most likely to be departing in the very near future.

As they seek to shape the workforce indispensable to executing their missions, government finance leaders must realize they are contending with the private sector for talent as never before and they are facing substantial challenges in attracting and -- perhaps even more important -- retaining their best people.

The battle for talent continues to intensify and the need to attract and retain top performers remains essential to organizational success.

By distinguishing oneself from the competition, by promoting strengths and confirming values ensures your organization will stay ahead of the pack and becomes an employer of choice during both recession and boom times.

The sum of all these moving parts is that for government finance leaders to build their 21st-century workforce, old models must be discarded in favor of “next practices”— contemporary, progressive and practical strategies and tools to attract, retain and optimize talent.

Raising the Caliber of the Talent Pipeline The first step in pursuing change in recruitment is for there to be a shift in mind-set away from the status quo practice of “we’ve always done it that way” and towards the realization that your organization is an employer. In order to recruit the most qualified and talented candidates, the organization and its leaders must take actions consistent with that approach. In addition, there should be recognition that recruiting, while primarily a Human Resource Department function, must be shared by the Finance Department; creating a healthy and viable “pipeline” of incoming talent is a responsibility all members of the organization should indeed share.

The best people today aren’t simply looking for a job. They want meaning and impact, and local government is all about having an impact on the quality of life for citizens. The time when all government agencies had to do was simply post an ad in a newspaper, on their website and includeing it on their job hotline, while sitting back waiting for applications from qualified candidates to come pouring in are OVER! It’s a competitive talent marketplace, and the old recruiting ways are long gone. The “post-and-pray” method of posting a job listing and praying that good candidates would apply doesn’t work anymore. That’s because today’s recruiting efforts must be proactive, dynamic and capable of engaging candidates through the entire candidate lifecycle.

It’s important to think like a marketer, understanding that hiring is not simply about generating a large number of applicants, but should be a targeted approach aimed at attracting highcaliber candidates: • These days, it’s hard to overestimate the value of social media in the hiring process. Sites like Facebook and LinkedIn have emerged as more important than agency hiring websites and seem poised to overtake them as the primary focus for prospective job-seekers.

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• Learning Program – It’s time to move away from the training mindset (considered an expense) and instead to a learning approach (considered an investment). If not already in place, you should immediately develop a series of learning courses which focus on equipping employees with the requisite leadership, management and supervisory skills. In addition to the traditional topics of managing employee feedback, communication and delegation emerging topics include Leading Change, Innovation, and Performance Management. Ask yourself “what if we don’t develop our people and they stay?”

• The world is crawling with smart, skilled, zealous people who won’t be remotely interested in your organization if what you provide as a job announcement is the kind of utterly dull description that’s still far too common for government. Use more of a social-marketing approach that offers a powerful message: Join our organization and be a part of something truly outstanding.

• As in other aspects of life, first impressions are critical.

Job candidates from all walks of life want ease and convenience when applying for positions. Publicsector employers often require a series of written exams and performance tests as part of their hiring process, but keeping the interest of talented candidates means streamlining and simplifying this too-cumbersome process.

• Feature testimonials from current employees about what a wonderful organization yours is and how the work is challenging. Testimonials by existing employees can relay powerful messages not only about the job/role one has, but the environment in which they work. The more progress your agency makes in this area, the more you will set yourself apart from other government employers.

• Modify promotional practices to factor in performance as much as seniority, because it’s a myth that seniority translates to competence, just as it is a myth that technical proficiency translates to supervisory effectiveness.

• Wise leaders pivot from these tired old notions and adopt a more practical approach that reflects what they’re seeking from their workforce. Remember, hiring is like dating — you get what you look for.

Strengthening the Internal Bench of Potential Successors Progressive organizations realize that in today’s workplace, candidates and employees alike are seeking an employer who chooses to invest in developing their skills and capabilities as a strategy to elevate employee performance and improve organizational effectiveness. They also acknowledger that being recognized as an employer who, even-through tough economic times, makes the strategic decision to invest in their workforce builds a reputation as a builder of people and that, ladies and gentlemen, is a magnet to retain and develop talented people.

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• Mentoring – Establish a pool of willing employees interested in sharing their knowledge with others.

Mentoring Programs are easy and inexpensive ways to both effectively transfer tacit knowledge about city operations from senior employees to others, as well as enable those employees who are seeking advice and counsel to developer their capabilities in advancing their career goals.

• Growth – Your employees will increase their capabilities and positon themselves for future opportunities not just by learning new skills and actively engaging in a mentoring partnership, but also participating in a series of targeted employee development activities. For instance, rotating job assignments, “acting” roles and shadowing are attractive to top performers who want to stretch themselves.

• Career Development - The concept of a career is transitioning from the traditional ladder, where up is the only way to go, to more of a lattice, where employees move in different directions – up and sideways – gaining essential skills and experiences to keep pace in today’s quickly changing workplace. Most finance departments do not have a structure that lends itself to clear career paths anyway. Consequently, it is incumbent, regardless of the size of your agency to create a process involving key leaders from your Finance and Human Resource Departments and interested employees in co-creating a customized career plan for those employees. Be careful not to assume classification levels are career paths, they are not. Instead, they are tools for compensation purposes.

What all these “next practices” approaches have in common is a focus on transitioning to the workforce that is right for the times as they are now and as they will be. The old models just won’t get you there.

Patrick Ibarra is an “entrepreneur of ideas” and architect of innovation who takes the headwinds governments are facing about the current climate of unprecedented changes and translates them into a tailwind with practical, tactical and impactful solutions that can be used immediately. Patrick, a former city manager, owns and operates an organizational effectiveness consulting practice, The Mejorando Group (www.gettingbetterallthetime.com), and is one of the country’s leading experts on optimizing the performance of public sector organizations. Mejorando is Spanish for “getting better all the time,” and Ibarra’s firm brings fresh thinking, innovation, and new ideas to help governmental organizations succeed in the 21st century. For those seeking additional information, Ibarra can be reached, either by phone at (925) 518-0187, e-mail at patrick@gettingbetterallthetime.com.

FEATURED ARTICLE

New GASB Reporting Model Changes for a new accounting generation

This article was compiled by a joint team including: Ahmad Gharaibeh, Partner, Vavrinek, Trine, Day & Co., LLP

Supported by a belief

that elected officials will change their inherent, short-term focus based on changes to Governmental Fund accounting and presentation, the Governmental Accounting Standards Board (GASB) has put forth three sweeping proposals to change our financial reporting through the issuance of a new Statement in November 2021.

Drew Corbett, Assistant City Manager/Finance Director, City of San Mateo; President, CSMFO

GASB’s final decision could end modified accrual as we know it and/ or dramatically change accounting requirements within Governmental Funds, as well as significantly alter the presentation of the Comprehensive Annual Financial Report (CAFR).

John Adams, Finance Director/ Treasurer, City of Thousands Oaks; Past-President, CSMFO

GASB appears to share in the concern that governments in general are still not doing enough to: (1) publically reflect the true level of future liabilities; and (2) implement strategies to reduce these liabilities. Perhaps fed by like concerns from within our profession and from other governmental stakeholders, GASB feels their action will better inform and lead decision makers to take action to reduce unfunded liabilities like Pension, Other Pension and Employment Benefits (OPEB), and Compensated Absences.

Marcus Pimentel, Finance Director, City of Santa Cruz Harriet Commons, Retired Finance Director, PastPresident CSMFO

In addition, GASB has other concerns with current approaches for resource recognition, with the difficulty of using reconciliation statements, and with specific items like how governmental funds currently include loans to external parties. GASB also wants to remain responsive to other key governmental partners who require long-term assurances of a government’s financial status, such as rating agencies, underwriters and bond holders.

Missing from GASB’s three new proposals is the option to retain the current structure. Instead, each proposal will lead to wide ranging degrees of new accounting treatment and presentation. Those three proposals are currently referred to as the Near-term, Short-term and Long-term approach. Each of these proposals focused on changes primarily in the following areas: • Recognition approaches (measurement focus and basis of accounting) • Format of the governmental funds statement of resource flows • Specific terminology • Reconciliation to the government-wide statements • Adding a statement of cash flows to governmental funds GASB is currently holding public hearings across the Country where interested parties can speak to the Board as well as information gathering sessions with key stakeholders. Recently, on May 11th and May 12th, 2017, GASB held hearings and received feedback within the City of Burlingame (CA). During the May 11th hearing, our own CSMFO President, Drew Corbett provided caution to the board to consider the impacts on staff workloads when weighing the benefit of changes as well as reminding the board of the comments received by CalCPA and the GFOA. More information about GASB’s upcoming hearings and digital archives of prior meetings can be found within the Meetings section of GASB website. And to review comments submitted or learn more, go to GASB’s Major Project page about the new Conceptual Framework.

Following is a brief summary of GASB’s alternate proposals.

Near-term approach.

The Near-term approach, while being the closest to current governmental accounting standards, does little to address concerns with long-term liability disclosure within each of the Governmental Funds. It would exclude all long-term items having a pay/receive date beyond the near-term (still to be defined but expected to be within 60 to 90 days). For example, loans receivables could be excluded from the governmental funds but accrued interest on bonds due within the near-term would be included as a liability.

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Many governmental agencies favor this approach. It is seen as keeping a familiar measurement focus of “current” resources available for spending. It is also presumed to be the least impactful to CAFR preparers.

And, perhaps more importantly, it would retain the familiar governmental fund reporting format that is used by elected officials, city staff and other local users when determining funding capacity within the current operating cycle. There may also be the benefit of allowing financial schedules to be more in line with Federal reporting requirements and to provide higher credibility when requesting State of Federal reimbursements. There is concern with GASB’s other proposals of how the inclusion of long-term, estimated liabilities would impact or draw concern from Federal or State officials when considering reimbursements.

And while more opinions may end up favoring this approach, as past history has documented, it doesn’t mean the GASB Board will end up electing this approach.

Short-term approach.

The Short-term alternative, as opposed to Near-term, would allow for inclusion of items like loans receivable and accrued interest if they could be liquidated, used, or received within one year after the fiscal year-end. This approach would also include a new statement of cash flows for governmental funds.

According to GASB, this approach would assist in (a) assessing a government’s ability to meet service needs and pay obligations in the subsequent operating cycle, (b) analyzing whether a government is falling behind or keeping pace in funding its short-term obligations, and (c) determining whether the government has available resources (beyond those needed to meet current-year obligations) to meet new or additional service needs.

Some in the industry and those who have provided public testimony may refer to this as the hybrid approach between the Near-term and Long-term. Accordingly, some public testimony and early opinions are concerned with this measure as it may result in both sides of the discussion equally disappointed with the outcome (it either does not go far enough or it would provide little value as compared to the efforts required to compile financial statements).

Long-term approach.

The Long-term alternative would include all the long-term items except capital assets and capital related debt. It is closer to how Government-Wide statements or Proprietary Funds statements are prepared. This approach would also include a new statement of cash flows for governmental funds.

One of the concerns from within preparers of financial statements is in order to record these future liabilities, it would put more reliance on future estimates that are subject to significant, annual changes based on revised assumptions (as we’ve experienced in the past several years with CalPERS pension revisions). There is also concern that it would put more reliance on third parties to provide these estimates, thereby putting pressure on providing timely financial reporting.

And by moving away from a “current” resources focus to a longer term focus, many users within our communities may not understand what’s available for spending for an upcoming budget year.

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However, it would provide comfort and assurances to longterm investors of government agencies as to the degree future liabilities may impact future resource decisions. And, based on many comments by the GASB board and staff during public hearings, appears to be a proposal that garners a lot of favor with GASB because of its inclusion of a proportional share of pension and other long-term liabilities within each of the Government Funds. And, it could provide another useful data source for governmental financial professionals to continue the focus on increasing funding of future liabilities and being cautious with today’s commitments. There is also a recognition that such a conversion could eliminate the need for the current reconciliation schedules between the Government-Wide and Governmental Fund presentations.

In the end, there is passion on both ends of this discussion with the shared goal of preparing informative, timely and useful financial statements that adequately discloses financial condition of agencies for key decision makers. The differences are in where that information resides. For example, many argue that the full liability of long-term debt, pensions, OPEB and compensated absences has already been disclosed in financial statements for nearly two decades within the note disclosure and within the Government Wide presentation.

While others want consistency between the notes and all the financial statements and to encourage government officials to adopt longer term views when making annual budgetary decisions.

What the GASB will ultimately do is still to be written. What is clear is they will do something. We will have changes in definitions, in terminology, in the Management Discussion and Analysis (MD&A), in how and perhaps where the statement of cash flows is presented, how budget to actual information is presented, and ultimately what is included and not included in fund statements.

So it is up to each of us to stay informed, stay engaged and leverage your accounting relationships and organizational contacts to help guide GASB. GASB plans to conclude its outreach, information gathering, and public hearings in August 2017. At that time, it plans to analyze all the new information received and report out by April 2018 with a draft of their preliminary views. And, by June 30, 2018, GASB will develop a pre ballot draft of preliminary reviews.

INSIDE CSMFO

Mission Assignment Are you looking for a new or different way to become involved with CSMFO? Volunteer to be a budget reviewer or an award presenter, or both!

Budget Reviewers Budget reviewers are a vital part of the CSMFO Budget Award Programs. Every year, CSMFO receives over 100 award applications, submitted by cities and special districts.

Each budget reviewer generally receives one or two budgets to evaluate, between September to December, and it takes about one to two hours per review. Don’t think you have the experience to be a budget reviewer? Don’t worry - CSMFO’s Professional Standards & Recognition Committee will provide you with the tools and guidance to help you through the review process. As a budget reviewer, you also get exposure to different local government budget documents, budgeting best practices, and connect with your CSMFO network community. Become a budget reviewer today! Contact Yolanda Rodriguez at yolanda. rodriguez@bcvwd.org.

Award Presenters CSMFO coordinates award presentations for the CSMFO Budget and CAFR Award Programs, as well as the GFOA Budget and CAFR Award Programs. CSMFO is looking for volunteer award presenters throughout California to make presentations for local governments who receive these awards. Don’t know what to say?

Don’t worry - a presentation slide deck and a presentation script are available for award presenters to use. Your participation will allow many more award recipients to receive an in-person presentation. Be a part of this newly re-engineered award presentation program. Help provide recognition to CSMFO members’ reporting accomplishments by presenting to their elected officials. Become an award presenter in your area today!

Contact Juliana Demers at jdemers@elsegundo.org.

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FEATURED ARTICLE

Gas Tax: What You Need to Know to Survive an Audit Seldom does a title born from accounting create such fear as the Auditor title. Sure, you may be familiar with and

have the pleasure of working with your friendly neighborhood auditing firm. But when the audit involves the IRS, CalPERS, or Gas Tax, the stress level jumps (as it should). These are all serious audits that require organization wide attention.

As for Gas Tax audits, these can be an intrusive, compliance heavy reviews that, at times, may be subject to State political influences; in contrast to working collegially with your financial audit firm where you may expect or encourage candid, inquisitive, and overly thorough discussions. The scope of these Gas Tax audits can extend back several decades, result in findings in excess of $1 million, and the frequency of these audits appear to be on the rise (88 completed audits in 2016).

And, with the recent approval of The Road Repair and Accountability Act of 2017, local government should expect increased scrutiny related to the $5.2 billion that will be annually provided as an investment in California’s transportation infrastructure. It is critical to prepare now for a future audit with how public agencies will account for and ensure compliance with this increased allocation.

AUDIT EXPERIENCE What will your audit experience be like?

According to State Controller’s Gas Tax officials, the scope and internal control testing of their audits exceeds the applicable Gas Tax, Traffic Congestion Relief and/or Prop 1B funds, and the time periods reviewed per State code can extend far beyond an agencies records retention schedule.

entire payroll database. It may also include project site visits, equipment inspections, and inspection of native supporting documents of accounting transactions buried deep in the bowels of your corporation yard.

AUDIT TRENDS A total of 480 audits have been completed by the State Controller’s office between calendar year 2007 and 2016.

During this period, nearly 35% of agencies were audited two or more times.

The scope of the audits can vary widely. Some agencies may have only a one year review limited to Special Revenue Gas Tax funds while others can have reviews that extend beyond a decade and include various time periods for Special Revenue Gas Tax, Traffic Congestion Relief and Prop 1B funds.

Drilling down into the audits completed in 2016, the average scope of the audit was six years for Gas Tax and seven years for Traffic Congestion Relief and Prop 1B funds. Although some agencies experienced audit periods that spanned as far back as sixteen years.

The frequency of audits appears to be increasing. Audits of City’s has increased from an average of 24.7 audits to 61.8 audits when comparing the period of 2010-2012 to 2013-2016; with 88 audits completed in 2016. Of the audits completed in 2016, 39 had negative findings with a financial impact averaging near $830,000.

As far as a notification period, you can expect a two month notice period before the auditor will be onsite. Depending on the scope and complexity of the review, you can expect a two week onsite presence.

A typical audit may encompass a broad testing of other State funding and general systems of control across all City operations (General Fund, Enterprise funds and other funds) in the areas of fraud prevention, accounting treatment, cash handling, payroll and employee timesheets, purchase orders, accounts payable invoices and check processing, physical construction of projects, security of the City’s work sites and inventory of all the City’s assets from small equipment to roads and facilities.

It can also include interviews with your agency’s management team to assess management controls and fraud interviews; as well as conducting random interviews with employees across the 22

Resources: Guidelines Relating to Gas Tax Expenditures: For Cities and Counties (http://www.sco. ca.gov/Files-AUD/gas_tax_guidelines.pdf) State Controller’s Office- Annual audit results (http://www.sco.ca.gov/aud_gastax.html)

Venture with

Confidence

Following are 10 topics that an audit will focus on.

1. Proceeds must be spent within the narrowly defined authorized expenditure requirements (see the “Guidelines Relating to Gas Tax Expenditures”).

2. Interest allocation must be consistent and uniform across all funds; and gas tax related funds must be excluded from negative interest (if any).

3. If administrative costs are allocated to Gas Tax related funding, there must be consistent and well documented cost allocation through an approved cost allocation plan.

4. Proceeds of gas tax related assets sold must returned to the applicable fund.

www.willdan.com

5. Debt service expenditures must meet all three tests: (1) debt was approved by your community’s voters; (2) debt maturity does not exceed 25 years; and (3) debt service must be limited to no more than 25% of funds allocated.

6. Total expenditures can’t exceed available fund balance (i.e., cannot create indebtedness by using future year funding for current year projects).

7. Gas tax and related cash balances cannot be borrowed for any other purpose.

8. Must expend allocations within 2 years for Traffic Congestion Relief and 4 years for Prop 1B funds.

9. Must have an active whistleblower policy with toll-free number available for staff to easily find.

10. Must confirm how fraud policies are communicated across all the organizations staff levels.

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FEATURED ARTICLE

Navigating the Minefield of Cannabis Politics to Arrive at Sound Fiscal Policy Written By Mark Lovelace

After decades as a ‘fringe’ issue, cannabis has now

Mark Lovelace, Cannabis Policy Advisor HdL Companies

landed squarely in the forefront of most counties’ and cities’ legislative agendas.

California’s Medical Cannabis Regulation and Safety Act (MCRSA) was passed in 2015, followed by the Adult Use of Marijuana Act (AUMA) in 2016.

Now the Governor and the legislature have merged the two into the Medical and Adult Use of Cannabis Regulation and Safety Act (MAUCRSA), to create a single, unified regulatory framework for this emerging industry. County supervisors and city council members can no longer ignore the subject, and neither can administrators and finance officers.

Unfortunately, when local elected officials take up the issue, they are likely to have a very different discussion than the one that administrators and finance officers might like them to have.

Heated discussions about community values, public safety and neighborhood impacts may leave little room for less ‘sexy’ concerns such as permit fees, cost recovery, staff workload, and impacts on the General Fund. How can finance and administrative officers get their concerns in front of their boards or councils in a way that will help them see cannabis regulation not just as a cultural issue, but as a fiscal issue?

Regulatory solutions for dealing with cannabis aren’t hard to come by Unfortunately, obtaining direction from policymakers on how to craft those solutions can often prove difficult.

For sixty years, or more, the primary 24

conversation that our society has had around cannabis has been a debate over values, where there are only two possible positions one can take. It’s either good or it’s bad; You’re either for it or against it. Simple, two-sided arguments like this set up a “win or lose” political dynamic for elected officials. And no elected official likes to lose.

Staking out turf on a playing field of values does not help communities move towards solutions. To begin to craft effective regulations for this emerging industry, administrators and finance officers need to help their elected officials shift the dialogue away from an inflexible debate over differing values and move it towards productive conversations about effective regulatory programs, fee recovery, staffing levels and sound fiscal policy.

At the simplest level, there are two directions a county or city can take to deal with the cannabis industry. They can choose to ban it, or they can choose to regulate it. It would be a mistake, though, to conflate these two directions with the “good or bad/for it or against it” dichotomy mentioned above. As with prohibition, a ban has the counter-intuitive effect of supporting the illegal industry by tipping the market in its favor, by driving up prices and profits, and by giving it immunity from taxes, employment laws, permitting requirements and environmental regulation. There are many in the cannabis industry who would prefer that it remain illegal at both the State and local level.

By the same token, regulating the industry should not be taken as being “pro-cannabis”. Regulation helps to protect consumers, public safety, community character, and the environment by zeroing-in on specific issues, impacts and concerns with the industry. Regulation tends to increase costs and complexity for any industry, while free-market competition tends to drive down prices and profits.

One way to move past dogmatic values and towards solutions is to consider the effects that either a ban or regulation might have on specific cannabis-related issues. For example, demand is generally considered to be a constant, which is affected little or not at all by legalization. Consumer demand for cannabis has persisted for decades despite enforced prohibition, yet cannabis users have always found access. Given this, it is unlikely that a local ban will reduce demand.

If demand is unchanged, then a local ban on commercial cannabis businesses will lead to consumers either buying cannabis in neighboring jurisdictions where purchases are legal, or buying it on the black market, as there is no legal alternative to meet existing market demand. With sales of illegal cannabis, there is no way to ensure it is not being sold to minors, that the product is safe, or that it is not being sourced from illegal, black market grows. A ban does not make the industry go away; it just pushes it back underground. All of the community impacts continue as before, along with all of the costs to government services and public safety, with no resources available other than the General Fund.

Regulation provides a safe, legal alternative to the black market.

From a fiscal standpoint, choosing to permit and regulate cannabis businesses at the local level opens up opportunities to reduce General Fund liabilities by shifting them onto the regulated industry. The legal, regulated industry pays its own way through fees, thus reducing both the burden on law enforcement and the drain on the General Fund.

Permitting fees can average $17,500 to cover the annual costs for processing, inspection and enforcement of the permit’s terms and conditions, not including the highly variable costs for processing the initial application. Inspections by other agencies such as fire departments can add to this cost. Through regulation, these costs may be borne by the regulated industry, not by the taxpayers generally.

Regulating the industry also presents the opportunity to generate new General Fund revenues through taxes on legal, commercial cannabis activities. Though there are a variety of ways to structure cannabis taxes, and a wide range of rates that can be applied, these taxes have the potential to deliver

millions of dollars to county or city coffers, which can be used for any public purpose. Commonly, taxes on legal cannabis businesses are used to defray the costs of enforcement against the remaining black market as well as other costs associated with the industry, including environmental cleanup and Health and Human Services programs.

In this way, taking a regulatory approach to cannabis, rather than a prohibitionary approach, allows local governments to shift costs away from the General Fund, to develop substantial new revenue sources, and to make the legal, regulated industry pay its own way through fees.

Taking a pragmatic, regulatory approach to dealing with cannabis does not require anyone to give up their values.

No one has to lose. Ultimately, the reasons for regulating the industry are the same, whether one believes cannabis is “miracle medicine” or the “Devil’s weed”. By getting away from this “good or bad” dichotomy, local governments can exert effective control over the industry, increase public safety, generate new revenue sources and reduce the impact on the General Fund.

Mark Lovelace is a Cannabis Policy Advisor for HdL Companies, working with counties and cities to develop effective land use and taxation policies for regulating the local cannabis industry. He previously served as a Humboldt County Supervisor from 2009 through 2016, where he was a leader in advancing the statewide discussion about cannabis regulation.

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FEATURED ARTICLE

Finding & Keeping Employees in A Sizzling Job Market Written By Sharon Kropf

Currently California’s unemployment rate is at 4.7%, the lowest rate since 2001. When considering

Sharon Kropf, Principal with TAP Technologies, LLC.

this statistic it is no surprise that Government HR Managers list recruiting and retaining qualified personnel as one of the most challenging issues they face (The Center for State and Local Governance Excellence). The problem HR Managers are facing will not go away soon; according to the April California EDD Labor Market Report, the local government sector added 11,300 jobs in April alone. Despite these statistics, there are ways that your organization can recruit and retain employees in the sizzling California job market, where the costs of living are some of the highest nationwide.

Recruiting Strategies Make the Application Process Easy Complex application processes are burdensome and deter candidates from applying for jobs. It’s a buyer’s market for jobs and job seekers will take the path of least resistance with the opportunity for the largest potential gain. Government agencies must reduce the steps required to apply for positions and use technology to manage the recruiting and ranking process. If a prospective employee is looking at 10 jobs and one requires the applicant to manually input their information onto a form and to answer supplemental questions as a first step in the process, they will most likely not apply. In contrast applicants will apply if an organization allows them to view 26

the job from their mobile device, upload their resume and apply with minimal effort. Prospective applicants aren’t vested in the job or organization at this stage and the goal is to get potential employees in the door so that you can screen them further to find the best organizational fit.

Government Service Makes a Difference Develop a marketing strategy that changes the public’s perception from the idea that government employment is “bureaucratic and boring” to the idea that government employment is “productive and meaningful”. As Abraham Lincoln stated “government of the people, by the people, for the people shall not perish”, employees want the work they do to matter, make a difference, and to help others. Government employment is a perfect example of jobs that contribute to the public good.

Proactively Target Talent Outside of Government Government organizations generally do not actively look for employees. Instead, government organizations wait for potential employees to apply. In a tight job market HR needs to target their recruiting efforts outside of government towards companies or organizations that are of similar size, have similar job functions, etc. Targeting non-government entities increases the candidate pool and diversifies the candidate base. It also has the added benefit of bringing in candidates with new ideas, experiences, and skill sets, outside the government box.

Partnering with universities or trade schools and providing internship opportunities can also increase your candidate pool when openings occur.

Recruiting in California – High Housing Costs Recruiting employees in areas with high cost of living requires creative solutions because we cannot control the housing market. Some agencies are considering incentives such as providing a housing stipend, low interest or no interest loans, but there can be a long-term downside to financial incentives.

Financial incentives can create a sense of entitlement and are hard to rescind when economic conditions change. An alternative incentive for positions that don’t require daily

interaction with the public, is giving employees the ability to work remotely from their home, likely in a lower cost area.

Similarly, alternative work schedules such as 3/12, 4/10 or 9/8/80 plans can allow employees greater flexibility to live in more distant, lower cost areas without having to commute every day. Many of these incentives have become common practice in certain industries, but as of yet have not been widely adopted in government organizations.

Retaining the Best One thing to understand is that no matter how many incentives or perks you give, employees don’t stay long with one employer. According to the Bureau of Labor Statistics, in January 2016, median employee tenure (the point at which half of all workers had more tenure and half had less tenure) for men declined to 4.3 years and for women, median tenure declined to 4.0 years. Median employee tenure was generally higher among older workers than younger ones. For example, the median tenure of workers ages 55 to 64 was 10.1 years compared to 2.8 years for workers ages 25 to 34 years. The objective is to keep productive employees as long as possible.

Coaching versus Dictating Once salary is taken out of the equation Millennials want the opportunity to advance quickly and perform challenging and engaging work. Government organizations tend to be hierarchal and manage from the top down. Millennials are more project oriented and desire a mentoring or coaching environment allowing them to develop new skills and take responsibility for assignments. To retain talent, organizations need to move from a hierarchal management style to a coaching management style emphasizing employees’ needs, motivation and need for regular feedback.

Career Planning Hiring fully trained employees is not always realistic and organizations need to develop a systematic and comprehensive strategy to train new employees and assist them in developing a career path. Creating a program for every step of an employee’s career and concentrating on knowledge transfer and cross-training provides the employee with a future and

allows the employee to realize they are not stuck in a dead-end job. Organizations also need to look at an employee’s goals and to not be afraid if the employee’s goals include transfers among departments. In the end transferring departments is not a loss to the department, but a gain to the organization.

Preparing for Loss While you may not be able to stop employees from leaving, you can be prepared by managing your employee talent which will prevent you from being caught off-guard. Developing long range workforce plans on an annual basis that predict retirements, attrition as well as future technologies or skills required will prepare the organization and diminish the loss of current employees.

Continual Change As we have seen in the past when the economy declines, finding employees becomes much easier. No matter the status of the economy, one item remains constant, the individuals who make up today’s labor force, how they search for job opportunities, and how they decide on what job benefits are important to them when accepting a position are continually changing. To succeed in appealing to and keeping the best people, organizations need to examine their internal structures to ensure they can adapt quickly to changes. Recruiting and retaining employees today require managers with a host of tools, experiences and skills. The workplace has shifted from hierarchy to teamwork, collaboration, and networking.

Successfully retaining employees requires flexibility, a collaborative work environment, career planning and nurturing their sense of public service and serving for the greater good.

Sharon Kropf is a Principal with TAP Technologies, LLC, which provides information management and technology services to government organizations including staff augmentation, IT audit and project based consulting. Sharon has more than twenty years of account management, business development, human resource and executive recruitment experience working with over 200 local and state government agencies.

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FEATURED ARTICLE

The New Normal Technology and Corporations are Challenging Traditional City Revenues; Fiscal Officers Must Actively Shape the Future of City Governance

Written By Nicolas Romo

“Vision is the art of seeing what is invisible to others”- Johnathan Swift Nicolas Romo, Legislative Policy Analyst, League of California Cities

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Swift’s adage is a poignant call to action for local officials across California. Our state is often called a “laboratory for democracy” such that many believe ‘as California goes so goes the nation.’ Similarly, we have become the world’s nucleus for technological development and catalyst for the boom of the global “tech” economy. The confluence of these assets and privileges demands of our local officials a strong presence in shaping their impacts on California residents.

In doing so, local officials may be laying a positive foundation for local governments across the country.

The world is rapidly changing .

Since the 1970s, relative to the history of technological advancement, we have experienced unprecedented advancements and innovations . In the last decade alone, we witnessed the exponential rise of internet platforms and enabled devices that have transformed how we interact with each other, our government, and our workplaces. Technologies have become smaller, faster, and more durable. They have become much more accessible to nearly all demographics, albeit access issues persist, and have integrated themselves into our personal lives, our homes, and our bodies. Devices, such as smart phones, are becoming more mobile, interconnected, and autonomous. In this time, the “tech” economy matured and evolved from devices used as supplementary tools, to critical infrastructure that assists our daily lives.

Local governments have taken to this trend. Tech-based initiatives and internet enabled platforms and devices are enhancing local government transparency through open data policies. Cities are providing residents free access to digital documents, recorded meetings, and raw data so they can participate in policymaking. City infrastructure is being updated to interact with smart phones and computers via internet applications, or “apps,” to encourage interaction, improve business climate, and attract younger generations.

At what cost?

Emerging “tech” based companies are definitely transforming the economy and providing tangible benefits. Enabled by the ubiquitous ownership of smart phones which provide a suitable platform for mobile apps, companies are empowering individuals to access jobs and services that are flexible and largely do not require higher levels of education or certification.

Conversely, tech based companies are disrupting trades and industries such as hotels, taxicabs, and food service providers— which are often important revenue sources for government operations. Companies such as Uber (ride service), Airbnb (home sharing) and Postmates (food delivery), utilize webbased platforms to enable individuals to provide and receive services. In doing so, these companies are transforming the American workforce into an on-demand and mobile group that enjoys flexibility, but largely lacks health and workplace safety benefits- hallmarks of 20th century reforms.

What does this mean for Cities?

New technologies are changing the manner in which people, goods, and services engage each other. The same goes for local government. Cities, if they have not already begun, need to adapt their policies, infrastructure, and communications to ensure that they are effectively governing a populace which spends significant time and capital on internet platforms.

Longstanding local and state laws, such as statutes governing for-hire transportation services, lodging, and access to public records are already being challenged by internet-enabled platforms.

A New Front: Legislative Efforts Led by Emerging Companies and “Tech” Initiatives While we have become accustomed to tax and revenue limits, shifts, exemptions, and subventions mandated by the state government and often supported by taxpayer advocates, there is a perceived new source of threats to local revenues and governance: “Tech” Companies.

Tech-based companies are by no means an enemy. In fact, they are improving the quality of life of residents, efficiency of services, and should become partners with local governments in improving civic engagement and public services. State and local laws have not fully adapted to the times and many companies are successfully operating outside the parameters of existing statutes.

Central to municipal finance officers are challenges to local revenue sources. Tech companies are looking to the State House in Sacramento to grant them reprieve from local tax and fee requirements applied to established companies and services within their respective industries via prohibitions, caps, or favorable terms. Such efforts affect the broad array of local revenue sources: Utility User Tax, Transient Occupancy Tax, Business Operation Taxes/Fees, Rents, and Sales and Use Taxes.

Re-imagining the Role of Public Finance Professionals in New Age of Governance Our new reality demands strong local leadership and vision.

Tech-based companies and initiatives will continue to challenge the broader society and operations of local governments (sometimes for the better). Despite rapid technological changes, municipal finance officers, city managers, and elected officials remain astutely situated to be strong advocates for public services that improve the quality of life of their residents.

Local officials of the 21st century will require an acute attention to legislative and administrative attempts to thwart local revenue and enforcement mechanisms in the name of technological advancements that ignore community needs. Local officials will also need the vision and skills to identify private and non-profit partnerships to implement tech-based solutions that modernize government and meet growing demand.

Moreover, public finance professionals and local elected officials will need to do the hard work of persuading new generations of the value of local revenues. Perhaps an open and accessible dialogue about the public services that keep their families safe and communities healthy is a good start.

In all, a renewed call to service in a new age.

Additional Food for Thought • What is the appropriate balance of privacy and disclosure?

• What is the appropriate measure of oversight and regulation of new industries, products, and services?

• To what extent do cities value local revenue sources and land use authority weighed against popular services?

• How do cities tax and regulate new business models, products, and services?

• How do or should cities modernize existing legal and tax structures to address the new “sharing” or “on demand” economy?

Nicholas Romo currently serves as a Legislative Policy Analyst at the League of California Cities, with focus on Land Use, Housing, Economic Development, and Labor Relations. Prior, Nicholas served as a Legislative Aide to Senator Connie M. Leyva and Intern for Los Angeles Mayor Eric Garcetti. Nicholas earned a double major in Political Studies and Sociology at Pitzer College, a member of the Claremont Colleges, where he focused on California Politics and issues facing urban communities across Southern California.

29 CSMFO MAGAZINE JULY 2017

INSIDE CSMFO

CSMFO Shines a Spotlight On… Ivan Chand

Deputy County Executive Officer, County of Riverside

Interviewed By James Russell-Field

James RussellField, City of Thousand Oaks

Welcome to the CSMFO Member Spotlight! Because CSMFO has a diverse membership spread across California, we wanted to give our members a chance to share their backgrounds, accomplishments, and perspectives. If you are interested in being highlighted or nominating another CSMFO member for the spotlight, please contact James Russell-Field at JRussell-Field@toaks.org Tell the readers a little bit about yourself… (Where you’re from, schooling, career, family, etc.)

Ivan Chand Deputy County Executive Officer, County of Riverside

I was born in India and came across the pond in 1976. I like to say I came for the bicentennial and liked it so much, I adopted the country. I finished my undergraduate at Loma Linda University with a B.S. in Accounting and completed my Masters in Public Administration from California State University, San Bernardino. I have been married for 33 and am the proud father of two young adults; one who teaches 5th grade and another who works as a business consultant in the healthcare industry. I started working with the County of Riverside right out of college and now, 33 years later, I work in the Executive Office as a Deputy County Executive Officer.

When and why did you first join CSMFO? Early in my career, I realized the benefits of participating in professional organizations. I joined CSMFO in the early 90’s as it allowed me to build relationships and learn new processes I could adopt in my organization. I was an early Special District Representative on the CSMFO Board and was proud of adding their voice to the organization.

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What have you worked on in the last month?

Most of my time this last month has been spend on the selection of a Human Capital Management system for the County of Riverside. The vendor selected provides the latest in a cloud based solution for the County and has the potential of saving the County $70 million over the next 10 years.

What aspect(s) of your job do you enjoy the most?

Mentorship is something I have always enjoyed. I have had several mentors that have guided me along my career, and feel it is my personal responsibility to pass it along. The wonderful people I come in contact with are the future leaders of the finance and I want to make sure they are prepared to handle their tasks.

What has been your favorite project at Riverside County Flood Control and Water Conservation District?

In the early 90’s, the District needed to replace its ERP system and critical to its needs was a robust project accounting system. As the Finance Director, I led the team that selected and implemented the financial system that is still in use. The system still meets the needs of the District and has stayed current with modern processes including paperless processes, workflow and providing metrics that enhance management of financial operations.

What is the most challenging situation you’ve faced in your career?

Personnel management has been the most challenging part of my career. Challenging staff to do their best in the government sector has always been a challenge, and it continues to be a challenge.

What are some of the important issues you foresee in the future of California finance?

As with most organizations, reduced revenues and increased expenses are going to be challenges. California agencies face a monumental lift in pension obligations, need for services and the need to update technology to bring the governmental agency up to the private sector. All these items will require significant investment, something governments do not have unless there are changes in how revenues are collected and distributed to the agencies.

What do you enjoy outside of work?

I enjoy spending time with my family and friends, watching my favorite sports teams and reading political autobiographies.

Do you have a favorite quote?

John Wooden said, “Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.”

If Hollywood made a movie about your life, what actor/actress would you like to see cast as you?

What an interesting proposition. I’m not sure anybody is going to want to see a movie about a government accountant that did his job.

We definitely want to see a movie about Ivan doing his job!

- CSMFO

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INSIDE CSMFO

Conference in the Mile-High City Written By James Russell-Field

At the end of May, I made the trip to Denver, Colorado for GFOA’s 111th Annual Conference.

James Russell-Field, Senior Accountant City of Thousand Oaks

Finance professionals from the United States and Canada filled the Colorado Convention Center in downtown Denver.

Prior attendees warned me about the size of the GFOA conference, but the warnings still didn’t prepare me for the 7,000 members and vendors in attendance. Of course, many CSMFO members were a part of that figure!

GFOA provides several opportunities for first-time conference attendees. They offer fifty scholarships per state (or province) to first-time attendees, which waives the conference registration fee.

GFOA’s website has more information on the scholarship, and I recommend putting in an application to help your staff attend! Additionally, GFOA offers first-time attendees the Annual Conference Mentor Program. This program gives first-timers an opportunity to network with other “rookies” and get advice from an assigned mentor.

I was fortunate enough to receive the scholarship, and gladly signed up for the mentorship program.

On the first morning of the conference, GFOA hosted a first-timers brunch for scholarship recipients and mentees. My group’s mentor was a fellow CSMFO member: Ivan Chand. Ivan kicked off the conference on a high note, passing on tips for how to make the most out of the sessions, networking events, and GFOA. Check out the CSMFO Member Spotlight for some more information on Ivan!

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Five to seven concurrent sessions took place at the same time, meaning I had to make some tough decisions on what to attend. Out of all the sessions I attended over four days, two in particular stood out: • Long-Term Strategies for Budgeting New Money.

This session covered how governments should deal with budgeting a new revenue source. This was very applicable to California, as some local agencies are dealing with a new revenue source from marijuana.

Revenue from marijuana will continue to be a hot topic in California for the next few years, so it was interesting to hear approaches to budgeting the “unknown.”

• Engaging the Public in a Hyper-Polarized World. This session outlined the various aspects of involving the public in government, even in a contentious community. The presenters emphasized that public engagement is not just a one-time action, but a long-term plan to help build trust with the community and set expectations. If you have a chance, take a look at the slides online for a quick recap of the potential benefits of public engagement, and some key engagement principles.

Outside of the sessions, GFOA, CSMFO, and our business vendors put together some great events! GFOA hosted a welcome reception on Sunday night at the Wings Over the Rockies Air and Space Museum, housed in an old hangar on the former Lowry Air Force Base. Attendees gathered at the Air and Space Museum to admire impressive airplanes and exhibits while enjoying appetizers and drinks.

Following the GFOA welcome reception, CSMFO hosted their annual reception at Peaks Lounge on the top floor of the Hyatt Regency. Peaks Lounge had a great night-time view of downtown Denver and the surrounding city lights. Per John Adam’s request, fellow Thousand Oaks co-worker, Gilbert Punsalan, and I took up the role of security for the event. We greeted everyone at the door and made sure to keep the CSMFO reception under control! The size of the conference made it difficult to run into anyone familiar during the day, so the CSMFO reception was a fun opportunity to catch up and network with California peers.

Vendors hosted their own events on the second night, helping to create some unique experiences! We started the night at the Hilltop Securities reception at Coors Light Field, the home field of the Colorado Rockies. Although rain kept the event from the rooftop, we still had great view of the Rockies Field, coupled with great refreshments.

DO MORE WITH LESS.

IT’S THE ORDER OF THE DAY. HOW CAN YOU MEET THE INCREASING DEMAND? From Coors Light Field we travelled to Mile High Stadium, home of the Denver Broncos. I ended up in charge of directions, and managed to get our group lost. We finally made it to the right door, and hopped on a tour of the Bronco’s facilities, including a trip on the field. I put my personal feelings about the Broncos and my love for the Minnesota Vikings aside for one night, and had an amazing time!

GFOA did a great job hosting the 111th Annual Conference in Denver. I had a great time at the conference sessions, events, and exploring the downtown. More opportunities are on the horizon, as CSMFO’s 2018 Annual Conference will be in Riverside, California, and GFOA’s 112th Annual Conference will be in St. Louis, Missouri. Hope to see you there!

Technology can be a powerful tool for increasing efficiencies and maximizing resources. The BerryDunn local government consulting team has deep experience helping government agencies nationwide find practical, cost-effective ways to leverage technology and advance their goals.

Contact us to learn more about how our independent and objective advisors are helping

Last October, James Russell-Field moved from Utah where here worked for the Federal Government (Department of Interior) to become a Senior Accountant with the City of Thousand Oaks.

California cities and counties do more with less.

SETH HEDSTROM, Senior Manager shedstrom@berrydunn.com berrydunn.com

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CSMFO MAGAZINE JULY 2017

FEATURED ARTICLE

The Next Generation of Economic Development: Destination, Digital & Development Written By Larry J. Kosmont

Welcome to the Next Generation of Economic Development. Today, economic Larry J. Kosmont, CRE, President & CEO, Kosmont Companies

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development requires a bit of alchemy, whereby a blend of finance, economics, real estate, land use, politics, promotion, and communication is needed to create and implement successful projects.

The fundamental and unchanged aim of economic development is to make communities better through transactions that improve a given city’s image, quality of life, and economic conditions.

Although the goals of economic development have not changed, the strategies and methods used to attain those goals certainly have, primarily due to technologic advancements & digitization.

The way people communicate and how information is processed about projects has changed dramatically.

Even the real estate industry, once the bastion of brokers working the phones, has embraced technology as a basis for showcasing opportunities and communicating on sites, transacting and elevating real estate to its highest and best use, which can result in increased tax production and hopefully better jobs.

To direct these activites in a manner that results in beneficial projects, requires communities to develop and adopt a strategic approach to economic development that embraces digital, destination, and properly incentivizes development.

Digital-- “join the online conversation” Utilization of digital resources in an economic development strategy can help promote sites, connect and communicate with developers/stakeholders, navigate political hurdles, and increase transparency on economic development projects in your community.

For example, OppSites (https://oppsites.com/) is a digital economic development marketplace, where the public and private sectors work together to promote up- zoned properties and special tax districts by exposing these “opportunity sites” online to thousands of real estate investors and developers who have registered their interest in project categories (e.g. mixed use, residential, transit-oriented, retail). OppSites enables real estate professionals to find development opportunities, learn about local priorities and incentives, follow preferred cities/ target areas, and the engage in an online conversation with local economic development leaders about those opportunities using a proprietary instant messaging system.

Digital Community Outreach (DCOTM), another technology based tool, has become a critical piece of the economic development implementation puzzle. This technology uses social media in conjunction with an interactive project website enabling cities to reach more constituents and expand project awareness; thereby creating transparency and providing the information balance necessary to counteract “alternative facts” often promoted by a smaller but social media skilled group of project naysayers. Digital Community Outreach is now a must to gain clarity and generate broader understanding and support for key economic development projects in your community.

Creating resources such as a project website (sample: https:// www.gelsonsmb.com/) is an essential ingredient of DCO as it provides a location for stakeholders to find accurate information and milestones around a given project.

Destination-- “it’s the trips, stupidthat matter” Due to changing technology and consumer habits, retail sales can take place anywhere. It is now just as likely for a sale to be made on a computer as in a store. As a result, getting people out into the community by creating a sense of place has never been more essential to an economic development strategy. Specifically, for retail, “placemaking” today is about generating trips from activities that can’t as easily or acceptably be done on the internet (food, exercise, medical, education/ training, special events). As such, the economic metric of sales per square foot is less and less relevant, replaced by unique trips generated as a valuable benchmark of potential sales tax generation. This means that developing and investing in a tenant mix which generates frequent and substantial levels of trips is a key strategy behind placemaking and economic development implementation. Examples of trip generating retail include lifestyle oriented centers such as the Aazalea in the City of South Gate, the Americana at Brand in Glendale, and The Point in El Segundo, which boasts more restaurant/food than retail square footage. You can’t eat on the Internet!

It is also important to understand the tax revenue implications of “place” in the context of sales that are made over the internet.

The location of goods at time of purchase and the way those goods are received/delivered can affect the way in which taxes from those sales are allocated. For example, if a good is purchased online and the location of those goods is in-store, no matter how/where those goods are received, the sales tax is allocated to the jurisdiction in which the store is located; and if a good is purchased online from an out of state fulfillment center, local tax is not allocated to any jurisdiction, but to a countywide pool. And in California, in-state fulfillment centers allocate taxes to the jurisdiction in which the fulfillment center is located.

Development-- “Bricks and Clicks”, partners

forever

As communities’ grapple with creating successful economic development strategies, there are new recently state approved tools available to incentivize development. California now allows special districts such as Enhanced Infrastructure Financing Districts (EIFD) and Community Revitalization and Investment Authorities (CRIA) to utilize tax increment to pay for or finance infrastructure that can induce private investment in higher density mixed use, transit oriented development, affordable housing. and viable placemaking, while increasing taxes, creating jobs, and improving a communities’ quality of life.

Whatever financing and/or zoning tools are applied, the key is to engage development projects that create environments where people want to go and see and be seen. These trends are driven primarily by millennials, the same generation that brought us life through “clicks”. Yes, Millenia have the need for interaction, so well-planned places or “bricks” are not going anywhere.

Overall, no matter what your attitude towards technology, the plumbing of the world is changing. The ubiquitous presence of technology in our lives and the diverse lifestyle shifts technology facilitates, is forcing changes in how local government should approach economic development. Today, economic development requires a mixed blend of finance, economics, real estate, land use, politics, promotion, and communication.

Creating and implementing viable projects requires communities to embrace use of digital platforms, deliver exciting desirable community destinations, and incentivize development appropriately, which can be accomplished on a project-byproject basis or in specially created tax increment districts.

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INSIDE CSMFO

Heard on the Floor How do you recognize the Fiscal New Year?

The CSFMO Monterey Bay Chapter held their annual end of the Fiscal Year session in June featuring CalPERS and LSL CPAs. The session focused on improving internal controls in preparation of a CalPERS pension audit, GASB changes, and Federal Regulatory compliance. In addition to great Hawaiian Theme decorations and inspired food, fun was had in the contest for best Hawaiian wear. Congratulations to Susan Salunga (Monterey Regional Water Pollution Control Agency) as the clear winner in Theme Attire, Marcus Pimentel for honorable mention (City of Santa Cruz), and Denise Reid (City of Santa Cruz) as the winner of the Hawaiian Beach bundle.

Kelly Cadiente Director of Administrative Services Marina Cost Water District

Bryan Gruber, CPA Partner, LSL CPAs and Advisors CSMFO Member

Lauren Lai, CPA CSMFO Monterey Bay Chapter Chair Finance Director, City of Marina

“I like to have fun and celebrate the Fiscal New Year with my staff and generally bring in donuts or bagels.

We can often get those funny looks from the other departments but we love it.”

“We celebrate the Fiscal New Year the way every accountant should, by doing inventory counts at your corporation yards.”

“We definitely celebrate with decadent desserts. There is a world-famous local bakery that certainly delights my staff.”

J.D. Black Accountant Salinas Valley Solid Waste Authority

Denise Reid Accounting Services Supervisor City of Santa Cruz

“We will welcome the Fiscal New Year by preparing for our upcoming audit and actuarial reports.”

“To celebrate our Fiscal New Years, we have our much anticipated annual BBQ feast for the Finance Department.

During the week leading up to July 1st I love to say Happy New Year’s to City employees when they call or drop by the office! I can tell by the looks and hesitation in their voices that they are wondering if January has snuck up on them!”

Tori Hannah CSMFO Monterey Bay Chapter Chair Chief Financial Officer, Monterey Regional Pollution Control Agency

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“We plan to have a break room countdown and celebrate with good food. It’s a great way to acknowledge all of the work for the ending year and welcome in the new year.”

FEATURED ARTICLE

Statement of Auditing Standards 130….Timing is Everything!

Written By Rich Kikuchi

Rich Kikuchi, CPA, Managing Partner, LSL CPAs

In the May issue of the CSMFO magazine, I had written an article entitled “The Viewpoint from the Managing Partner of a CPA Firm”. This was an article that was written from the heart and was sparked by the numerous and recent incidences of fraud occurring in local governments. In that article, one key point was that there is much misperception regarding the objectives of a financial audit. To quote that article, “The heart of the matter, in my opinion, is that there is a disconnect between the objective of a financial audit and what governing board members are looking for in an audit.”

The disconnect is that financial auditors are engaged to render an opinion on the year-end financial statements and do so following the concept of reasonable assurance. The auditors test material accounts in those financial statements and also gain an understanding of internal controls regarding the financial reporting system. Financial auditors are not required to audit the government’s controls during the financial audit… and are only required to “gain an understanding”. Financial auditors may elect to test controls which will often reduce the amount of account analysis required on the year-end financial statement. But again, financial auditors are not required to test internal controls.

In the article, I discussed the importance of monitoring internal

controls and the advantages of performing internal audits through out the year and other procedures in order to meet the needs of government finance officers and elected officials.

Well….timing is everything they say! Recently, Statement of Auditing Standards (SAS) 130 was published which has an effective date for audits beginning after December 15, 2016.

The title of SAS 130 is “An Audit of Internal Control over Financial Reporting that is Integrated with an Audit of Financial Statements”. I believe SAS 130 will provide an opportunity for all finance officials to send a message to your governing board members and citizenry, that more resources, time and attention ought to be directed towards your internal control framework.

The Standard is lengthy and detailed…..but let’s look at some of the key points of this timely SAS which have been extracted from the pronouncement: What is SAS 130 all about?

It “Establishes requirements and provides guidance that applies only when an auditor is engaged to perform an audit of internal control over financial reporting (ICFR) that is integrated with an audit of financial statements.”

As mentioned, financial auditors are not required to test, let alone audit, internal controls. SAS 130 now gives guidance when a government elects to have their auditors “audit” the internal controls over financial reporting which will then be integrated with the financial audit.

What are the objectives of SAS 130?

To “Obtain reasonable assurance about whether material weaknesses exist as of the date specified in management’s assessment about the effectiveness of ICFR” and, To “Express an opinion on the effectiveness of ICFR in a written report, and communicate with management and those in charge with governance as required by SAS 130.”

The objectives of SAS 130 are what I believe governing board members, management and citizens are looking for. Currently, financial auditors render an opinion on the material accuracy of the financial statements and do not render an opinion on internal controls.

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auditor is engaged to perform an audit of internal control over financial reporting (ICFR) that is integrated with an audit of financial statements.”

A SAS 130 audit is not required, however, I believe it addresses much of the disconnect between the perception of a financial audit and the objectives of a financial audit.

Your governing board members, management and citizens all want a level of assurance that your controls over financial reporting are operating effectively. So though it is not required, I believe that most governments will request this audit annually.

Are the ICFR effective to eliminate fraud?

A SAS 130 audit will result in the auditor actually expressing an opinion on internal controls and will require reporting whether there are material weaknesses in internal controls.

SAS 130 talks about ICFR, what is it?

“Internal control over Financial Reporting (ICFR). A process effected by those charged with governance, management and other personnel, designed to provide reasonable assurance regarding the preparation of reliable financial statements in accordance with the applicable financial reporting framework and includes those policies and procedures that: a. Pertain to the maintenance of records b. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with the applicable financial statement framework, and c. Provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use or disposition of the entity’s assets that could have a material effect on the financial statements ICFR has inherent limitations. ICFR is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. ICFR also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements will not be prevented or detected and corrected on a timely basis by ICFR.” A SAS 130 audit will be designed to specifically test the internal controls over financial reporting (ICFR) and look at records such as journal entries, purchase orders, etc. The auditors will test to determine that the transactions are being properly recorded and that there is reasonable assurance that any errors or unauthorized transactions will be prevented or detected and corrected in a timely manner.

Are auditors required to perform an audit of ICFR? “This statement on Auditing Standards (SAS) 130 establishes requirements and provides guidance that applies only when an 38

“….an entity’s ICFR is less likely to prevent, or detect and correct, a misstatement caused by fraud than a misstatement caused by error.”

The fact is, is that even with the strongest of controls in place and regular monitoring, there is still the chance that fraud will occur. When the fraudster has a will, there will be a way! SAS 130 acknowledges that a misstatement caused by fraud is less likely to be prevented or detected than that caused by human error.

I do believe, that with sound controls, regular monitoring and regular audits, there will be the lessened likelihood that a material fraud will occur.

Does SAS 130 give guidance on how to test internal controls?

Yes, some of these are: “The auditor should evaluate the design effectiveness of controls by determining whether the entity’s controls, if operated as prescribed by persons possessing the necessary authority and competence to perform them effectively, satisfy the entity’s control objectives, and can effectively prevent, or detect and correct, misstatements cause by error or fraud that could result in material misstatement of the financial statements.

The auditor should obtain evidence about the effectiveness of selected controls for each relevant assertion. The auditor is not responsible for obtaining sufficient appropriate audit evidence to support an opinion about the effectiveness of each individual control.

The auditor should vary the nature, timing and extent of testing of controls from period to period to introduce unpredictability into the testing and respond to changes in circumstances.”

Yes, timing is everything….in many respects! In order to effectively audit internal controls, it needs to have a measure of “unpredictability” which a financial audit is not necessarily designed to do. Also, since SAS 130 is effective for periods ending after December 15, 2016 (FY 2017) and financial audits are not designed to test controls or give an opinion on internal controls…..it is time for all government finance officials to discuss with their governing boards the importance of devoting more resources and time to their internal control framework and engage their auditors to perform a SAS 130 audit!

FEATURED ARTICLE

Once You Get MAD, Your Life Will Never be the Same Learn How a People-Centric Culture Reinvented Government and Transformed People’s Lives

Written By Maria Blanco

Live first, work second.

Maria Blanco, Financial Analyst, City of Ontario

The words “this sucks” no longer ricocheting in my head. Hello. My name is Maria, and I am a MADonian.

No, this is not some kind of 12-step program. Becoming a MADoinian changed my life and is something I am incredibly proud of. What is a MADonian, you ask? In its simplest form, it is somebody who lives to make a difference. If you want to dig a little deeper, you are going to have to open up your heart and your mind and read on.

Before going MAD (Making A Difference), I was probably a lot like many of you. I graduated from college during the onset of the Great Recession and considered myself very lucky to have landed a permanent, full-time government job in the Finance department at the City of Ontario after 3 long years of part-time work.

A government job with all the great features people usually look for: security, stability, regular hours, and great benefits. I was ready to arrive on time, behave professionally, learn my job and do it well to become a great employee. I didn’t hate it and I didn’t love it, and I thought that was normal. In fact, I thought not hating my job was a good thing, failing to recognize that not loving it was a bad thing. However, it didn’t take long for the job to become perfunctory to a fault.

And as the novelty of the new job wore off, I became totally disengaged and I couldn’t wait for the next 5:30 pm, the next weekend, the next vacation. Was this what full-time work was all about? I

didn’t want to believe it. You hear so many great things about employment in the private sector with their modern work cultures and happy employees, great work settings, ping pong tables, happy hours, etc. We know government has many advantages in the long term, but if this is what the short term feels like, then is it really worth it? What can government do to make the day-to-day more bearable? And beyond that, enjoyable. I knew my feelings were not exclusive to me. The sad thing was that I didn’t think it was even possible to change an age-old institution like municipal government, and I was going to have to either surrender my life to this humdrum reality or look for opportunities elsewhere.

Having identified that there was a serious problem, and not just for me, but also for others around the office, our agency head, Grant Yee, set out to solve this workplace crisis. Grant began by asking all of us what our needs at the office were.

OUR needs. A wish list of sorts of what an ideal employer would look like to us. I thought this was genius. In a world of increasing responsibilities, it is not uncommon to ignore our own basic human needs in order to satisfy the realities of external demands, like the need to make a living. But here we all were contributing to the “ideal employer” list. Surprisingly, things like a game room were not on it (although Bob’s desk is turning into a mini arcade these days.) Instead, we wanted things like flexible work schedules, exercise equipment, fun, more meaningful work, and most importantly, a family environment. Grant emphasized that the requests alone were not important without knowing why we desired these changes to begin with. We eventually established that our why was to make a positive difference in our lives and the community, and, maybe ambitiously, the world. But it starts with one change at a time, and, as his name suggests, Grant began granting the things on the list. Over time, the list evolved into the establishment of our 5 core values: 1) A fun and enjoyable working environment 2) Friends and connections, 3) Leading a healthy lifestyle (mind, body, and soul) 4) Personal growth and learning 5) Doing meaningful work Coincidentally, it turned out that our core values corresponded very closely with Abraham Maslow’s well known “Hierarchy of Needs.”

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I think by their nature our values seemed to influence the way we started to think about our jobs. Everything revolved around making a difference and we started to call ourselves the MADonians. We changed the definition of our work to extend beyond the purview of our desk work; leaving behind the fixed government policies and procedures mindset to allow for a more meaningful growth mindset. None of this happened overnight, of course.

And as one can imagine, the fun part of our core values was the easiest to execute. Byut in sharing fun moments with each other came the friends and connections, and we began to care more about each other and ourselves. We started an exercise group, hosted healthier snack bars and meditation sessions, engaged in more out-of-the-office activities and attended more conferences together, created vision boards, and recognized our true significance as public servants. Our culture became more people-centric instead of task oriented. IAnd isn’t that what government is supposed to be all about? That is the beauty of our value system; while making work fulfilling and engaging for all of us, it simultaneously aligns with the City’s goal of caring for its people. When the job brings no satisfaction, it is easy for government employees to lose sight of the bigger picture. Luckily for us, our vision was only getting clearer. Instead of merely processing invoices and cutting checks every week, I was thinking of creative ways to connect with my customers, aiming for 5-star/Wow service every time. I was no longer being managed, but instead was being given guidance to discover and develop my own leadership potential. We were soon incorporating what we called “MAD” time, a concept similar to Google’s “Think Tank”, where we would focus on ideas unrelated to our task oriented roles. We were happy to volunteer in the community, from reading to kindergarteners and back-to-school drives, to crafting and caroling at the senior center. And our personalities were really starting to come out in our workspaces, not unlike the workspaces at Zappos and Google.

When people started to notice our MADness, they thought it synonymous with crazy. And maybe so, because we were disrupting the conventional way of conducting business. But there was a method to our madness. Our emphasis was to take the hearts we already had and put them back into government.

The trust that was extended by management to all team members has engendered a strong sense of team loyalty. We were working better together, and by thinking with this new mindset we became more engaged as employees. The engagement led to authentic public interactions as opposed to transactions, which led to happy patrons who submitted compliments instead of complaints, coming back to us like a beautiful circle of life.

Other departments realized the positive working environment that we had created was more than just the fun and games it looked like on the surface and that there was real value to the City, its employees, and its citizens in the changes we were making.

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I have now been on this MAD journey for 5 years and through 2 promotions, and I’ve learned so much about life, leadership, and myself. My focus is no longer on being the ideal employee, but on being my ideal self, knowing that the rest will take care of itself. I am blessed to be surrounded by coworkers who are leaders in their own right, and I’ve acknowledged and nurtured my own abilities to lead. As a mostly private person, it has been truly exciting and life changing for me to see myself come out of my shell and slowly, but surely, become more comfortable with myself and with the work place. So, I was very lucky to find this government job, but it turns out not to have been for the reasons I initially thought.

But my journey is far from over. Travel has always been something I’ve relished, and the flexible work schedule has been very accommodating for that. And now instead of dreading the inevitable return to work I can’t wait to share my experiences with my colleagues when I return. Because our culture lends itself to search for growth and new opportunities, I have been exploring my personal desires to work and live abroad in an effort to continue expanding my comfort zone and let go of my fears and insecurities. Desires I am able to share with my boss and coworkers because I know they are encouraging and supportive. On the other hand, the environment we have cultivated here is so special and unique, I also have to question why I would ever want to leave such a great workplace. In any event, you can take the girl out of the MAD house, but you can’t take the MADness out of the girl.

Because the good news is that you don’t have to work at the City of Ontario to be a MADonian. You can make a difference wherever you are. As I’ve discovered here, for emotionally driven humans, it is vital that we find meaning in what we do.

And what people ultimately want is not a better job, but a better life. Work does not have to get in the way of living, and your life shouldn’t have to suffer because your job is unfulfilling. If you have a higher purpose, genuinely care about others, are willing to take risks, exercise leadership, open yourself up to criticism and ridicule, and lead with your heart, you too can embark on the journey from bad to MAD, and your life will never be the same.

You can learn more about the MAD culture through this video: www.youtube.com/watch?v=2jIl-u19AOQ Maria Blanco is a Financial Analyst at the City of Ontario, and has worked in local government for 6 years. She has a B.A. degree in International Studies-Economics from the University of California, San Diego. When she’s not working on spreadsheets or building relationships with City developers you can find her exploring our National Parks or soaking up local culture domestically or abroad.

FEATURED ARTICLE

Ideas to Maximize TOT Revenues PART 2 Written By Jennifer Farr & Marcus Pimentel

This is the second in a two-part TOT article series. Part two will discuss local Jennifer Farr, Davis Farr LLP

agency collection agreements with online companies and work by the League of California Cities with Airbnb.

Another hit from the Disrupter Economy- Vacation Rentals Communities across the country are struggling with crafting policies to offset lost revenue and community impacts from short-term rental of formally developed long-term housing stock And, in many respects, California is acutely impacted by this evolving trend.

Marcus Pimental, City of Santa Cruz

And though the recent past is filled with examples where the disrupter economy has deteriorated traditional taxes (sales tax reduction from online sales; franchise fees and utility user tax reductions from streaming content); few have been so fueled with debate as online vacation rentals.

Here’s some key ideas that have worked for other local governments.

Online collection agreement Currently, there are various online providers supporting the vacation rental market. They include major players like Airbnb and HomeAway, as well as up and coming services like Cozy, FlipKey, and Zeus. In addition, craigslist still is an actively used, very broad platform that includes vacation rentals. In the last several years, California based Airbnb has expanded their model to enter into uniquely and tailored transient occupancy tax collection agreements with agencies across the United States and specific agreements in other parts of the world.

According to Airbnb, in May of this year they reached 250 collection agreements with agencies across the United States and 16 cities and 7 counties in California. Of those 16 cities, big names like San Francisco and Los Angeles provided major in roads to an industry wide solution. While much has been made of the legal and voter battles in San Francisco, other agencies have entered into Airbnb collection agreements under the expectation that their revenue base will grow.

And while these can prove profitable in the short-run, there are most certainly tradeoffs that come into place. Unlike property tax, sales tax, and other taxes (business license and utility users tax) where original source data is regularly available; Airbnb has made it a point to retain and protect the identify and location of their vacation rental properties.

This may result in a large amount of revenues ultimately coming in from anonymous sources and, while an agreement may be reached with one online provider, other providers may continue operating without any obligation to report taxes.

Consequently, enforcement and compliance can become burdensome for communities, especially those with special rules and regulations governing the activities, and those that have a vested interest in the management and tracking of short term rental properties.

The League of California Cities has been considering ways it can help agencies better prepare for or evaluate a potential online vacation rental collection agreement that still protects local government’s fiduciary responsibility.

Build up or start an internal audit program Having internal experts monitoring activity and enforcement fosters consistency of processes with the lodging community and allows for rapid response to the ever-changing areas of concern that ultimately arise.

An internally managed audit and enforcement program also offers the benefit of more control over processes. This controlled approach, along with the knowledge gained over time, leads to higher compliance rates from the lodging community which can eventually lead to positive revenue growth and stability.

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Contract with experienced firms Considering the unique nature of these issues, many jurisdictions are turning to trusted vendors to provide solutions both in the short and long term. There are a number of firms that offer a variety of valuable services ranging from tools and software that facilitate internal programs to the complete management of TOT and short term rental regulation and tax collection. Many of these programs offer flexibility of customizing the approach and even provide follow through and support with enforcement.

These programs can typically be implemented quickly and are generally significantly lower cost than developing an internal program. Like with any contracted service, it is important to choose the right product and the right vendor that fits the needs of your unique program.

Using a specialized contractor can also work as a stepping stone to building your own internal program. Taking advantage of the speed in which an outside consultant can implement a program, can start bringing in compliance immediately while foundations are laid for an internal program. Many firms also offer training and tools and provide assistance in development of an internal audit and management division.

Adopt community based regulatory policies.

Many communities are confronting the issues related to vacation rentals head on with solutions including complete bans, moratoriums on new rentals, and licensing and regulating the activity. Many zoning ordinances already limit or restrict where these types of rentals can be. Moratoriums or complete bans, while appropriate for some communities, are more valuable as a tool to implement while working towards a more concrete plan, rather a long term solution on their own.

Licensing and regulating the rentals allows communities to obtain details about the properties utilized for this purpose and can provide restrictions that address individual community concerns. Some jurisdictions track and limit certain criteria based on community feedback. This can, for example, place restrictions on the number of nights properties can be rented for, number of guests allowed, available parking, and other items that are of a concern to the community at large.

While licensing can be a great tool, it underscores the importance of continued monitoring and enforcement of compliance. In addition to normal compliance activities, some communities take alternative approaches to ensure proper registration and licensing takes place. Education campaigns can help both the lodging community and their neighbors understand the rules for operation and some communities even offer a hotline to call and obtain information or file complaints against possible violations.

Jennifer Farr, CPA, MBA has been providing audit and consulting services to California government agencies for over 20 years. After 1o years of experience with a national CPA firm, Ms. Farr became a founding partner of Davis Farr LLP in 2015.

Marcus Pimentel is the Finance Director the City of Santa Cruz. Marcus has over 20 years of California municipal finance experience and is an active member of CSMFO, having served as a past member of the CSMFO Board of Directors. Marcus is also a past chapter chair of the Monterey Bay Chapter of 42

CSMFO and currently serves on multiple CSMFO committees.

INSIDE CSMFO

Focus on the CSMFO Orange County Chapter Written By Stephen M. Parker

Stephen M. Parker, Administrative Services Director, City of Stanton

On June 15, 2017, Jennifer Farr of Davis Farr LLP presented an “Annual GASB Update” to the Orange County Chapter of CSMFO – our third of six presentations this year.

This was a well-timed presentation for finance professionals that have completed their focus on the new fiscal year’s budget and are shifting their attention to preparation for the upcoming financial statements.

During the presentation, Jennifer kept the atmosphere light while delving into the heavy topics of Pension and OPEB Accounting GASB Statements.

Jennifer also discussed GASB 77, the Tax Abatement Disclosure, GASB 84 regarding fiduciary activities that goes into effect in 2020, and the New Financial Reporting Model that currently has an invitation to comment.

Jennifer’s presentation was very well received by the 105 attendees that RSVPed for the meeting (including 73 municipal government professionals).

She was able to provide valuable information in a fun way while providing 1.5 hours of CPE. The June meeting was actually the third consecutive meeting where 1.5 hours of CPE was provided to attendees that needed it. In early March, Kerry Worgan, Senior Pension Actuary with CalPERS gave a presentation titled “CalPERS Rates: Where Are They Going – and What You Can Do About It”, right as the municipal government world was realizing what a significant impact CalPERS’ discount rate reduction was going to have on local government.

In April, two consultants from HdL Companies presented on “Sales Tax Outlook and Impacts of Prop 64”. With the passage of Proposition 64, there

were many questions as to what effects local government would be seeing as a result. David McPherson provided a plethora of information on the topic to compliment Andy Nickerson’s excellent update on the state of sales tax in California.

Though we are halfway through our luncheons for the year and have had such relevant topics, there is still plenty to look forward to. On August 24th, Michael Coleman will be providing our chapter with a “Financial Update for California Cities”. With the governor’s budget getting approved and new legislation to consider, it will be an informative meeting. In October, our chapter will receive a Legal Update from Liebert Cassidy Whitmore, which is always valuable when the legal world is always changing. And finally, in December, we will celebrate our Holiday Meeting with a popular speaker from the past - Neil Kupchin. Neil does an amazing job of finding a way to encourage you to be a better co-worker and/or supervisor, and I’m looking forward to getting a dose of that around the holidays.

The Orange County Chapter has been blessed to have some excellent speakers in past years, and this years’ crop could be the best yet. One big reason for this is the excellent speaking resources we have in vicinity to our chapter. However, when a speaker has the opportunity to present to groups of 60 to over 100 professionals, especially with such a high percentage of governmental attendees, they usually jump at the chance. We are also quite proud of our wonderful commercial attendees who help make our meetings successful, including a number of regulars – many of whom provide donations for a drawing at the end of our meetings. While our group is too big to get to have introductions at every meeting, we still operate as a support to one another in our common goal of promoting excellence in government finance.

Stephen M. Parker, CPA has served as the Administrative Services Director for the City of Stanton for the last 3+ years.

He enjoys involvement with CSMFO as the Orange County Chapter Chair and the Administration Committee Vice-Chair.

He is a proud father of three beautiful children (Sydney - 11, Benjamin - 9 and Isaac - 7), and husband to his magnificent wife, Koryn for 7 wonderful years (15 total).

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JOB OPPORTUNITIES Finance Manager, Helix Water District Salary Range: $115,200-$147,024 Application Deadline: Application Review Date: August 7, 2017

Buyer I, West Basin Municipal Water District Salary Range: $64,522 - $80,652 Annually Application Deadline: 7/25/2017

Assistant Director ? Administrative Services, City of Palo Alto, CA Salary Range: $137,446 - $206,170 yr Application Deadline: Sunday, August 13, 2017

Payroll Services Manager, City of Pasadena, CA Salary Range: Salary range $97,331 - $121,664.

Application Deadline: Sunday, July 23, 2017

Director of Finance, City of La Canada Flintridge Salary Range: $9,087 to $12,180 monthly Application Deadline: August 14, 2017 no later than 5:00pm

Finance Manager, CPS HR Consulting Salary Range: Annual Salary Range: $115,752 to $140,691 DOQ Application Deadline: Monday, July 24, 2017

Budget Manager, City of Elk Grove Salary Range: Annual Salary $99,748 - $133,672.00 + excellent benefits Application Deadline: Monday, July 31, 2017 Finance Director, San Mateo County Mosquito & Vector Control Distric Salary Range: $85,593- $116,068 Application Deadline: 7/28/2017 17:00 Senior Accountant, County of Ventura Salary Range: $58,909.55 - $82,473.39 Annually Application Deadline: Apply Today!

Supervising Accountant, Lodi Salary Range: $6,051.73 - $7,355.91 Monthly Application Deadline: 7/31/2017 Senior Risk Manager, California Joint Powers Insurance Authority Salary Range: $92,114 - $131,592 annually Application Deadline: 3-Aug-17 Payroll Supervisor, Santa Rosa Salary Range: $70,922.00 - $93,748.00 Annually Application Deadline: 7/19/2017 Accounting Manager, Monterey Regional Waste Management Distr Salary Range: $7823 - $9983 / Month Application Deadline: Open Until Filled Finance Director, Bob Murray & Associates Salary Range: $98,802-$128,741 annually Application Deadline: 6-Aug-17 Director of Financial and Administrative Services, Stanislaus Council of Governments Salary Range: $93,000 - $128,000 Annually Application Deadline: Open Until Filled 1st File Date: July 30, 2017 Budget Administrator, Poway Salary Range: $7,592-$9,228 monthly Application Deadline: Sunday, 07/30/17 11:59 PM Pacific Time Financial Services Manager, Gardena Salary Range: $96,876 - $123,648 Annually Application Deadline: Tuesday, August 8, 2017 at 4:00 p.m.

Director of Finance, Ridgecrest Salary Range: $65,362 - $130,659 annualy Application Deadline: 31-Jul-17 44

Finance Division Manager, Pittsburg Salary Range: $8,557.00 - $10,401.00 Application Deadline: Open until filled Investment Officer, County of San Diego Salary Range: 108K-$115K Application Deadline: Open Until Filled Assistant Auditor-Controller, County of Sonoma Salary Range: $124,559-$151,378/Annually Application Deadline: 7/19/2017 Management Analyst - Budget and Audit Services, SHRA Salary Range: $65,519.00 - $101,641.00 Application Deadline: Continuous until filled ADMINISTRATIVE SERVICES DIRECTOR, City of Watsonville Salary Range: Up to $155,562/Annually Application Deadline: Friday, July 21, 2017 Finance Manager, Encinitas Salary Range: $6,822 - $10,501 Monthly Application Deadline: Open Until Filled Senior Accountant, Otay Water District Salary Range: $83,939 - $104,923/year Application Deadline: Apply immediately Financial Analyst I/II Flex, Eastern Municipal Water District Salary Range: $5058-7268/monthly Application Deadline: 29-Jun-17 Director of Finance, City of Poway Salary Range: $132,000.00 - $160,440.00 Annually Application Deadline: Open Until Filled Deputy Director of Finance, City of San Bernardino Salary Range: $9,210 - $11,195/Month Application Deadline: Controller, San Joaquin Regional Rail Commission Salary Range: 80,000 - 110,000 Application Deadline: Until Filled FINANCE DIRECTOR, City of West Covina Salary Range: $129,240 - $174,480 Annually Application Deadline: Open until filled. First review June 21, 2017.

INSIDE CSMFO

Announcing QUICK HITS An Exciting New Resource From CSMFO! We are pleased to introduce “Quick Hits,” an exciting new professional development resource for CSMFO members.

This new offering is designed to supplement our webinars, core courses, and annual conference sessions by providing municipal finance information in quick, easy bites.

Quick Hits are short 10 to 15 minute videos on a variety of focused areas, ranging from hot topics to technical information. Our first Quick Hit, which is attached, features an introduction to the new Road Repair and Accountability Act of 2017 by our fiscal expert, Michael Coleman.

The idea of Quick Hits was developed to address CSMFO’s ongoing goal of delivering high quality, timely training to our members in an easily accessible format. This is a pilot program, and we are exploring different technical methods of presenting the information. We encourage you to provide feedback on the presentation and to submit ideas on any short topics that you think would make for a good Quick Hit. You can e-mail Executive Director Melissa Dixon at melissa.dixon@staff.csmfo.org.

A leader in public finance.

Quick Hits will be available on the CSMFO website under Professional Development, Webinars and Resources. We will be adding additional videos going forward in response to your feedback. We hope that you enjoy this first “Quick Hits” offering!

NOTE: James Russel-Field is now CSMFO’s content manager for our Facebook page (yes, we have a facebook page!) and you can send him all of your photos from finance conferences and chapter meetings, as well as relevant articles or events. You can reach James at jrussell-field@toaks.org.

It is up to CSMFO’s discretion what content will and will not be shared.

Since 2000, we have represented more than 750 California local agencies. Our singular focus enables us to provide you with the expertise you need to make your project a reality.

475 Sansome Street, Suite 1700 San Francisco, CA 94111 415.391.5780 tel 415. 276.2088 fax info@joneshall.com www.joneshall.com

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