Financial Antics & Semantics
August 31, 2024
Troy’s current financial predicament has captured the imagination of many. Despite assurances from the administration, most residents and rubberneckers seem to intuitively grasp that the situation is not ideal. Nevertheless, we are concerned that recent communication about Troy’s financial situation is actively harmful to the public’s understanding of the issues at hand and undermines the city’s credibility for anybody paying attention.
One example of alarming messaging was the Mayor’s comment in an August 30 article in the Troy Record where she says that Troy’s finances are solid and that it is just “the accounting and the reporting” that is the problem. When she and other officials express similar sentiments at meetings, what they mean is that the money in the bank accounts currently looks fine to them. This narrow understanding of finances moves things like “accounting” and “reporting” into a new, undefined second category. This is especially perplexing given that, earlier this year, the mayor explicitly called the absence of a Comptroller a financial emergency.
This conceptualization of finances is probably fine if you are riding around town on your bicycle selling weed. For a city with 112 million dollars spread out across five different funds, it does not work. Some of that money can be used relatively freely, and some is set aside for specific purposes. Accounting is critical for knowing which funds are which, and the consequences of using restricted funds for the wrong things can be extremely serious. These are just some of the reasons why cities are legally required to use modified accrual accounting, which is completely at odds with what the mayor is describing.
Troy’s operations are also extremely dependent on bonds, grants, and all sorts of other revenue sources that require compliance with and faith from external entities derived from our ability to accurately report a healthy financial situation, which we cannot do. In fact, Troy was required to notify many of those entities that our recent financial reports were both late and unreliable. Until the situation is corrected, we will be lucky if bonding merely gets more costly. Even if you think finances just means “cash in bank accounts,” accounting and reporting problems today spell less cash in bank accounts tomorrow, so these things can only be separated if you expect to be mayor for just one year.
City officials need to be more precise and forthcoming when talking about this financial crisis. This rhetoric does not educate the portions of the public that are just now learning about these issues and it is very scary to those who already understand them.
