HomeMy WebLinkAboutFiscal Year 2013/14 Year-End Budget Adjustments for the Work6Dept. ID FN 15-002 Page 1 of 2
'J Meeting Date: 1/20/2015
CITY OF HUNTINGTON BEACH
REQUEST FOR. CITY COUNCIL ACTION
MEETING DATE: 1/20/2015
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Lori Ann Farrell, Director of Finance
SUBJECT: Fiscal Year 2013/14 Year -End Budget Adjustments for the Workers'
Compensation Internal Services Fund
Statement of Issue:
The Finance Department is currently undergoing the year-end closing process for Fiscal Year
2013/14, which began on October 1, 2013, and ended on September 30, 2014. Certain technical
adjustments and fund transfers need to be made to reconcile the budget with actual expenditures
incurred and to comply with auditing, actuarial, accounting or legal requirements. City Council
authorization is requested to perform these reconciliations with regard to the Workers'
Compensation Internal Services Fund in anticipation of the annual audit for last fiscal year.
Financial Impact:
This action will result in the transfer of $1,306,675 from various City Funds (including the General
Fund, Special Revenue Funds and Enterprise Funds) to the Self Insurance Workers' Compensation
Internal Services Fund (Fund 551) pursuant to Generally Accepted Accounting Principles (GAAP)
to accurately account for the actual costs and liabilities incurred in FY 2013/14 related to the City's
workers' compensation program and benefits. There are sufficient revenues and/or fund balances
in each of the respective Funds to support this request.
Recommended Action:
Approve the appropriation and transfer of $1,306,675 in the Fiscal Year 2013/14 Revised Budget in
the Funds and amounts contained in Attachment 1 to the Self Insurance Workers' Compensation
Internal Services Fund (551).
Alternative Action(s):
Do not approve the recommendation and direct staff accordingly.
Analysis:
California Workers' Compensation Law provides benefits to employees for work -related illness or
injury. Benefits may include payment for medical treatment, salary continuation, Total Temporary
Disability (TTD) benefits, and permanent disability benefits. The City is self -insured for its workers'
compensation program and is liable for all costs up to $1 million per claim. These costs are all paid
for by the City as the Employer.
Annual Operating Costs
As discussed at last year's January 31, 2014, Strategic Planning Session, actual workers'
compensation expenses have grown significantly from $4.5 million in FY 2004/05 to the FY 2012/13
actual cost of $5.6 million — a 24 percent increase, over an eight -year period. The growth in
IJB -69- Item 6. - I
Dept. ID FN 15-002 Page 2 of 2
Meeting Date: 1/20/2015
expenditures is primarily a result of the increased costs of medical care, statutorily enhanced
benefits, and labor cost increases.
To facilitate improved accounting and full financial disclosure of the City's current and future
Workers' Compensation program costs, the separate Workers' Compensation Internal Services
Fund was created to better account for program expenses now totaling approximately $5.9 million.
The components of this expense include, but are not limited to, annual claims administration
expense, direct and indirect claims costs (e.g. professional medical, hospital, pharmacy and legal
costs), salary continuation and utilization review costs. This new Fund has allowed for greater
tracking, planning, and transparency of all expenses and long-term unfunded liabilities. Greater
transparency has also been achieved as all costs are distinctly accounted for within a segregated
fund in the City's annual adopted budget and its financial statements.
Authorization is requested to transfer $800,342 from various Funds citywide to properly fund actual
operating and claims costs incurred in the Workers' Compensation Fund in Fiscal Year 2013/14.
Unfunded Liabilities and Net Fund Position
While the City has implemented several plans to reduce its retirement unfunded liabilities, another
area requiring future action is the City's total workers' compensation liabilities. The City has a
liability of total outstanding claims (comprised of short- and long-term claims) currently estimated at
$10.5 million. As one of the Strategic Planning Goals is to "Improve the City's Long -Term Financial
Sustain ability," it is strongly recommended that the City formalize a plan to address these costs.
Last year, the City Council approved the deposit of $800,000 of remaining year-end fund balance
into the Workers' Compensation Fund to help pay down the unfunded liabilities. This reduced the
then existing Fund Balance of the Fund from a negative $11.3 million to a negative $10.5 million.
As of the most recent actuarial valuation, the actual unfunded liability is $506,333 higher than the
amount contained in the preliminary draft actuarial report prepared by Aon Consulting, Inc. that
formed the basis for last year's audit. City Council approval is also requested to transfer $506,333
from the City's various Funds into the Workers' Compensation Fund to properly book the actual,
final Fiscal Year 2013/14 liability consistent with the final actuarial valuation that will be reviewed by
the City's independent auditors. This will result in an additional expense of $506,333 in Funds
citywide and the Worker's Compensation Fund.
Lastly, a formal plan to address the City's unfunded Workers' Compensation liabilities will be
presented to the City Council at a later date.
Environmental Status:
Not Applicable.
Strategic Plan Goal:
Improve Long -Term Financial Sustainability
Develop, Retain and Attract Quality Staff
Attachment(s):
1. Fiscal Year 2013/14 Recommended Year -End Budget Adjustments —All Funds and
Workers' Compensation Fund.
Item 6. - 2 HB -70-
Attachment 1
Transfers Out
Fund Department
Appropriation
100 - Generol Fund
City Attorney
9,974
City Clerk
2,319
City Council
284
City Manager
7,666
City Treasurer
489
Community Services
37,916
Finance
13,491
Fire
351,437
Human Resources
7,861
Information Services
16,488
Library
14,160
Non -Departmental
-
Planning & Building
26,505
Police
561,446
Public Works
119,189
Subtotal General Fund
1,169,225
209 - Pork Acquisition & Development
Community Services
484
213 - Measure M Fund
Public Works
8,504
501 - CUPA
Fire
992
504 - Refuse Collection Service
Public Works
2,199
506 - Water
Public Works
92,854
507 - Water Master Plon
Public Works
476
511 - Sewer Service Fund
Public Works
28,783
551 - Self lnsuronce Workers' Comp
Human Resources
2,166
704 - Fire JPA Fund
Fire
992
Subtotal Other Funds 137,450
Total Transfers Out 1,306,675
Transfers In
Fund Department Appropriation
551 Self lnsuronce Workers' Comp
Human Resources 1 1,306, 775
H B -71 _ Item 6. - 3