SNOW HILL — For the second year in a row, Greene County has received a warning from the Department of State Treasurer concerning its audit, but this year’s three-page letter is requiring “immediate” corrective action.
“The county has serious financial problems which the county’s governing board must address immediately,” the warning states.
The letter dated Dec. 12 and signed by Sharon Edmundson, director of the Fiscal Management Section, addresses a number of concerns, including the percentage of fund balance available to support operations was 6.32 percent on June 30. The available balance was $1.1 million — less than a month’s expenditures. Statewide, comparative-sized governments average nearly 28 percent.
“Fund balance declined primarily because the county significantly over-estimated its revenues in the 2012 budget,” the letter states. “Some of this amount was offset by a reduction in expenditures from what was appropriated, but not enough to prevent a significant depletion of fund balance by over $1.6 million. The county cannot afford to continue this practice.”
At the county’s Dec. 17 meeting, Snow Hill resident Tom O’Brien, in referring to commissioners’ remarks about not getting financial reports, said he had never been to a meeting where financial statements were not “part of the meeting.”
“We felt like for months, as a group, the shortfall was going to be serious,” he said.
The town of Snow Hill experienced a similar problem in 2010 when Edmundson came to a public meeting to address the budget concerns following the town’s audit report.
Snow Hill Commissioner Becki Scarborough said town commissioners hadn’t been receiving a monthly or quarterly report on the financial statements, either, prior to the visit.
“It’s very concerning,” Scarborough said. “I think it’s time to step back and be thoughtful and considerate of the decisions (county commissioners) are making.”
Scarborough said the town’s unrestricted funds are now at 76 percent, or about $840,000.
Another factor with the county’s financial state was the advancement of $661,925 from the general fund to other funds — some being the result of timing issues, while others stem from project or other long-term commitment cost overruns. Those that will not be repaid should be written off, the letter advises.
The collection rates were improperly budgeted for 97.44 percent for property tax and 87.85 percent for vehicle tax revenues. State law requires the budgeted property tax estimation cannot exceed the previous year’s collection rate.
For vehicle tax, the budgetary estimation for motor vehicles must be the collection rate for nine months of taxes levied through March and the 12 months of collection efforts.
The 2011 collection rate for property tax was 96.56 percent, and the estimated vehicle tax should have been budgeted as 86.01 percent.
Some utility and alternative water expenditures exceeded appropriations.
“The number of over-expenditures has significantly decreased from previous years;” the letter continues, “however, the county must continue to improve its pre-audit process.”
The N.C. Local Government Budget and Fiscal Control Act requires expenditures to be budgeted before the county obligates for the funds to be spent.
The finance officer and his or her sureties are legally liable for funds dispersed without those funds actually being included or amended in the budget, the letter states.
The county must amend the budget to correct these problems and develop a financial plan explaining how it will prevent a similar situation from occurring again.
The state is requesting a copy of the budget amendment and updated budget, most recent interim financial reports and the corrective action plan signed by each board member. The state is also requesting statements of actual revenues that may not be realized and an estimate of the savings to be generated by a proposed hiring freeze and travel restrictions.
The 2011 audit also generated a letter from the state dated Jan. 1, 2012. State staff worked with the county to correct the deficiencies and the county obtained approval by the Local Government Commission to incur multiple debts on the basis that the county was improving its methods and in compliance with the LBFC Act, according to the most recent letter.
The county’s 2011 audit was submitted Jan. 3, 2012, missing the Oct. 31, 2011 deadline. As was the case this year, the county didn’t budget for certain utility fund expenditures. Over-expenditures were also found in the jail project fund, and a budget wasn’t adopted for the April 2011 tornado fund.
“We are especially concerned that the auditor reported as a material weakness that USDA loan covenants and debt service reserve requirements were not being met;” the January letter states, “reconciliations of ledgers to underlying accounting records had not been done at year end; and the fixed asset spreadsheet had a significant number of errors and omissions.”
The reconciliation of ledgers to accounting records was a repeat finding from the previous year.
Margaret Fisher can be reached at 252-559-1082 or Margaret.Fisher@Kinston.com.
Breakout box:
The fund balance dropping below state requirement is the result of:
n Over-expenditures in the utility fund
n Over-estimation of revenues in the budget
n Advancements from the general fund to other funds
n Over-estimation of property and motor vehicle tax revenues
Source: Department of State Treasurer’s Office