TO: Mayor and Members of City Council
THRU: Douglas J. Hewett, ICMA-CM, City Manager
FROM: Jeffrey Yates, Assistant City Manager
DATE: April 28, 2025
RE:
Title
Receive the FY 2025 Third Quarter Financial Report
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
Goal V: Financially Sound City Providing Exemplary City Services
Executive Summary:
The update presented reflects the City's financial performance through the first three quarters of the fiscal year-from July 2024 through March 2025. The presentation includes a variety of financial data, offering insight into revenue trends, expenditure levels, and other critical fiscal metrics.
This quarterly update plays a vital role in maintaining transparency, promoting accountability, and supporting informed decision-making for both City Council and community stakeholders.
Background:
The City Council adopted the FY 2025 Operating and Capital Budget on June 24, 2024, with the new fiscal year beginning on July 1, 2024. Upon adoption, the budget became available for expenditure. Throughout the fiscal year, the budget is periodically revised to reflect transfers and funding adjustments. These revisions may occur through formal City Council actions-such as Budget Ordinance Amendments, Capital Project Amendments, and Special Revenue Ordinance Amendments-as well as through staff-level budget revisions authorized by the budget ordinance.
Budget Compliance and Oversight
In accordance with state statute, no expenditures may occur without an approved budget. To enforce this, the City utilizes a robust internal control process known as the “pre-audit.” Through this process, the Chief Financial Officer certifies that funds are properly appropriated before any expenditure is made. Court rulings have established that any contract executed without a pre-audit certification is invalid, reinforcing the critical nature of this control mechanism.
Expenditure Monitoring and Trend Analysis
The attached report provides a snapshot of actual expenditures compared to the revised FY 2025 budget, through the first three quarters (as of March 31, 2025). To offer meaningful context, the report includes a three-year comparison of expenditures during the same period in prior fiscal years.
This comparative analysis helps assess year-over-year trends:
• If current expenditures are trailing previous years, it is reasonable to expect lower year-end totals.
• Conversely, if there is significant growth compared to prior years, it is likely that growth will continue through year-end.
Vacancy Savings and Budget Flexibility
The City closely monitors vacancy savings, which occur when budgeted positions remain unfilled for part of the fiscal year. The FY 2025 Adopted Budget included an assumed vacancy savings of $8.5 million. These savings serve a dual purpose:
• First, to offset any potential revenue shortfalls in the current fiscal year.
• Second, any additional savings beyond those needed for operational balance will contribute to the City’s fund balance, in accordance with the City Council’s fund balance policy.
This approach ensures responsible fiscal management and positions the City to respond to unforeseen needs or economic changes.
Issues/Analysis:
Third Quarter Financial Update Summary
A thorough review of third-quarter data indicates that the City's financial performance is in line with expectations, based on historical trends. The Finance Department has begun year-end planning efforts, including meetings with departments to prepare for final expenditures and purchase orders. In parallel, preparation is underway for the annual audit, ensuring that the City will continue to meet or exceed the standards set by the Local Government Commission (LGC).
Debt Collection and ERP Modernization
Before reviewing broader financial trends, it’s important to note the City's renewed focus on revenue collections and past due accounts. The Finance Department is actively collaborating with departments to improve collection of delinquent debts, and the first round of debt set-off processing is now underway.
Historically, the City operated under a decentralized billing model. With the implementation of the new Enterprise Resource Planning (ERP) system, the City will maintain this decentralized structure for operational control while centralizing the receivables and invoicing process. This improvement will enhance tracking, accountability, and revenue recovery efforts across all departments.
Key Financial Trends Through Q3
1. Strong Financial Health: The City continues to demonstrate strong fiscal health. Revenues and expenditures are tracking closely to budget and are consistent with trends from previous fiscal years.
2. Vacancy Savings and Operational Impact: While position vacancies continue to generate financial savings, they also create operational challenges, especially in critical service areas such as public safety.
o Estimated savings to date: $13.1 million
o However, a portion of these savings is offset by increased overtime costs and contracted or temporary services used to maintain service levels.
3. Economic and Geopolitical Uncertainty: Global market conditions, including tariff policies, shifting grant availability, and broader economic volatility, remain ongoing concerns. These factors influence material costs, staffing decisions, and capital planning at both the local and national levels.
Looking Ahead
The third quarter represents the final comprehensive snapshot before fiscal year-end. As we transition into Q4 and the closing stages of the fiscal year, the Finance Department will continue to:
• Monitor and manage departmental expenditures
• Support year-end processing and compliance
• Engage in audit preparation to ensure transparency and accountability
The detailed financial reports are attached for review. Staff welcome any questions or feedback as we move toward closing out FY 2025.
Budget Impact:
See above discussion, no budget impact from reporting.
Options:
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Recommended Action:
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Attachments:
Presentation
Report