The city of Lincoln should fix its budget to account for erroneous information given to the state five years ago, State Auditor Charlie Janssen says.
The city can't change its original report to the state, which incorrectly showed that the City Council had approved an extra 1 percent of potential growth in the city's budget. But Lincoln can make changes to its current budget to reflect accurate information, Janssen said in a Friday telephone interview.
Such a change would mean a $2.5 million drop in the city’s spending authority, or the amount its budget is allowed to grow from year to year, Janssen said.
The city isn't required to correct the error, and the auditor’s office can’t force the city to make the change.
But correcting an error “should be an obligation of an elected official if they have a way to do it,” Janssen said.
Mayor Chris Beutler has said his administration does not intend to correct the error because that extra 1 percent is critical to Lincoln’s growth and future budgets.
The state auditor is treating Lincoln differently from other cities, Beutler said in a letter responding to Janssen's recent comments.
State auditor's staff told city staff the situation would not require a correction, Beutler said.
“The staff indicated the Auditor’s Office does not typically ask for changes based on alleged errors that are more than three years old.
“Their explanation was it would be impossible for municipalities to develop budgets moving forward if they cannot rely on the previous financial assumptions approved and reviewed years earlier. We certainly agree with, and relied on, that rationale,” the mayor wrote.
Five years ago, the city administration reported that the City Council had approved an extra 1 percent increase in the budget lid, based on a 5-1 council vote.
Beutler’s budget director reported that vote as a 75 percent supermajority, based on the six council members present at the meeting.
But the state auditor’s office recently told city staff the 75 percent calculation should be based on all seven members, no matter how many are present for the vote. So supermajority approval would require six votes, not five.
Janssen said his office is not saying anyone did anything improper. “They probably did the simple math and it hit the number — more than 75 percent."
But it should still be corrected, he said.
Janssen said his office will ask the attorney general for an opinion on what constitutes a 75 percent vote to make sure its traditional interpretation is correct.
If the council vote should have been based on seven members, his office will write a letter to the city administration recommending it reduce its current spending authority to reflect that the council did not approve the extra 1 percent budget lid authority.
State law caps that growth at 2.5 percent per year, but cities often vote to increase the lid to 3.5 percent. Spending authority that goes unused one year can be carried over to following years.
Beutler said he doesn’t understand why the state auditor seems to be adopting a position contrary to what the auditor’s staff has characterized as standard practice.
“It seems unfair that the city of Lincoln is being held to a different standard than applied to other subdivisions. We request a clarification on why the city of Lincoln would be asked to change a filing, when, according to auditor’s office staff, your office apparently has not asked other jurisdictions to correct alleged errors after three years.
“I would respectfully request that the state auditor apply the same standard to the city of Lincoln as it has to other jurisdictions and not attempt to impose a correction that serves no good purpose,” Beutler wrote.
Councilwoman Cyndi Lamm, who first discovered the budget-reporting error several weeks ago, says she believes the city ought to be able to correct the original report.
“That sure would be cleaner if we could go in and change the report,” she said Friday. But correcting the current budget to reflect the accurate vote and the real spending authority number is an alternative.
Janssen, who was not the auditor five years ago, said Lincoln's mistake was missed by the auditor's office, which reviews 2,500 local budget filings each year.
Seventy-six percent of cities take the 1 percent additional spending authority every year, according to Janssen. “So it’s pretty common practice.”
Granting the additional 1 percent does not mean a city will increase spending that much. It simply gives the city authority to do so.
In the past, when Lincoln did approve the additional 1 percent, the city did not use that authority, Janssen said.