Audit reveals good news

Published 10:35 am Wednesday, December 28, 2011

GATESVILLE – Despite a national economy slow to recover from the financial crisis of three years ago, Gates County local government has appeared to have weathered the storm.

That’s the opinion of  J.P. Jones of Martin Starnes & Associates who just recently presented excerpts from the audited financial statements of the county for the year ending June 30, 2011.

Jones said the audit yielded an “unqualified opinion” – which in the world of finance means “the best you can get.”

“It’s considered an A-plus,” Jones said of the audit as presented Dec. 7 during a scheduled meeting of the Gates County Board of Commissioners. “Anything short of an unqualified opinion is considered unacceptable by the Local Government Commission.”

Jones went the numbers inside the numbers of Gates County’s annual audit, highlighted by the fact that the county’s assets exceeded its liabilities by $5,491,622. That marked an increase of $924,872 over the 2009-10 fiscal year.

In his report Jones said the county’s General Fund revenue is up and so are expenses. He said the hike in revenue was tied to an increase in the amount of local option sales tax received by the county from the state. He added that DSS revenue also increased.

The county’s total governmental funds reported a combined ending fund balance of $3.86 million. That marked an increase of $559,273 from 2010. The fund balance for the General Fund is $3.4 million, an increase of $425,280 over the previous fiscal year. The county’s available Fund Balance stood at $2.6 million. The percentage of fund balance vs. the overall budget is 26 percent (state statutes require a minimum percentage of eight percent).

The county, still with a 64-cent tax rate that was initially lowered in 2009, operates with a total budget of a shade over $13 million, of which $10.59 million is related to the General Fund.

To operate the county’s services to its citizens, Gates builds the majority of its budget based on 56 percent of the total funds coming from property taxes, 23 percent from restricted intergovernmental funds and 16 percent from local option sales tax. Jones noted in his audit report that the county commissioners were firm in their quest to expand the tax base from a commercial standpoint rather than balancing the budget on the backs of the taxpayers.

“The Merchants Commerce Center has come into greater focus than ever before,” Jones reported in the audit. “There are significant projects that will begin during the 2011-12 fiscal year that will continue the commissioners’ quest to expand the width of the tax base and not simply increase the tax rate.”

The audit report also stated that “Gates County finds itself in fiscal year 2011-12 in better financial condition than most of its neighboring counties and a significant number of counties across the state. While counties in the region are considering such drastic actions as reductions in force, raising property taxes by up to eight cents and going into their general fund balance to finance operating expenses for the second year in a row, Gates County has experienced none of these issues.”

Jones noted the county’s top three expenditures were education (26%), human services (19%) and public safety (15%).

“While other counties were cutting education spending, Gates County actually gave a slight increase,” Jones said. “You also spent a bit more for human services, with that tied to DSS having to account for taking over Child Care operations based on state cuts.”

As far as the Enterprise Fund, Jones said the cash on hand as of June 30 was $1.8 million while unrestricted net assets were $1.9 million. Charges for services and debt service were fairly consistent from one year to the next.

Jones offered advice for Gates County’s leadership team as they prepare for 2012 and beyond.

“Your state tax revenues are not enough to fully embrace the federal stimulus funds that expired in June,” Jones said. “You’ve already seen what’s been cut. Keep in mind they are dealing with a lot of cuts at their level that will trickle down and may affect you. Federal Healthcare Reform will make harder for states to control costs. That will be something that will impact you in the future.”

Commissioner John Hora asked Jones was it a wise move on the county’s behalf to borrow $1.5 million (at a 1.77% interest rate) to build a new library considering the financial strength of its fund balance.

“Would it not be a wiser use of cash in this marketplace to pay down our debt,” Hora inquired.

“It’s a tough decision and there are a couple of ways to look at that,” Jones replied. “One, yes you are paying down something that you have a higher rate on. However, there was a unit we audited in the current year that because of Hurricane Irene took a $4 million hit in fund balance. If they would have used all of their cash to pay down their debt they would not have had the cash to operate on for the short term. Also when you issue debt, yourself and I as individuals can go borrow at anytime we wish. The county can only borrow when they have a capital adventure. If you don’t issue debt, you can’t go back later and issue debt. You have to do it at the time you decide to move forward with a capital project. If you are going to issue debt, I would say to think about issuing it first with anticipation that you’ll pay if off early.”

“What about refinancing your current debt,” Hora asked.

“You can do that at any time,” Jones answered.

Jones said Gates County’s finances are consistent from one audit year to another.

“Your staff are very knowledgeable and stays on top of everything that goes on in the county,” he noted. “That fact allows you to make the decisions you need to make as a board.”

“We need to thank (Gates County Finance Officer) Sandy (Pittman) and her department for the job they do,” Board Chairman Graham Twine said.

About Cal Bryant

Cal Bryant, a 40-year veteran of the newspaper industry, serves as the Editor at Roanoke-Chowan Publications, publishers of the Roanoke-Chowan News-Herald, Gates County Index, and Front Porch Living magazine.

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