Many residents mistakenly believe District staff’s expenditure of public monies is protected from inappropriate financial deceit/manipulation/wrongdoing simply because: those expenditures must be budgeted to be appropriated¹; District budgets must be filed with the State²; and, it’s unlawful for staff to expend public monies which have not been formally appropriated³. Unfortunately, that’s not the case. And the culprit of this misconception is the statute’s use of the term “function.”

Understanding the Word “Appropriation:” Let’s begin by understanding exactly what represents an “appropriation.” NRS 354.482 defines the term “appropriation (to be)…an (express) authorization by a governing body to make expenditures and…incur obligations for specified purposes.”

Understanding The Word “Function:” Next let’s understand what the word “function” means. NRS 354.529 defines the term “function (to be)…a group of related activities aimed at accomplishing a major service or regulatory program for which a governmental unit is responsible, including, without limitation, general government, public safety, public works, health, welfare, culture and recreation, conservation of natural resources, urban redevelopment and housing, economic development and assistance, economic opportunity and activities relating to the judiciary.”

Understanding The Term “Related Activities:” There is no statutory definition of this term. However, since NRS 354.472(2) instructs that “the provisions of NRS 354.470 to 354.626, inclusive, must be broadly and liberally construed,” wouldn’t that term mean every expenditure in a fund or sub-fund in any manner related to the purpose for the fund/sub-fund?

Understanding District “Functions:” So what activities (i.e., “functions”) does IVGID engage in which are “aimed at accomplishing a major service…for which (the District) is responsible?” As elsewhere explained, furnishing facilities for: water, sewer disposal, the collection and disposal of garbage and refuse, streets and highways, curbs, gutters and sidewalks, storm drainage and flood control, street lighting, electric light and power, and public recreation. In other words, essentially everything the District does.

Thus it Doesn‘t Really Matter Whether Any Specific Expense Has Been Formally Budgeted: So what expenditures does the District incur which aren’t somehow related to running a government, public utilities, and public recreation? Since we can’t think of many, if any, hopefully the reader can begin to understand that essentially every expense staff incur, either with or without spending authority, ends up being a “related activity” expense. Let us provide an example.

Let’s assume that the District Board expressly appropriates monies in the budget for a lawnmower purchase to be used at the Championship Golf Course. Yet instead of spending that money on the appropriated lawnmower, District staff choose to spend it on Championship Golf personnel. Maybe as a bonus. Thus making the expenditure on personnel in excess of the amounts expressly budgeted therefore. Since both types of expenditures are related to the activity of running the District’s Championship Golf Course, wouldn’t that mean that the apparent limitations of NRS 354.626 [“expend(ing) or contract(ing) to expend any money or incur(ring) any liability, or enter(ing) into any contract which by its terms involves the expenditure of money, in excess of the amounts appropriated for that function”] do not apply? Thus can’t you see how staff can legally make expenditures never expressly appropriated? This explains why we have concluded that it doesn’t matter whether any specific expense has been budgeted. Rather, what matters is for what an expense is incurred.

To Prove Our Point, Let‘s Examine The Budgets The District Board Actually Approves: The District maintains a web site which provides links to budgets going back to 2011-12. Although the reader should feel free to examine any one or more of these budgets, we can almost guaranty you’re going to be confused (don’t feel badly; that confusion is by design). So let’s try to make things a bit easier to understand.

As stated above, the District’s principle activities encompass: basic governmental functions, public utilities (water, sewer and solid waste garbage and refuse), public recreation, and the beaches. Revenue and expenses for the District’s “overall management and administrative” functions are assigned to its General Fund⁴. Its public works “water and sewer…engineering services…maintenance projects…compliance activities…fleet maintenance…and administration and management of the solid waste franchise” functions are assigned to its Utility Fund⁵. Its golf, ski, Recreation Center, facilities, tennis public recreation functions are assigned to its Community Services Fund⁶. And its beach, Ski Beach boat ramp, and Burnt Cedar pool functions are assigned to its Beach Fund⁷. So let’s examine discrepencies between actual expenditures for these activities, and the budgeted amounts for these same activities. And we can do this by examining the District’s Annual Comprehensive Financial Reports (“ACFRs”). The Schedule of Revenues, Expenditures and Changes in Fund Balance for the Fiscal Year Ended June 30, 2023, for the District’s General Fund, appears at page 49 of the 2023 ACFR. Here we see that although $879,739 was budgeted for administrative expenses, staff actually spent $1,124,751. We also see that all spending assigned to this fund was less than budgeted. Thus although $245,012 more was spent than appropriated on administration, this was permissible because all spending assigned to this fund was less than budgeted.

Let’s examine the Schedule of Revenues, Expenditures and Changes in Net Position for the Fiscal Year Ended June 30, 2023, for the District’s Utility Fund. This schedule appears at page 51 of the 2023 ACFR. Again, here we see that more was spent on insurance and utilities than was budgeted. Although $221,900 was budgeted for insurance, staff actually spent $238,881 ($16,981 of overspending). And although $958,691 was budgeted for utilities, staff actually spent $1,185,815 ($227,124 of overspending). Thus although all told, $244,105 more was spent than appropriated on insurance and utilities, just like the General Fund, this was permissible because all spending assigned to this fund was less than budgeted.

Let’s examine the Schedule of Revenues, Expenditures and Changes in Net Position for the Fiscal Year Ended June 30, 2023, for the District’s Beach Fund. This schedule appears at page 53 of the 2023 ACFR. Again, here we see that more was spent on wages and benefits, costs of goods sold, insurance and utilities than was budgeted. Although $1,190,505 was budgeted for wages and benefits, staff actually spent $1,274,803 ($84,298 of overspending). And although nothing was budgeted for costs of goods sold, staff actually spent $244 ($244 of overspending). And although $41,300 was budgeted for insurance, staff actually spent $44,493 ($3,193 of overspending). And although $128,817 was budgeted for utilities, staff actually spent $150,942 ($22,125 of overspending). Thus although all told, $109,860 more was spent than appropriated on wages and benefits, costs of goods sold, insurance and utilities, just like the General Fund, this was permissible because all spending assigned to this fund was less than budgeted.

Finally, let’s examine the Schedule of Revenues, Expenditures and Changes in Net Position for the Fiscal Year Ended June 30, 2023, for the District’s Community Services Fund. This schedule appears at page 52 of the 2023 ACFR. Again, here we see that more was spent on central services, insurance, and utilities than was budgeted. Although $5,769,708 was budgeted for services and supplies, staff actually spent $6,349,111 ($579,043 of overspending). And although $1,178,206 was budgeted for central services, staff actually spent $1,204,069 ($25,863 of overspending). And although $427,200 was budgeted for insurance, staff actually spent $495,552 ($68,352 of overspending). And although $1,285,128 was budgeted for utilities, staff actually spent $1,567,973 ($282,845 of overspending). Thus although all told, $854,310 more was spent than appropriated, unlike the District’s other major funds, this was more than budgeted.

So as the reader can see, essentially every expense staff pays ends up being a “related activity” one, whether or not expressly appropriated. Which allows for selective overspending.

Conclusion: We hope the reader understands that it really doesn’t matter how or on what expenses the public’s monies are actually spent. Because at the end of the day, staff will claim the expense was related to some activity the District is authorized to perform. Now do you the reader think this kind of staff spending discretion “control(s)…revenues, expenditures and expenses (and)…promote(s) prudence and efficiency in the expenditure of public money?”⁸ Do you think it “provide(s) specific methods (which) enabl(e) the public, taxpayers and investors to be apprised of (IVGID’s)…financial preparations, plans, policies and administration?”⁹ Do you think this kind of staff spending discretion is what the Board and the public have in mind when a budget is formally adopted? Notwithstanding the answers to these questions are a collective no, we hope the reader understands he/she and the IVGID Board have no standing to complain.

And now you know.

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1. NRS 354.598(4) instructs that “upon…adoption of the final budget…the several amounts stated in it as proposed expenditures are appropriated for the purposes indicated” therein.
2. NRS 354.598(3) instructs that a local government’s “final budget must be certified by a majority of all members of (its) governing body, and a copy…must be transmitted to the Nevada Tax Commission.”
3. NRS 354.626(1) instructs that but for exceptions not relevant to this discussion, it is unlawful for a “governing body or member thereof, officer, office, department or agency may, during any fiscal year, expend or contract to expend any money or incur any liability, or enter into any contract which by its terms involves the expenditure of money, in excess of the amounts appropriated for that function.”
4. See page 563 of the packet of materials prepared by staff in anticipation of the Board’s May 25, 2023 meeting (“the 5/25/2023 board packet“).
5. See page 570 of the the 5/25/2023 board packet.
6. See pages 591-638 of the the 5/25/2023 board packet.
7. See page 639 of the the 5/25/2023 board packet.
8. See NRS 354.472(1)(d).
9. See NRS 354.472(1)(e).