Audit: County Fund Balance Grew By $1 Million - Brevard NC
Last updated 12/16/2013 at 8:54am
The first look at the financial audit for fiscal year 2013 found that lower than expected expenditures and higher than anticipated revenues led to an increase of around $1 million in Transylvania County government’s unassigned fund balance.
While no problems were found with the county’s finances for fiscal year 2013, according to the audit (see below) presented at last week’s board of commissioners meeting, Board Chairman Mike Hawkins reiterated his belief the board should draw down the amount of money the county holds in unassigned reserves.
During last week’s regular commission meeting, Hawkins described the increase in the unassigned fund balance as something that was both good and bad news.
“Every year we go through a budget process and really struggle during that process to try and estimate and predict what’s going to happen in the coming year,” Hawkins said. “So, it’s good news that things like sales tax came in higher than we anticipated.”
Hawkins said an unexpected increase in sales tax, careful spending by department heads and an increase in efficiencies all attributed to the increase. However, he said the increasing fund balance is counter to discussions held earlier this year by commissioners when they agreed that maintaining around 15 percent of the total budget in unassigned funds should be the goal. The state recommends counties maintain at least 8 percent of their total fund balance as unassigned.
According to the annual audit presented last week, the county currently has more than 30 percent of its total fund balance designated as unassigned, which equates to just more than $12 million in unassigned, available funds.
“This is not a criticism. It’s actually a compliment to staff and the work (they do),” Hawkins said. “It’s not just increased revenues, it’s also efficiencies that took place that we did not anticipate.”
Hawkins believes heading into the budget next year there are things that can be earmarked by the commissioners that will help reduce that level, but said it was important to remember that a decrease in unassigned fund balance was one of the commissioners’ stated goals.
On June 8, 2012, in the first of several budget workshop meetings held at the county library, County Manager Artie Wilson presented his recommended budget to commissioners, which projected total revenues of $39.1 million. Basing his projections on estimates from the N.C. Association of County Commissioners, Wilson told commissioners he expected a slight increase in sales tax revenues and a total increase of just $400,000 during the year. In the end, revenues for the year increased around $980,000, while expenditures increased around $750,000.
In 2012, Wilson recommended commissioners approve an increase of $1.8 million in expenditures that he projected would have led to a nearly $2 million budget deficit, but after much debate on the issue, commissioners opted to increase expenditures by just under $1 million.
Slashed in the budget process in June 2012 was $743,611 from the school system’s budget, $20,963 for an Animal Shelter attendant, $57,810 for a county planner, $19,500 in planning contract services, $15,236 for additional hours to employ a facilities superintendent, $50,000 in economic development reserves requested for economic visioning and $100,000 in proposed funding to explore a wellness initiative program for the county.
At the time of the budget process, Commissioner Larry Chapman repeatedly voiced his concerns about the projected deficit, saying the county was “spending significantly more that it is bringing in.”
In comments made during the final budget workshop session of 2012, Chapman said the county’s financial situation would likely necessitate a tax increase, but that the actions taken by commissioners to cut the budget deficit probably delayed how much the tax increase would be.
“I don’t think we’ll be able to avoid it unless we really take some drastic cuts,” he said in 2012.
But by March of 2013, Wilson said budget projections had taken a positive turn and were much higher than initially projected, saying county revenues were outpacing estimates by roughly $1.129 million, an increase of 5.4 percent over 2012.
During the fiscal year 2014 budget planning process, commissioners agreed to begin drawing down the unassigned fund balance to around 15 percent of their total fund balance.
The audit has been sent on to the Local Government Commission. The process could take around one month or more to be approved. Once approved, the audit will be made available to the public.
Wilson commended the county finance department, in particular Gay Poor and Abby Owen, for the work in preparing the audit. Erica Brown, audit manager at Martin Starnes and Associates, CPAs, echoed Wilson’s remarks.
Audit Highlights: The following are some of the highlights of the audit for the 2012/2013 financial year in Transylvania County government:
• Revenues increased 2.4 percent to $40,954,419, while expenses increased 1.9 percent to $40,029,351. Expenditures include transfers out to other funds. Revenues include transfers in, as well as capital lease obligations that were issued.
• The total fund balance grew around 4 percent in 2013, growing $925,068 since 2012 to $21,963,860 in 2013. Included in that amount are around $2.88 million of restricted funds set aside for state stabilization and just over $400,000 in other restricted funds.
• Sales tax revenues, which include Medicaid hold harmless payments, exceeded budget by around $470,000.
• Health insurance costs were around $444,000 less than originally estimated due to lower claims costs than anticipated.
• The county’s total unassigned fund balance totaled $12,302,809 in 2013. This amount is calculated by subtracting all non-spendable items, restricted receivables (stabilization by state statute), restricted funds, committed funds and assigned funds from the total fund balance.
As a percentage of expenditures in the general fund, the audit found the county’s unassigned fund balance as a percentage of expenditures of the general fund was 30.7 percent, an increase of 1.2 percent over fiscal year 2012.
• The top three revenue sources were ad valorem taxes (58 percent), local option sales tax (15 percent) and restricted intergovernmental revenues (16 percent). Other revenues totaled 11 percent.
• The total amount collected in property tax increased around $25,000 to $23,781,655 in 2013. The tax collection rate for 2013 was 99.68 percent. The state average is 97 percent.
• The total amount of sales tax collected increased around $300,000 (5 percent) over fiscal year 2012, which was attributed to local option sales taxes increasing.
• The top three expenditures from the general fund balance were education (34 percent), public safety (26 percent) and human services (21 percent). Other expenditures, including general government expenses, transportation, economic and physical development, cultural and recreational expenditures and general debt, totaled 19 percent.