Quarterly Report: 2014, January - March (Q3), McGrath

Community:
McGrath 
Staff:
Glen Hamburg  
DCRA Regional Office:
Anchorage regional office 
Gov't Type:
Second Class City 
Borough:
 
Agreement?
No 
Agreement Date:
 
Entity:
City of McGrath 
Population:
320 2013 Department of Labor Estimate 
Assessment Status:
Assessment Completed 
Assessment Date:
2/19/2013 
Exp Date:
 
Last Updated:
3/28/2014 
Community Sanitation Overview:
McGrath is located in Alaska’s Interior Region 221 miles northwest of Anchorage and 269 miles southwest of Fairbanks. The City of McGrath operates a piped water system that serves nearly all 178 households; a few homes have individual wells or haul water. The Federal Aviation Administration (FAA) branch in McGrath operates its own water system. The majority of the community’s residents use individual wastewater tanks, while a limited city wastewater system serves approximately 34 homes. Funds have been requested to expand the piped wastewater system to the 144 houses and businesses currently utilizing their own individual wastewater tanks. There is also a washeteria owned and operated by the city. McGrath is poised to begin substantial upgrades of its water treatment plant with design and engineering phases of this project already complete. Erosion control is a critical issue, as the water treatment facility is located next to the river. The cost of moving the facility would triple the costs of the upgrade. The city has applied for funding to complete their erosion control project, ensuring the integrity of the water treatment facility. 
RUBA Status & Activities This Qtr:
RUBA staff travelled to McGrath this quarter to assist in the preparation and distribution of appropriate financial reports, discuss the enforcement of the city’s utility bill collections policy and ways to reduce utility-related expenses, and be introduced as the city’s newly-assigned RUBA staff to the city council. The financial reports the city council receives at its monthly meetings only outline budgeted and actual expenses and make no reference of income. RUBA staff spoke at length with the city administrator, who serves as utility manager, and to the city’s acting clerk/treasurer during the visit about the importance of including income values in the monthly reports. RUBA staff demonstrated how profit and loss reports can be printed from the city’s QuickBooks file, diagramed alternative ways of preparing proper financial reports using Microsoft Excel, and provided sample financial reports from other communities. The administrator and clerk/treasurer stated that they will be including income values in the reports from this point forward, as advised. In meeting with city staff and officials during the visit, RUBA staff stressed the importance of collecting on past due utility accounts before considering raising utility rates to cover its expenses, and helped to brainstorm alternative collection strategies. RUBA staff also offered to deliver a presentation to the council on utility bill collections and other financial management practices. A recent check by RUBA staff of the city’s federal tax payments showed that the city owed just over $500 in unpaid tax penalties to the IRS, leading to increased costs for the provision of sanitation services. RUBA staff therefore used the visit to assist city staff in contacting the IRS, identifying correct amounts due, and filing necessary paperwork. The visit also allowed RUBA staff to address the council on the importance of making timely payments on the city’s bulk fuel loan in order to reduce the utility’s expenses, the impact of reduced Community Revenue Sharing (CRS) funds on utility finances, and the training opportunities available through the RUBA program. During the visit RUBA staff verified that proof of insurance coverage and council meeting notices were posted as required and toured the city’s utility infrastructure with the primary operator. The operator explained that while he and the other operator routinely discuss safety issues together, formal safety meetings are not held with the utility manager. RUBA staff explained the importance of holding and documenting these meetings, and explained the benefits of participating in the monthly safety teleconferences conducted by the city’s workers’ compensation insurance provider. Further, RUBA staff provided staff and officials with information on the RUBA-sponsored QuickBooks hotline, the process of conducting a head count census to revise population determinations used for CRS funding, and the importance of the council appointing a permanent city clerk/treasurer. RUBA staff communicated regularly with the city administrator this quarter to address financial matters impacting sanitation services in the community, including the high cost of utility staffs’ health insurance, bulk fuel loan payments, and delays in a water treatment plant upgrade. With regard to health insurance, RUBA staff clarified for the city that it is not required under state or federal law to provide health insurance to its employees, but could choose to do so through a number of methods likely cheaper than the $900-per-month-per-employee plan it has now. RUBA staff met with the city administrator in Anchorage this quarter, as well as with the city’s workers’ compensation insurance provider over the phone, to talk through alternative healthcare benefits the city could provide in order to maintain or reduce the cost of city services, while not losing utility employees. The city will continue to pursue more affordable employee benefits with the help of RUBA staff. RUBA staff also spoke with the city’s assigned utility engineer this quarter about the progress of a water treatment plant upgrade in McGrath. The current facility is facing regulatory issues, is generally in poor condition, and is costing the city a significant amount of money in additional fuel costs. While funds for an upgrade have been appropriated, the new system is still in the design stages and construction will likely not begin until the summer of 2015. RUBA staff shared this information with the city administrator and advised that utility finances take into account the need to continue using the current system for at least another year. RUBA staff also provided members of the city council, the utility’s governing body, with printed guides to council members’ roles and responsibilities. 
RUBA Activities for the Coming Qtr:
RUBA staff will continue to assist the city clerk/treasurer in preparing appropriate monthly financial reports for the council. RUBA staff will also encourage regular, formal safety meetings between all utility be held and documented and prompt bulk fuel loan payments. Further advice will also be given to the city on how to increase utility revenues with improved utility bill collections, and how to decrease certain expenses. Additionally, RUBA staff will communicate with city staff and officials to schedule an on-site training on roles, responsibilities, and financial management practices for the city council.
Scores:
 
Essential Indicators:
23 of 26
Sustainable Indicators:
25 of 27
Total Score:
48 of 53

Finances

Essential Indicators
Answer Question
Yes All revenues and expenses for the utility are listed in the utility budget.
Yes The utility has adopted a balanced realistic budget.
No Monthly financial reports are prepared and submitted to the policy making board.
No The utility is current in paying all water/wastewater electric bills.
Yes The utility has on hand a year's adequate fuel supply or it has a financial plan to purchase an adequate supply.
Yes The utility is receiving revenues (user fees or other sources) sufficient to cover operating expenses.
Sustainable Indicators
Answer Question
No The utility is receiving revenues (user fees or other sources sufficient to cover operating expenses and Repair & Replacement (R) costs.
Yes YTD revenues are at a level equal to or above those budgeted.
Yes YTD expenditures are at a level equal to or below those budgeted.
Yes A monthly manager's report is prepared.
Yes Budget amendments are completed and adopted as necessary.
Finances Comments
The City of McGrath’s fiscal year follows the State fiscal year running from July 1 to June 30. The city’s balanced and realistic FY14 budget was adopted timely by non-code ordinance on July 1, 2013. The budget compares projected income and expenses next to FY13 budget and actual figures. Piped water utility revenues and expenses are appropriately separated from other city functions, as are wastewater revenues and expenses and washeteria revenues and expenses. The city projects to spend approximately $288,000 on piped water utility expenses, but to collect $230,000 in revenues. Seventy-eight percent of these water revenues are to come from user fees, while the remaining revenues are subsidies sourced from the State’s Community Revenue Sharing program. The wastewater utility is expected to generate $49,000 in revenue during FY14, but to cost the city more than $52,000. The roughly $3,000 deficit will be covered by other city revenue sources. The washeteria plans to see a net profit of more than $3,000. A review of meeting minutes shows that financial reports are provided to the city council, the utility’s governing body. However, the financial reports only detail expenses and say nothing about income. RUBA staff is working with city staff to have proper financial reports developed. A review of council meeting minutes does show that verbal managers reports are provided to the city council each month and that financial matters are given appropriate consideration. City staff have reported being behind in paying electric bills.

Accounting Systems

Essential Indicators
Answer Question
Yes The utility has adopted a collection policy and actively follows it.
Yes The utility bills customers on a regular basis.
Yes An accounts receivable system is in place which tracks customers and reports past due accounts and amounts.
Yes An accounts payable system is in place.
Yes The payroll system correctly calculates payroll and keeps records.
Yes A cash receipt system is in place that records incoming money and how it was spent.
Yes The utility has a cash disbursement system that records how money was spent.
Sustainable Indicators
Answer Question
Yes A chart of accounts is used that identifies categories in a reasonable, usable manner.
Yes Monthly bank reconciliations have been completed for all utility accounts.
Yes The utility has a purchasing system that requires approval prior to purchase, and the approval process compares proposed purchases to budgeted amounts.
Accounting Systems Comments
The utility has adopted a collections policy which is outlined in Title 13, Chapter 4 of the McGrath Code of Ordinances. The city provided RUBA staff with a sample water utility bill who then verified that they contain the appropriate information. Customers are billed on a regular basis in accordance with established billing policies. The city uses QuickBooks Pro 2012 to track all financial transactions of the utility and other city finances, including accounts payable and payroll. The city maintains a comprehensive and organized chart of accounts that address appropriate line items. Purchases for the utility are discussed between the administrator and lead operator to confirm the purchase is necessary and also to identify if funds are available in the budget. Decisions outside of budgetary line items are made based on the determination of necessity and available general funds.

Tax Problems

Essential Indicators
Answer Question
Yes The utility has a system to accurately calculate, track, and report payroll tax liabilities.
Yes The utility is current on filing tax reports.
No The utility is current on making tax deposits.
N/A If there are any past due tax liabilities or recorded tax liens, a lien release has been issued or a repayment agreement has been signed and repayments are current.
Tax Problems Comments
The City of McGrath uses QuickBooks to calculate and track its payroll tax liabilities. The IRS’s taxpayer advocacy service has issued notification on March 10, 2014 that the city owes federal taxes from December 2013. The Alaska Department of Labor and Workforce Development did, however, grant the corporation employment security tax clearance on March 21, 2014. The city is not listed on the most recent Lien Watch report.

Personnel System

Essential Indicators
Answer Question
Yes The utility has a posted workers compensation insurance policy in effect.
Sustainable Indicators
Answer Question
Yes The utility has adopted and uses a Personnel Policy, which has been reviewed by an attorney, AML or Commerce for topics and language.
Yes The utility has adequate written job descriptions for all positions.
Yes The utility has adopted and follows a written personnel evaluation process that ties the job description to the evaluation.
Yes The utility has an adequate written hiring process.
Yes The utility has personnel folders on every employee that contain at least: I-9, Job Application and Letter of Acceptance.
Yes The utility has a probationary period for new hires that includes orientation, job training/oversight, and evaluations.
Yes The utility provides training opportunities to staff as needed and available.
Personnel System Comments
RUBA staff confirmed on March 11, 2014 that the city has a valid workers’ compensation insurance policy through the Alaska Municipal League Joint Insurance Association (AMLJIA). The city also has an employee handbook that addresses hiring, evaluation, personnel files, a 90-day probationary period, promotions and transfers, and other necessary personnel matters. The city encourages employee training, as evidenced in council meeting minutes authorizing utility employees to travel to trainings, and by reasonable budget allocations for travel and training costs.

Organizational Management

Essential Indicators
Answer Question
Yes The entity that owns the utility is known; the entity that will operate the utility is set.
Yes The policy making body is active in policy making of the utility.
Yes The policy making body enforces utility policy.
Yes The utility has an adequately trained manager.
Yes The utility has an adequately trained bookkeeper.
Yes The utility has an adequately trained operator or operators.
Yes The utility has adopted the necessary ordinances (or rules and regulations) necessary to give it the authority to operate.
Sustainable Indicators
Answer Question
Yes The utility has adopted an organizational chart that reflects the current structure.
Yes The policy making body meets as required.
Yes The utility complies with the open meeting act for all meetings.
Organizational Management Comments
The City of McGrath owns and operates the sanitation utilities in the community. It has adopted ordinances addressing service standards for the water utility and clearly stating what and how those services are to be provided. The McGrath city council members are active in policy making for the utility and enforces those polices, as evidenced through a review of council meeting minutes and the customer user fee income levels. The city administrator acts as the utility manager and the utility foreman reports to the city administrator. The city administrator has over six years’ experience with the City of McGrath and has completed various RUBA program utility management trainings. The administrator has been awarded the 2005 Alaska Water and Wastewater Management Association (AWWMA) System Manager of the Year and has been recognized by Tanana Chiefs Council for outstanding dedication to the McGrath Water System. The utility foreman has three plus years of experience and has been with the city for the last year. There are two water operators employed by the city and recognized by the State’s Department of Environmental Conservation. One of these operators holds Water Treatment Level 2 and Water Distribution Level 2 certifications, both expiring at the end of 2015. The other operator is certified to operate a small water system until the end of 2014 and holds provisional water treatment certification valid until the end of 2015. The bookkeeping is done by the city's acting city clerk/treasurer, who has held the job for several years. The council meets at least once each month and meeting notices are posted in accordance with Alaska’s Open Meetings Act.

Operation of Utility

Essential Indicators
Answer Question
Yes The utility operator(s) are actively working towards necessary certification.
Yes The utility has a preventative maintenance plan developed for the existing sanitation facilities.
Sustainable Indicators
Answer Question
Yes The manager receives a monthly O&M report from the utility operator and routinely "spot checks" the facilities to see that the maintenance items are being completed.
No The utility has a safety manual and holds safety meetings.
Yes Utility facilities have not suffered any major problems/outages due to management issues that are unresolved.
Yes The utility is operating at the level of service that was proposed.
Yes The operator provides status reports to the manager on a routine basis.
Yes The utility has completed and distributed its "Consumer Confidence Report".
Yes The utility is not on the "Significant Non-Complier" (SNC) list.
Yes The utility maintains an inventory control list.
Yes The utility maintains a critical spare parts list.
Operation of Utility Comments
In addition to the utility foreman, there are two water operators employed by the city and the information provided in the Organizational Management section of this reports demonstrates that they actively work toward maintaining necessary certification. There is a safety manual on hand, but utility employees do not hold or document regular formal safety meetings. Nonetheless, the utility has not had any significant outages due to management issues. The utility maintains a monthly preventative maintenance checklist for the water utility. The checklist includes maintenance of the river pump, inspection of chemical feed pump and injection point for fluoridation, inspection of chemical feed pumps for chlorination system and clearing sediment, inspection of tank farm valves, alarm panel battery backup system and pressure relief valve in the boiler. The City of McGrath has a current Consumer Confidence Report on file at the utility and is not on the January 2014 Significant Non-Compliance list. The utility has an inventory control list and critical spare parts list; copies have been provided to RUBA staff.