Guest Editorial: Lone Star Groundwater Conservation District Budget A Mess
This saga started several months ago when I was in attendance at a Lone Star Groundwater Conservation District (LSGCD) meeting. I merely pointed out that when businesses start losing money, they simply cut the budget. My suggestion was met with silence! With that in mind, I hired Crowl & Associates to review the budget and give a big picture breakdown so us lay persons could understand. This way I could keep it impersonal and strictly business!
After many months of Freedom of Information Act requests, the following is a letter of our findings from Crowl and Associates:
“They did not provide details for legal fees or engineering, only a summary. However, here are a few of the observations I had in reviewing the documentation.
“Lone Star Groundwater Conservation District states in its Notes to Financial Statements that “the District is not a taxing authority and that it is funded by charges to water well users. The mission is to manage and protect the groundwater resources of Montgomery County”. It is a quasi-governmental entity and as such is a non-profit. Most non-profits create budgets and are required to limit spending to expected revenue and governmental entities have restrictions on spending especially conferences and meals.
“LSGWCD had net assets of $2,151,258 at the end of 2016. They had $1,476,267 in income and $2,254,888 in expenses for a net loss of $778,621. The five largest expenses were:
Programs $364,986 25% of revenue
Personnel $630,895 43% of revenue
Legal $561,542 38% of revenue
Engineering $146,946 10% of revenue
Public awareness $158,451 11% of revenue
“The financials show that LSGCD was aware of a mandated 30% reduction in water for 2016 which impacted the revenue generated by the District. To combat this, the District raised the rate on water by 25%. The District shows that they expected $1,516,568 in revenue but agreed to budget $2,084,533 for expenses. Actual revenue was slightly less by approximately $40k but expenses exceeded an already negative budget by $117,482. Given the expected 30% reduction in use you would expect to see a similar reduction in expenses both for budget and for actual. Since 2013, revenue has dropped 26.5% from $2,008,799 to $1,476,267 while expenses have increased 35% from $1,668,815 to $2,254,888. The largest expense categories have expanded from 3 law firms to 8 law firms, 3 engineering firms to 4 and from 1 consultant to 3. If the mission has not changed and revenue has decreased then why have outside expenses increased? Especially given the stated staffing. The District shows it has 2 managers, 1 director, 1 accountant, and 2 assistants but only has 4 techs. This seems to be very top heavy for such a small staff. Additionally, personnel cost run 43% of revenue. Most for profit businesses run at lower than 35% and non-profits are significantly less than that.
“The District operates as if it were a for profit business however it wants to be treated as a non-profit or governmental department when arguing for fee increases and budget setting.
“The District spent over $54,000 on advertising at movie theaters and television and $16,700 on website design. For a non-profit that is not soliciting donations that seems excessive. They spent over $35,000 on donations and sponsorships to conservation programs and $20,000 on exhibits and conference fees just for the 2 managers. Additionally, most entities that are losing money do not spend money on meals and entertainment and it is barred by most non-profits and governmental entities. However, based on Kathy Jones expense reports, she expensed 77 meals in 2016 at an average of $76 per meal. For an entity losing money that is an easy cut. There is also a budgetary line showing $12,000 for a car allowance. These are not the type of perks you generally see with a non-profit.
“My observation is that LSGCD has overstepped its stated purpose to manage and protect water resources. They were not formed to educate school children or the public. They have no stated reason to advertise or need to spend excessive amounts ($10,000) to have editorials written for them to try lawsuits in the court of public opinion. They operate day to day as if they were a private business by spending money they don’t have on gifts, meals, perks, and marketing materials. It appears they spend most of their time attending meetings or conferences. They create budgets that exceed expected revenues by 25% and then fail to adhere to the budget they set. They fail to plan for mandatory reductions they helped implement and try to use all of this as an argument as to why they need to increase fees again after already implementing a 25% increase. They have too many people in management for the number of staff. LSGWCD needs to operate like the non-profit quasi-governmental entity that it is, eliminate the expenses not related to its stated purpose, create meaningful budgets that stay within its expected revenue, and hold management accountable to stay within those budgets.
“Let me know if you need anything else,
“Michael (Crowl and Associates)”
Not a pretty picture and, from what we can see, 2017 (soon to be reported) is no better.
You can draw your own conclusions as I have drawn mine. (My conclusion is that it is pretty ugly).
I sent this same report to LSGCD about a month ago and the only response has been that it was sent to their president! To be fair, the CPA that did this work (former state auditor) pointed out the 72 meals at $76 each could/should be called meals and gifts. (Really!!) We are borrowing money and running a very large negative and they are still having $76 meals and giving (government sponsored) gifts!!??
Thanks to recent legislation, the entire board of LSGCD is up for election in 2018. The five person majority that is responsible for this fiscal mess is Rick Moffatt, Jim Stinson, W.B. Wood, Gregg Hope and Jace Houston. Make sure we replace them!
Michael Stoecker is a businessman, real estate developer, and utility company owner who lives in Conroe. He’s a renowned squirrel hunter.