So let’s assume you’re spending more on expenditures assigned to your General Fund¹ than the revenues you’re able to generate. What do you do to balance your General Fund budget? The short answer is you increase revenues. Or you decrease expenses. Okay. How do you increase revenues given the above definition of General Fund? It’s not possible. How do you reduce expenses? Assuming you’re not willing to reduce expenses, it’s not possible either. So what to do? Not to worry because your Incline Village General Improvement District (“IVGID”) is up to the challenge. It’s called central services cost transfers from funds which benefit from a steady revenue source. And here the vehicle is a “Central Service(s) Cost Allocation Plan.”² Once you adopt a formula of recoupment associated with the Plan, use it to generate the deficient funds you require to transfer to your General Fund and balance your budget.

What Are Central Serices? As elsewhere stated, according to District staff allocated central services cost transfers represent “an equitable distribution of (IVGID’s) general, overhead, administrative and similar costs³ Incurred by the District’s General Fund (to)…support the operations of (its)…Enterprise Funds.”⁴ But in reality, we say they represent nothing more than another financial subsidy [like the Recreation (“RFF”) and Beach (“BFF”) Facility Fees are to the Community Services and Beach Funds, respectively] intended to “plug” the difference between estimated revenues and deliberate overspending [except for personnel and capital improvement (“CIP”) costs] assigned by staff to the District’s General Fund. And it turns out this is the very same description IVGID staff used to represent to the public before the adoption of NRS 354.613.

Now We Need to Come Up With a Formula: which generates the deficient funds required to balance the General Fund budget. We really don’t care about the formula’s justification nor components, nor its reasonableness nor equitableness. Because it’s the end result we’re interested in which then justifies the means employed. Right? And here District staff have come up with a formula, and here’s what it is:

sum(sum(x*.80) + sum(y+x*.20))*a plus sum(sum(f+w+b+s)*a2

Now it doesn’t matter what x, y, f, w, b, a and a2 represent. Because whatever they may, it’s the above formula which generates the result required. In other words, it is the ends which justify the means employed. And the beauty of this formula is that if you don’t get the result you’re looking for, no problem. You have the freedom to adjust a and a2 from 1 – 100/each. And if the means don’t yield the result required, just change the formula! And for this reason alone, we cannot agree with District staff’s representation its allocated central services cost transfers represent an equitable distribution of IVGID’s general, overhead, administrative and similar costs.

Notwithstanding, to fill in the uncertainties of the above formula, x = Accounting budget; y = Human Resources budget; f = District wide budgeted FTEs; w = District wide budgeted wages; b = District wide budgeted benefits; District wide budgeted services and supplies; a = allocation, from 1 – 100; and, a2 = allocation from 1 -100. Got it?

Where Does The Money Come From to Pay For The District’s Central Services? And since IVGID staff also budget to deliberately overspend in the District’s Community Services Fund which is subsidized by the RFF, and in the District’s Beach Fund which is subsidized by the BFF, in reality General Fund overspending is also indirectly subsidized by the RFF and BFF, respectively. And since spending in the District’s Utility Fund is paid by the water and sewer utility rates and charges local parcel/dwelling unit owners are mandated to pay/guaranty⁵, General Fund overspending is also subsidized by those rates and charges. 

General Fund Balance “Creep,” And How it Demonstrates Central Services Cost Transfers: Actually, the District’s central services cost transfers represent more than that necessary to “plug” the difference between estimated revenues and deliberate overspending assigned by staff to the District’s General Fund. A LOT MORE! Let us explain.

The term “fund balance” means “the excess of assets over liabilities in a governmental fund.”⁶ Simply stated, fund balance is the excess moneys on deposit over payables at a given point in time. “At the end of the (2010-11) fiscal year(, the beginning of the 2011-12 fiscal year), the District’s General Fund balance remained unchanged at $615,774.”⁷ The following fiscal year the General Fund Balance (began its steady) increase…by $368,119.”⁸ “As of June 30, 2022 (the)…unassigned fund balance…in the General Fund (stood at)…$6,010,867.”⁹ This represents a $5,395,093 increase in ten (10) short years or an average increase of $539,509 per year for each and every one of those ten (10) years! Given ¶2.1 of Board Policy No. 7.1.0 instructs that “the policy of the District shall be to maintain a target fund balance within the General Fund equal to 15% of annual budgeted expenditures (less transfers and debt),” budgeted expenses less transfers and debt assigned to the General Fund “for the year ended June 30, 2022 (totaled) were $3,741,148⁸, 15% of this number totals $561,172, and you the reader can see that what staff has been doing is grossly in conflict with Policy No. 7.1.0. Please explain how this can happen when the District intentionally budgets to spend more in its General Fund than the revenues it budgets to receive? There’s only one answer. It can’t!

The District is systematically budgeting for central services cost transfers well in excess of those required to balance the General Fund budget. Just as we have alleged¹⁰, to build a “slush fund” to be spent on future unidentified, unbudgeted and unappropriated “pet” projects! In other words, the District’s central services cost transfers represent a vehicle primarily intended to raise revenues, just like a tax¹¹, and they are not what staff/the Board represent.

Moreover, Most if Not All of the District’s Other Departments Don’t Require The “So Called“ Services Furnished By The General Fund: Remember, according to the District it does not allocate all of its employee, equipment or other resource costs related to the purpose(s) of the enterprise fund(s) from which central services cost transfers are made¹². Rather, staff tell the public that “the District…limit(s) the allocation (of) allowable administrative overhead costs to Human Resources and Finance/Accounting expenditures (only)…based upon a formula that uses staffing [Full-Time Equivalent (‘FTE’) positions], payroll costs, and services and supplies expenditures.”¹³ So which departments, if any, require Human Resources and Finance/Accounting services assigned to the General Fund?

Alleged Central Services Cost Allocations to The District’s Utility Fund: Let’s look to the District’s Utility Fund for starters. Very few employees (not portions of employees, but employees) dedicated one-hundred percent (100%) to Utility Fund functions¹⁴), very little employee turnover (40.2 FTEs in FY 2022-23 and the same number of FTEs proposed for FY 2023-24¹⁵), their own dedicated administrative building, four (4) employees dedicated to their own administrative business office, and for 2023-24 a whopping $600,268 of proposed necessarily allocated central services costs¹⁶? We don’t think so.

Alleged Central Services Cost Allocations to The District’s Facilities Sub-Fund: Let’s look at the District’s Facilities Sub-Fund to answer the same question. Very few employees (9.3 FTEs in FY 2022-23 and the same number proposed for FY 2023-24¹⁷), and $115,599 of proposed necessarily allocated central services costs¹⁴? We don’t think so.

Alleged Central Services Cost Allocations to The District’s Parks Sub-Fund: Let’s look at the District’s Parks Sub-Fund. Very few employees (8.4 FTEs in FY 2022-23 and the same number proposed for FY 2023-24¹⁸), their own dedicated building (a portion of the Recreation Center), and $71,813 of proposed necessarily allocated central services costs¹⁴? We don’t think so.

Alleged Central Services Cost Allocations to The District’s Tennis Sub-Fund: Let’s look at the District’s Tennis Sub-Fund. Very few employees (2.2 FTEs in FY 2022-23 and the same number proposed for FY 2023-24¹⁹), their own dedicated “center,” and $19,619 of proposed necessarily allocated central services costs¹⁴? We don’t think so.

Alleged Central Services Cost Allocations to The District’s Other Recreation Sub-Fund: Finally, let’s look at the District’s Other Recreation Sub-Fund. Very few employees (3.8 FTEs in FY 2022-23 and the same number proposed for FY 2023-24²⁰), their own dedicated work space (a dedicated portion of the Recreation Center), and $22,108 of proposed necessarily allocated central services costs¹⁴? We don’t think so.

Alleged Central Services Cost Allocation Summary: Nearly $830,000 of administrative overhead costs allegedly for Human Resources and Finance/Accounting services only furnished for these few employees? Sorry. It doesn’t even pass the smell test. These amounts to plug the financial deficiency between revenues and expenses assigned to the District’s General Fund? It makes a whole lot of sense!

The Alleged Central Services Cost Allocation Charged to the District’s Other Departments is Unnecessary For Their Operation²¹: Once payroll for these very few employees assigned to these other departments is outsourced, as it should be, exactly what necessary central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers are necessary for the operation of those fund(s) from which an allocation has been made?

The Alleged Central Services Cost Allocation Charged to the District’s Other Departments is Not Ordinary For Their Operation²²: Once payroll for these very few employees assigned to these other departments is outsourced, as it should be, exactly what ordinary central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers are ordinary and necessary for the operation of those fund(s) from which an allocation has been made?

The Alleged Central Services Cost Allocation Charged to the District’s Other Departments Have Not Been Properly Assignable Nor Chargeable to Their Cost Objectives²³: Once payroll for these very few employees assigned to these other departments is outsourced, as it should be, exactly what properly assignable and chargeable central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers have been properly assignable or chargeable to the cost objective(s) of those fund(s) from which an allocation has been made?

The Alleged Central Services Cost Allocation Charged to the District’s Other Departments is Unreasonable Insofar as Market Prices For Comparable Services or Property is Concerned²⁴: Once payroll for these very few employees assigned to these other departments is outsourced, as it should be, exactly what reasonable insofar as market prices for comparable services or property is concerned central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers are reasonable insofar as market prices for comparable services or property are concerned?

For All of These Reasons, The Amounts Charged to the District’s Other Departments Are Not Prudent Under the Circumstances²⁵: Once payroll for these very few employees assigned to these other departments is outsourced, as it should be, exactly what prudent under the circumstances central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers are the product of prudence under the circumstances considering staff’s responsibilities to each pertinent governmental unit they have assessed, its employees, and the general public?

The Alleged Central Services Cost Allocation Charged to the District’s Other Departments Haa Not Been Determined in Accordance With Generally Accepted Accounting Principles²⁶: Once payroll for these very few employees is outsourced, as it should be, exactly what GAAP compliant central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers have been determined in accordance with GAAP?

The Alleged Central Services Cost Allocation Charged to the District’s Other Departments is Not Adequately Documented For Independent Verification²⁷:Once payroll for these very few employees is outsourced, as it should be, exactly what adequately documented central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers are adequately documented for independent verificiation?

For All of These Reasons The Amounts Charged to the District’s Other Departments Are Inconsistent With Sound Business Practices²⁸: Once payroll for these very few employees is outsourced, as it should be, exactly what consistent with sound business practice central Human Resources and Finance/Accounting services from the General Fund are being provided for the operation of these departments? And given the burden is upon the District, what evidence have IVGID staff affirmatively produced which demonstrates the District’s central services cost transfers are consistent with sound business practices?

Based Upon All of The Above Factors, The Simple Fact of The Matter Is That The Amounts Charged by The General Fund to the District’s Other Departments Do Not Result in an Equitable Distribution of General, Overhead, Administrative and Similar Costs²⁹: So much then for District staff’s representation that its allocated central services cost transfers represent an equitable distribution of IVGID’s general, overhead, administrative and similar costs.

If Not Payments For Legitimate Central Services Costs, Exactly What Kind of Monetary Exactments Do These Transfers Represent? Criminal! NRS 354.626(1) states that “any officer or employee of a local government who willfully violates NRS 354.470 to 354.626, inclusive, is guilty of a misdemeanor and upon conviction thereof ceases to hold his or her office or employment.”³⁰

Is it Any Wonder Then That in 2014 Staff Circumvented the Protections of NRS 354.613 by Bamboozling The Then Board Into Converting the District’s Community Services and Beach Funds From Enterprise Into Special Revenue? Evidence of this behavior represents consent by means of conduct that IVGID staff agree that the District’s central services cost transfers represent nothing more than another financial subsidy (just like the RFF/BFF) intended to “plug” the financial difference between estimated revenues and deliberate overspending assigned to its General Fund.

Faced with added scrutiny over the “so called” central services allegedly provided to the District’s funds other than its General Fund, and the disingenuous explanations like those recited elsewhere, starting in fiscal year 2014-15 staff chose to eliminate the inquiry altogether by convincing the Board to change the District’s Community Services and Beach Funds from Enterprise³¹ to Special Revenue³². The justification given for this change appears at Note 19, on page 46 of the District’s 2014-15 Comprehensive Annual Financial Report (“the 2014-15 CAFR“): “Effective July 1, 2015, with its new fiscal and budget year, the District began utilizing Special Revenue, Capital Projects and Debt Service governmental fund accounting for (its) Community Services…and…Beach Fund(s), which have to date been accounted for as enterprise funds. The District has changed its approach to the pricing of services and in particular recognizes that the use of the facility fee to provide (financial) resources for capital expenditure and debt service (allegedly) cannot be displayed in a readily understandable fashion for its constituents” in enterprise funds.

What you had here was nothing short of circumventing the protections created by NRS 354.613 so District staff no longer had to concern itself with the validity of transfers from its Utility, Community Services and Beach Funds. After all, if transfers to the District’s General Fund are made from a fund other than an enterprise one, how can they be prohibited or limited by NRS 354.613 which speaks to enterprise funds? They can’t! And to further demonstrate that the conversion of these funds from/to enterprise/special revenue represents circumvention, for fiscal year 2021-22 a new IVGID Board took charge and transitioned the District’s Community Services and Beach Fund(s) back to enterprise fund-types³³.

Conclusion: One can affix any label one wants to a subsidy. And one can come up with any formula one wants to which produces the end result one seeks. But at the end of the day a subsidy is still a subsidy. And that’s what we have here. Numbers don’t lie. but the liars who tell us what those numbers represent do³⁴. Based upon the above discussion the District’s alleged allocated central services costs are not what staff/the Board represent. Rather, they represent nothing more than that necessary to “plug” the difference between estimated revenues and deliberate overspending assigned to the District’s General Fund, and A LOT MORE! And now you know!

---

1. According to NRS 354.534, “General fund means the fund used to account for all financial resources except those required to be accounted for in another fund.” This can’t include utility rates, tolls and charges because the District’s Utility Fund accounts for all financial resources with respect to utilities. Nor rates, tolls and charges associated with recreation other than the beaches because the District’s Community Services Fund accounts for all financial resources with respect to recreation other than the beaches. Nor rates, tolls and charges associated with the beaches because the District’s Beach Fund accounts for all financial resources with respect to the beaches.
2. See NAC 354.8654 which describes this term as “the documentation of a local government that identifies, accumulates, allocates or develops billing rates for the allocation of the cost of services and property provided by the local government on a centralized basis to its departments, agencies and enterprise funds.”
3. See NAC 354.8668(5)(a) which mandates the District’s central services costs adhere to this requirement.
4. See Policy No. 18.1.0.
5. The District has adopted a water Ordinance No. 4. According to ¶14.01 of that ordinance, “no person shall construct, extend, or connect to any Public Water System without first obtaining a written permit from (the) District and paying all fees and connection charges and furnishing bonds as required.” And according to ¶9.06 of that ordinance, “all charges, fees and amounts due and payable shall be billed to the owner of the premises, whether or not the owner is also the occupant.” Similarly, the District has adopted a sewer Ordinance No. 2. According to ¶3.03 of that ordinance, “it shall be unlawful for any person to connect to, construct or install or provide, maintain or use any other means of wastewater disposal from any building in the District except by connection to (the District’s) public sewer.” And according to ¶14.05 of that ordinance, “all charges, fees and amounts due and payable shall be billed to the owner of the premises, whether or not the owner is also the occupant.” In other words, local parcel/dwelling unit owners are mandated to pay/guaranty the District’s water/sewer charges to their parcels/dwelling units whether or not the occupants.
6. See NRS 354.533.
7. See page 16 of the 2010-11 CAFR.
8. See page 13 of the 2011-12 CAFR.
9. See page 14 of the 2021-22 CAFR.
10. For 2010-11 the District made $933,274 of transfers from its Utility, Community Services and Beach Enterprise Funds to its General Fund under the guise of central services costs (see page 23 of the 2010-11 CAFR). For 2023-24, the Board has just approved a Central Services Allocated Cost Plan which calls for doubling ($1,956,300 to be exact) of central services cost transfers [see ¶III(1) at pages 503-504 of the packet of materials prepared by staff in anticipation of the Board’s May 25, 2023 meeting (“the 5/25/2023 Board packet“)].
11. See our discussion of What is a Tax?
12. NRS 354.613(1)(c) instructs that “the governing body of a local government may, on or after July 1, 2011, loan or transfer money from an enterprise fund, money collected from fees imposed for the purpose for which an enterprise fund was created, or any income or interest earned on money in an enterprise fund, only if the loan or transfer is made…for a cost allocation for employees, equipment or other resources related to the purpose of the enterprise fund.
13. See page 24 of the packet of materials prepared by staff in anticipation of the Board’s May 27, 2020 meeting (“the 5/27/20 Board packet“).
14. See pages 082-083 of the packet of materials prepared by staff in anticipation of the Board’s January 25, 2023 meeting (“the 1/25/2023 Board packet“).
15. See page 078 of the 1/25/2023 Board packet.
16. See page 076 of the 1/25/2023 Board packet.
17. See page 112 of the 1/25/2023 Board packet.
18. See page 145 of the 1/25/2023 Board packet.
19. See page 153 of the 1/25/2023 Board packet.
20. See page 138 of the 1/25/2023 Board packet.
21. See NAC 354.867(1)(a) which mandates central services cost transfers must be “necessary…for the proper and efficient administration and performance of the enterprise fund(s)” for which allocation has been made.
22. See NAC 354.867(2)(a) which mandates central services cost transfers be “of a type generally recognized as ordinary and necessary for the operation of th(os)e fund(s)” from which an allocation has been made.
23. See NAC 354.8668(5)(b) which mandates central services cost transfers be limited to costs for services and property that have been properly “assignable or chargeable to the cost objective(s) of th(os)e fund(s)” from which an allocation has been made.
24. See NAC 354.867(1)(a) which mandates central services cost transfers must be “reasonable for the proper and efficient administration and performance of the enterprise fund(s)” for which allocation has been made. Moreover, NAC 354.867(2)(c) mandates central services cost transfers be reasonable insofar as “market prices for comparable services or property” are concerned.
25. See NAC 354.867(2)(d) which mandates central services cost transfers be the product of “prudence under the circumstances considering (staff’s) responsibilities to each pertinent governmental unit (they have assessed)…its employees, and…the general public.”
26. See NAC 354.867(1)(c) which mandates that central services cost transfers be “determined in accordance with generally accepted accounting principles” (“GAAP”).
27. See NAC 354.867(1)(d) which mandates central services cost transfers be “adequately…documented…for independent verification.”
28. See NAC 354.867(2)(b) which mandates central services cost transfers be “consistent with sound business practices.”
29. See NAC 354.8668(5)(a) which mandates central services cost transfers result in “an equitable distribution of general, overhead, administrative and similar costs.”
30. Recall that the NRS which has been violated is NRS 354.613.
31. NRS 354.517 defines an enterprise fund as one: “established to account for operations: 1. Which are financed and conducted in a manner similar to the operations of private business enterprises, where the intent of the governing body is to have the expenses…of providing goods or services on a continuing basis to the general public, financed or recovered primarily through charges to the users; or, 2. For which the governing body has decided that a periodic determination of revenues earned, expenses incurred and net income is consistent with public policy and is appropriate for capital maintenance, management control, accountability or other purposes.”
32. NRS 354.270 defines Special Revenue Fund to mean one “used to account for specific revenue sources, other than sources for major capital projects, which are restricted by law to (the) expenditure for specified purposes.”
33. See page 38 of the packet of materials prepared by staff in anticipation of the Board’s May 26, 2021 meeting (“the 5/26/2021 Board packet“).
34. This saying is a deviation of the maxim attributed to Mark Twain nearly one hundred (100) years ago; i.e., that “figures don’t lie, but liars do figure” (see https://quoteinvestigator.com/2010/11/15/liars-figure/). According to Carroll D. Wright, a prominent statistician employed by the U.S. government at the time, who used the expression earlier on June 25, 1889 while addressing the Convention of Commissioners of Bureaus of Statistics of Labor, “it is our duty, as practical statisticians, to prevent the liar from figuring; in other words, to prevent him/her from perverting the truth, in the interest of some theory he wishes to establish.”