Palo Alto, CA -- Palo Alto City Auditor Jim Pelletier released the results of the Utilities Reserves Audit focused on the adequacy and appropriateness of the City of Palo Alto Utilities Department’s management of its financial reserves. The audit, completed in 2012, found that the City generally maintained adequate reserves and used those reserves appropriately within established policies. The audit contains two key findings and five recommendations to assist the City in developing a comprehensive reserve policy, and to improve the consistency and completeness of reporting on financial reserves.
Palo Alto is the only city in California that offers a full array of utility services to its citizens and businesses including electric, gas, water, wastewater collection, and fiber optics. These utility services are managed by the Utilities Department, which controlled an operating budget of $222.8 Million and capital budget of $25.7 Million in Fiscal Year 2012.
The Utilities Reserves Audit focused on the financial reserves set aside by the department for general contingencies, for future capital and debt services expenditures, and for operating and capital contingencies such as unusual and emergency expenditures. In Fiscal Year 2011, these reserves totaled approximately $231.6 Million.
The audit found that the City could benefit from establishing a comprehensive reserve policy, with effective supporting procedures, that would clarify the criteria for communicating, managing and monitoring its utilities reserves. Additionally, by improving the consistency and completeness of reporting reserve balances, the department could better support the City Council’s operating budget, capital budget, and reserve processes.
“We believe that our reserves are in good shape and well-managed,” noted City Manager James Keene. “In the year ahead we will focus on the identified need for improved policy documentation and communication about the reserve management process.”
The City regularly reports all of its utilities reserve balances to the City Council through its Comprehensive Annual Financial Report. In addition, since November 2001, the Utilities Department has reported its Rate Stabilization Reserve levels and guidelines to the Utilities Advisory Commission (UAC) on a quarterly basis.
“I appreciate the City’s commitment to the responsible management of the utilities reserves,” said City Auditor, Jim Pelletier. “Our recommendations will assist the City with further improvements in this area.”