Sausalito preliminary budget audit finds extra $2M

Sausalito ended its fiscal year in June with more money than projected.

The update from city staff on Tuesday was part of an annual auditing process conducted for fiscal year 2023-24. The City Council used the session to discuss how budget projections could be more accurate.

The general fund is projected to end the year with a $2.6 million surplus — $2 million over expectations. This is because revenues were up by $1 million and expenses were under by $1 million, according to Chad Hess, the city’s financial director.

Hess said the changes stem from incorrectly budgeting property tax and Educational Revenue Augmentation Fund money. Additionally, revenues from the planning and recreational departments were up, and fines beat expectations by $172,000, Hess said.

“The primary driver of that is our parking tickets,” he said. “With that department being fully staffed, we did see an increase in parking citations.”

The overbudgeted expenses are related to the city practice of over budgeting for a full staff at a “top step” salary, said Hess. The city’s other funds, such as parking funds and revenue from the city-owned Martin Luther King Jr. Campus, also exceeded expectations.

“None of this is changing the fiscal year 2025 budget,” Hess said.

Councilmember Jill Hoffman pointed out that the current fiscal year budget has a general fund spending deficit of around $1 million.

Vice Mayor Joan Cox said she noticed variances throughout the budget categories and requested a list to reference next year. She said the city’s budgeting process needs to be fine-tuned to limit “volatile” changes.

“I know in our current budget we’ve addressed some of those,” Cox said. “While I’m happy to have a surplus and the problem of what to do with it, it’s concerning to me that our budgeting process is that inaccurate.”

Councilmember Janelle Kellman agreed, noting that a line item regarding legal fees seemed off.

“I’m curious about an improvement plan to make this more exact,” Kellman said.

Hess said the numbers are unaudited but believes them to be accurate. Sausalito is required by the state to do an annual audit of its finances and must release a statement within six months of the end of the fiscal year on June 30. The city uses the accounting firm Badawi and Associates for its auditing.

Auditors conducted their tests of balances — examining, recalculating and confirming the city’s financial statements and documents — about three weeks ago, Hess said.

“It takes about six months for the city to close its books and undergo the audit and the report issue date,” Hess said. “So it is important to understand that the audits take time to complete and releasing this interim information is our way to give council and the community more timely information.”

The report is expected to be released by mid-December.

In past years — fiscal years 2019-20, 2020-21 and 2021-22 — the city missed report deadlines due to high city staff turnover, according to a staff report.