The District ended fiscal year 2006 with a $325 million general fund surplus and a clean bill of financial health, but management trouble within the public schools and Medicaid threaten to derail years of progress, top D.C. leaders said Wednesday.
For the 10th consecutive year, District officials could once again tout a balanced budget and a remarkable fiscal turnaround, from a $500 million deficit in 1996 to a $1.5 billion general fund balance in 2006, according to an independent audit of the city’s financial condition.
The rainy day fund is nearly $300 million strong and Wall Street continues to eye the nation’s capital for a bond rating upgrade, which would bear lower interest rates on the city’s massive debt, Chief Financial Officer Natwar Gandhi said.
“I think we deserve it, because with this level of financial aptitude, fiscal prudence and financial responsibility, if they do not upgrade us one more time then they are smoking something that I don’t know,” he said.
Mayor Adrian Fenty said he is committed to “improve upon the prudent fiscal policies and financial viability of the District of Columbia that Mayor [Anthony] Williams achieved in his tenure.”
But not all is well with the District’s finances, auditor BDO Seidman said in its report. The D.C. Public Schools, according to the analysis, present a “material weakness” to the District’s finances because of poor procurement controls, human resources, payroll and Medicaid spending.
Fail to tackle a material weakness immediately, Gandhi said, and “We could lose our credibility on Wall Street.”
Fenty, who is lobbying to take control of the schools and reduce the Board of Education’s role, said the audit bolsters his argument.
“I sat on the council for six years and I see when the School Board comes midyear and says we overspent our budget; we need more money,” he said. “I think those days have got to stop.”
D.C. Council Chairman Vincent Gray, who is noncommittal on Fenty’s plan, said the audit “will weigh ultimately in the consideration of this council member.” Ward 8 Council Member Marion Barry said the report offered “awful news about the [schools’] management.”
BDO Seidman also listed the executive’s Medicaid management as an “area of risk” to the District’s financial standing, for its troubles handling cost reports, reimbursements and client eligibility.
