Perry-Mansfield disputes ‘reserve’
City, organization differ on meaning of financial term
October 5, 2007
Steamboat Springs — Board members of the Perry-Mansfield Performing Arts School and Camp say a city official’s assessment of the school’s finances was misleading and has damaged fundraising efforts.
As the Steamboat Springs City Council considered a $10,000 request from the school during all-day budget talks on Tuesday, interim Finance Director Bob Litzau told council members that Perry-Mansfield has $2.6 million in unrestricted reserves. That figure led the council to reject the $10,000 request. Perry-Mansfield asked for the money to help fund its 95th anniversary celebration.
On Thursday, Litzau said the city considers unrestricted reserves the same thing as unrestricted net assets, meaning it includes items such as land and buildings. An audited financial statement submitted to the city by Perry-Mansfield confirms that the school has unrestricted net assets of just more than $2.6 million.
“It’s not just the cash of an organization, it’s the assets of a corporation,” Litzau said.
Eddie Robison, treasurer of Friends of Perry-Mansfield, said that’s a misleading definition for reserves. Friends of Perry-Mansfield is the nonprofit organization that owns and operates the school.
“I think it’s a matter of semantics, but it certainly leaves the impression that we’re flush with cash reserves, which is absolutely not the case,” Robison said.
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Robison said that when it comes to actual cash on hand, the school has about $60,000.
“If he had called it assets, I couldn’t argue assets,” Robison said. “We really are cash poor.”
Litzau also told City Council on Tuesday that Strings in the Mountains has total reserves of $6.7 million and unrestricted reserves of $3.2 million. Strings officials immediately disputed that claim, noting that those figures were made up almost entirely of the value of the organization’s land and structures, and pledges made toward a new Strings pavilion.
“You certainly don’t want people to think you’re sitting on a bunch of cash, which is certainly not the case,” said Kay Clagett, president and CEO of Strings.
Litzau said the city generally equates reserves and assets in governmental finances. He said there is not a firm accounting definition for “reserves” and agreed there might be semantic disagreements to the way the city uses the term.
The issue evidently created confusion with the City Council as well. Councilman Paul Strong, an accountant, said Litzau’s report of Perry-Mansfield’s unrestricted reserves led him to believe the school had $2.6 million in cash or cash substitutes available, not $2.6 million in net assets. He said that perception “was a big factor” in his decision not to fund the school’s request.
This is the second year the city has required organizations to submit financial statements along with their budget requests to the city. Language disagreements aside, Litzau said an organization’s net assets are a measure of its financial strength.
“That’s the resources of the organization,” Litzau said. “The bottom line is they have the $2.6 million in net assets to run their programs with.”
Deputy City Manager Wendy DuBord said the city should take into consideration the overall financial strength of organizations as it decides how much to gift them.
“A lot of people were not aware of how financially strong these nonprofits are,” DuBord said Thursday.
DuBord said cities much larger than Steamboat don’t spend $1.6 million on community support, the amount currently proposed for the city’s 2008 budget.
City Council President Susan Dellinger said the city is, in effect, a granting organization. As such, the city needs to take a detailed look at an organization’s finances before awarding money, she said.
“If the city did any less, I would be disappointed,” Dellinger said. “For us not to look at the overall financial position would be a bad move. : I think the reserves count just as much as anything else.”