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Morro Bay's new finance director finds $800,000 error in sewer fund

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Just two months in, Morro Bay's newly hired financial director discovered an $800,000 error in the 2017-18 projected fund balance for the sewer project.

At the Nov. 14 City Council meeting, the city manager and project team were asked to prepare an updated fiscal year fourth quarter budget report for the city's Water Reclamation Facility project. Jennifer Callaway, the new finance director, said she and her team worked to put together the report but noticed that certain numbers weren't adding up.

"Internally, we reviewed the various funds and budget documents, but in doing our professional due diligence felt it was crucial to contact prior staff to get a comprehensive understanding of past processes and practices," she said.

As part of a staff report, newly hired City Manager Scott Collins wrote "the overstatement of funds resulted from human error."

The cash balances of the funds are taken from the city's budget document. The process is done manually and is independent from the city's finance software system.

"Because it's a manual process, it's critical to have several layers of review so that we can accurately tie information back to the software system," Collins said.

Although the error showed an excess of $800,000, Collins said that all project funds for the sewer and the Water Reclamation Facility are accounted for. The error doesn't affect anything moving forward.

The error was presented to the public and the City Council during the council's Dec. 12 meeting. Prior to the meeting Collins also attached a letter to the agenda item to further explain the error to the public.

"I felt it was important to provide the community with a complete report of the issue in a variety of methods, because not everyone has time to review agenda reports," he said.

Collins can't speak for the community, but he said the response has been positive.

"We received positive feedback from members of the community, and they seem to appreciate the efforts to be transparent and hold ourselves accountable," he said.

Callaway has a lot of experience working in local government. Her last position was as administrative director for the city of Sonora. Prior to that she worked for Los Gatos, first as the budget and finance manager and later as the assistant town manager. Callaway also has experience as the performance auditor for the state of New York and the city of San Jose.

What brought Callaway to Morro Bay was not only the location but the small town vibe.

"In a smaller community, you get to know all the staff by name and can interact with the city team on a regular basis, coordinate work more effectively and really get to understand the entire work processes and work flow of the city," she said. "While this may be a smaller city, Morro Bay is certainly big on heart, and it is the interaction and personal feel that keeps me passionate about my career and the work that we do as a small local government agency."

City Manager Scott Collins said that he is happy with Callaway as the new finance director given her experience and skill set.

"She and her team are committed to the same values, to learning, and to continual improvement. I have confidence in our team and strongly believe that an error like this will not occur in the future," Collins said. Δ

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