Two Live Oak City Council members have raised concerns over errors found in financial documents prepared by the city’s finance director. Their colleagues and other top administrators argue otherwise.
One discrepancy involved a $267 million error on an overlapping bonded debt report included in the city’s comprehensive annual financial report, which caused the city’s overlapping tax and assessment debt valuation to double. Another $175,000 error was found on a budget recap, and a third one was a $200,000 error on a water enterprise document regarding PERS costs for city employees.
Councilman J.R. Thiara said while mistakes do happen, the consistency with which the city’s finance director has made them over the past year indicate a pattern.
“There’s no excuse for this. You are a professional, and you should be catching these,” Thiara said. “I don’t know if it comes down to conspiracy to commit fraud or complete negligence. It’s to the point of incompetence.”
Finance director Joe Aguilar, an independent contractor whose firm Vavrinek, Trine, Day & Co. LLP has a three-year contract with the city worth $13,000 a month ($156,000 annually) for financial services, said aside from one error that he takes ownership of, the rest were easily explainable and inconsequential.
The most glaring error was the $267 million accounting error included in the CAFR. Somehow, numbers were added incorrectly to be double what they should have been. The error, Thiara said, was significant because it doubled the city’s overlapping bonded debt valuation – similar to an individual’s personal credit rating – which could impact the city’s ability to issue bonds.
But Aguilar said the financial statement’s only purpose was to be included in the statistical section of the city’s CAFR that was submitted as part of an award program through the Government Finance Officers Association. In other words, it was only informational, he said. On top of that, the city hired an outside provider – MuniServices, LLC – to prepare the document.
“Unfortunately, they made an addition error on the overlapping debt document. However, the city of Live Oak doesn’t have any bonded debt, so we don’t need a credit score. MuniServices made an error and no one caught it. We looked it over and didn’t notice it,” Aguilar said.
The statistical section was 20 pages long, he said, and has since been corrected by a different provider.
The second error was in a budget recap that was off by $175,000. That document, Aguilar said, was an informational page intended to give council members a brief narrative about the actual fiscal year budget, but the numbers included in the graph were added incorrectly and had no bearing on the budget itself.
“We corrected those pages. This page was only a narrative trying to help explain the budget to council members. The error had to do with the prior year budget and we were focused on the current year information, but it doesn’t affect the budget resolution,” Aguilar said.
Aguilar took ownership of the third error, which involved PERS retirement costs for the city and was $200,000 more than what it was supposed to be. The error was identified by Councilman Bob Woten during a budget workshop. No action was taken on the budget until Aguilar came back a few weeks later with an updated budget that had corrected the issue.
The finance director contests the assertion that he was neglecting his duties.
“What it shows is that we have a complicated financial set up and that understanding how to put these together is not easy. I think it’s unfair to throw someone under the bus for missing some personnel costs that we corrected rather quickly,” Aguilar said. “In the past, those budget submittals have been accurate, and the city has managed its finances very well for several years.”
City officials respond
The city’s fiscal year 2019/20 budget was approved in mid-July by a vote of 3-2. Thiara and Mayor Lakhvir Ghag – who are also relatives -- were the two dissenting votes. They requested answers from Aguilar about how the errors came about, but, they said, they never received an adequate explanation.
“I voted not to approve the budget for the reason that we didn’t know where the money really belonged. It was input incorrectly, and when they brought it back, he had made changes to the employee salaries but didn’t make any real changes to the benefits. It didn’t make sense,” Ghag said. “We pay him good money and we should get an excellent return on our money.”
Woten said he does not share the same feelings or concerns that some of his colleagues do regarding Aguilar’s ability to do his job.
“Everything has been done to my satisfaction, so I don’t think there is much to be concerned about,” he said.
Interim City Manager Aaron Palmer, who has been working with the city for five months, said he believes the allegations regarding Aguilar are unfounded. He said when he joined the city, he had an independent financial firm look over the budget and they didn’t find any problems with Aguilar’s work.
“I’m very happy with his work product. I think he knows a lot about public finance. Being such a small city, we receive a lot of grant funding, so to be versed in all of that you need a lot of experience, and I see that in Joe,” Palmer said. “Right now, I’m very comfortable with Mr. Aguilar’s performance and his firm as a whole.”
Councilman Aleks Tica also said the claims made by two of his colleagues are unfounded.
“Joe has been working for the city since I’ve been on the council for a total of five years, and there haven’t been any issues. Now, there have been the errors in these reports but those were fixed before the final approval,” Tica said. “I would trust the experts, that being Joe and his firm. Honestly, Joe has been great for our city. He’s found numerous grant opportunities and he continues to warn us about policies we have to fix. He’s been a professional for over 30 years, and for a council member to think they know more than someone who has been doing it as their job for that long, I just don’t understand.”
Councilman Luis Hernandez shares the same sentiment as the majority of his colleagues.
“When it comes to Joe, I think he’s done a great job. He’s made some minor errors here and there but they’ve been fixable,” he said. “I think he’s done an excellent job.”