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Audit report shows low fund balance
by Jule Hubbard
Wilkes County government's unreserved fund balance was the lowest on record on June 30, but county officials said it should improve considerably when the state reimburses the county for airport expenditures.
An annual audit report presented to county commissioners Tuesday night showed the county's unreserved fund balance—the portion of the fund balance that can be legally appropriated in the next year's budget—was 5 percent of general fund expenditures on June 30.
Previously, Wilkes County's lowest unreserved fund balance was 6.8 percent on June 30, 2001.
It was 12.1 percent on June 30, 2008, when the average for counties with populations between 50,000 and 99,000 was 24.81 percent. Only nine counties had lower fund balances then. Wilkes has a population of nearly 70,000.
The N.C. Local Government Commission (LGC) recommends an unreserved fund balance of at least 8 percent, which is roughly enough to cover a county government's expenses for one month. The unreserved fund balance this past June 30 was $3.44 million, compared to $8.16 million on June 30, 2008.
Wilkes Finance Officer Jerry Shepherd said county government already received a letter of concern from the LGC about the 5 percent unreserved fund balance in the 2008-09 audit.
After the letter was sent, Shepherd, County Manager John Yates, Commission Chairman Zach Henderson and Attorney Tony Triplett met in Raleigh with Sharon Edmundson, director of the LGC's Fiscal Management Section, and Biff McGilvray, an LGC senior financial analyst at the request if state officials to explain how county government is addressing the low unreserved fund balance.
An LGC spokesman said an unreserved fund balance below 8 percent warrants increased monitoring from LGC, including the possibility of sending interim financial statements to the LGC.
Paula Hodges, director of auditing for Hickory-based Martin Starnes & Associates CPA, said Tuesday night in the verbal portion of her company's audit report that the $4.72 million decrease in the county's unreserved fund balance resulted from capital expenditures and decreased revenue.
"Capital purchases increased in anticipation of installment financing and grant reimbursements. I understand you have already gotten some grant reimbursements," said Ms. Hodges. "This is a snapshot in time. If you get more reimbursements, this (unreserved fund balance) should return to normal."
Commissioner Keith Elmore asked Ms. Hodges if the 5 percent fund balance might affect county government's ability to borrow money. Ms. Hodges said the impact would depend on particulars of the financing plans, including whether it was bond financing or borrowing directly from a bank and what the money was for.
According to the audit report, total general fund revenues dropped from $6,564,803 in fiscal 2007-08 to $65,397,945 in fiscal 2008-09 and total general fund expenditures increased from $68,015,046 to $68,494,343.
The report showed that sales tax revenue dropped from $15.8 million in fiscal 2007-08 to $13.2 million in fiscal 2008-09;
It showed property tax collections increased from $31.2 million in fiscal 2007-08 to $31.4 million in fiscal 2008-09. However, the county property tax collection rate in relation to the tax levied (excluding vehicles) decreased from 97.26 percent to 95.61 percent. The motor vehicle tax collection rate dropped from 90.33 percent to 81.23 percent.
With less garbage being dumped in the county landfill due to economic conditions, the landfill's net profit was only about $20,000 in fiscal 2008-09. For the same reason, said Yates, landfill operations are $72,000 in the red so far this year. Money to cover this loss will be drawn from the general fund if income doesn't increase.
Capital expenditures included work at the county airport to establish an air industrial park ("airpark") on property the county purchased for economic development.
County Manager John Yates said some of the reimbursements are already overdue, but that the county has written commitments from state officials and anticipate the funds will come before the current fiscal year ends on June 30, 2010.
These reimbursements include:
• $500,000 from the N.C. Department of Transportation's (DOT) Division of Aviation for extending the airport taxiway to the airpark;
• $500,000 from the DOT for extending an airport access road;
• $600,000 from DOT for moving dirt on the west side of the airport to establish sites for airplane T-hangers.
Yates said the county gets $150,000 annually from the federal government for maintenance and other work at the airport, but the allocations for 2008 and 2009 still haven't arrived.
County officials also have a verbal commitment for additional funds.
Yates said a $400,000 DOT reimbursement the county received in September for the cost of extending and rerouting Aviation Drive on the west side of the airport two years ago wasn't reflected on the audit report discussed Tuesday night.
He said state officials have promised to give the county additional reimbursements for work at the airport, but that these commitments weren't in writing.
County officials said their fear is that money promised to the county won't be sent to the county by this coming June 30, even if it has already been appropriated, due to state government's financial problems.
The capital expenditures in the fiscal year ending this past June 30 also included $1.5 million for blueprints developed by Knoxville, Tenn.-based Cope Associates Inc. for a law enforcement center and county jail with 298 jail beds.
Commissioners tabled these plans in April when they couldn't reach a majority consensus on moving ahead with borrowing up to $26.1 million for building the facility.
Earlier this month, they unanimously agreed to move forward with plans for building a 256-bed jail without a law enforcement center, using the blueprints that cost $1.5 million. Yates said these plans include borrowing money to pay off the $1.5 million.
County government also had to spend $400,000 more on employee health insurance than in the previous fiscal year.
The fiscal 2008-09 budget included $12.2 million for Wilkes public school operating costs, up from $11.6 million the prior year. The increased spending also includes $1.4 million in state lottery funds on the Wilkes schools, up from $900,000 the prior year.
It includes an additional $350,000 to Wilkes Community College for operating and capital expenses.
Wilkes schools and WCC were spared a 10 percent across the board spending cut after the fiscal 2008-09 budget was already approved.
They also were excluded from a 10 percent across-the-board cut after the 2009-2010 budget was approved. Those most recent cuts, officially approved in budget transfers Tuesday night, saved nearly $500,000.
The current budget also plans on the county getting even less in sales tax revenue and the same property tax collection rate as listed in the audit for fiscal 2008-09.
The value of the county's assets totaled $59.4 million in fiscal 2008-09, down from $66.2 million the previous year. Total liabilities, including long-term debt, decreased from $66.3 million to $61.2 million.
According to a news release issued Monday, Fitch Ratings has affirmed the 'A ' rating on Wilkes County's $14.1 million outstanding public improvements project certificates of participation (COPs) series 2000.
"The 'A' rating on the COPs reflects the county's satisfactory credit characteristics, solid legal provisions, the lien on essential government assets, and the fact that COPs are subject to annual appropriation. The rating incorporates a limited county economy concentrated in manufacturing, contributing to the below average wealth indicators and high unemployment rate. Fitch expects that reserve levels will remain solid and the debt burden low, given the county's conservative budgeting and willingness to defer capital projects to enhance financial flexibility. Sound tax base growth will be augmented if planned residential development is completed," the release stated. |
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