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Draft audit mistake

MERRY HILL – Thanks to the quick eye – and quicker thinking – of Bertie County Manager Scott Sauer, and another county official, at the draft presentation of the county’s 2017 audit, Bertie County’s available fund balance, unassigned fund balance and restricted fund balance for the county’s General Fund are in better shape than first noted.

The draft audit for the fiscal year 2017 was presented to the Bertie County Commissioners at their Feb. 5 meeting in Windsor by the county’s auditor, Jeff Best, CPA, of Belhaven.

“As I followed along in my draft during his presentation, making my highlights, I realized when the auditor was giving his report that some of the numbers weren’t the same,” Sauer reported in the second Commissioner’s meeting in Merry Hill Feb. 19.

Sauer said the first discrepancy he spotted was in the unassigned fund balance for the county’s General Fund.

“The draft audit submitted to and approved by the County Finance Officer (William Robertson) and myself, and sent to the State Treasurer’s office in Raleigh had reported an unassigned fund balance of $2.8 million at 11.1 percent,” Sauer noted. “When the auditor presented his documents the numbers had changed by a half-million dollars, about $533,000 to be exact.”

The County Manager said, naturally, that raised eyebrows from all five Commissioners, and questions, of course, were raised on what accounted for the difference.

Sauer and Roberson then met privately with Best the following day (Feb. 6), and after hearing the auditor’s explanation. The discrepancy, the county officials discovered, was due to the timing of the receipt of state lottery funds which occurred in July of 2017. While that was after the report had been submitted to Raleigh, an adjustment of $532,221 was made by the auditor in his draft report, decreasing the unassigned fund balance and increasing the restricted fund balance by said amount.

“But the decision to change the audit was not taken into account,” Sauer explained.

At the Feb. 12-13 Commissioners’ Planning Session, the County Manager said he felt duty-bound to explain the error to the public so that it could be part of the official record.

“Of that $533,000 that got moved from our unassigned fund balance to our restricted fund balance was the N.C. Education Lottery Funds amount that Bertie County received from the state,” he acknowledged. “Last year that amount was $495,000. That money is dedicated and restricted by the Commissioners to pay the debt to finance the new Bertie High School.”

Sauer went on to explain that because the money was paid out in mid-July, coming in after the close of the fiscal year, the auditors had determined late in the process that those funds could not be reflected in the county’s unassigned fund balance; but rather was adjusted to the restricted fund balance.

“Of course two weeks later (July 15) that money was received,” he said, “and it was placed in the unassigned fund balance.”

The follow-up meeting helped clear up some of the confusion and inconsistencies regarding the 2017 audit.  Best apologized for the oversight, explaining, but not excusing, delays experienced due to the corporate transition of his office this past fall from the Carter, Riggs, and Ingram group accounting firm to a single operation now headed by Best.

In response to new questions from the Commissioners at the planning session, Roberson confirmed that the county’s available fund balance is indeed 18.61 percent as compared to the NC Local Government Commission standard of 8 percent, and Bertie County’s own financial policy of 10 percent. Roberson further explained that had the receipt of the lottery funds occurred prior to the close of the fiscal year (June 30, 2017), then the county’s available fund balance would have been 20 percent.

Commissioner John Trent asked during the planning session if Sauer and Roberson still had faith in the auditors, and both stated they did; re-affirming their confidence in the auditor’s adjustments to the financial statements submitted to the NC Local Government Commission.

Roberson says he has reviewed the 2017-18 fiscal year mid-year financial report of revenue and expenditures for the General Fund and also reviewed the draft schedule for development of the 2018-19 budget plan which will begin March 1 when the county’s department heads meet.

Part of the process will also be a public hearing on the upcoming proposed budget to be held June 11 at 7 p.m., when public comments will be taken.

Sauer said a copy of the 2017 audit, and those audits of the past eight years, are available at the county’s website for any citizens to review.

“We believe the adjustment by the auditor was correct and warranted,” Sauer stated, “but the timing of the adjustment and lack of communication with staff put us in an extremely awkward position.”

Following the planning session, the Commissioners requested of the County Manager an RFP (requests for proposals) for possible alternate auditing services for the upcoming audit cycle, and that it begin immediately.

“We’re looking at the responsibility of those who would be serving this Board, and the citizens of this county, so that everyone can have confidence in the amount of money that’s in the county’s treasury, the tax dollars that belong to Bertie County,” Sauer concluded.

“That was a good explanation,” Trent complimented. “As we said at the last meeting, there should be nothing that we shouldn’t know about in anything you’ve stated.  But this does warrant turning around and taking a good look at what we should do in the future, and this Board has to act on that.”