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HILLSVILLE — Carroll County had more money in its fund balance at the end of June 2007 than anyone expected — millions more, in fact, an auditor told the county supervisors at their June 23 meeting.
Corbin Stone of Robinson Farmer Cox appeared before the county officials to talk them through what the audit report on fiscal year 2006-07 meant. The period in the audit covered a time before the current board members took office.
The supervisors who started their terms on the board in January had been led to believe that the county faced significant financial difficulties because their predecessors had dipped into its pool of unallocated monies, also known as the “rainy day fund,” and took out about $1.3 million to balance the fiscal year 2007-08 budget.
As Chairman Sam Dickson noted after the meeting in a conversation with The Gazette, that led the county officials to believe that remaining money in the fund balance stood at around $2 million or $3 million.
So, supervisors were pleasantly surprised to learn that the balance at the end of June 2007 was actually more than $10.4 million, according to the audit.
At the beginning of the 2007-08 fiscal year, the fund balance had been $5.4 million.
“I asked [County Administrator Gary Larrowe] to get a representative here because for some of you guys this is the first time you've seen the actual audit,” Dickson said to his fellow supervisors at the meeting, inviting them to ask the auditor questions.
The general fund numbers show that county revenue from 2003 to 2007 grew faster than the expenses did, Stone explained. In 2003, those revenues were $21 million, but they grew to $31 million in 2007.
Expenses went from $21 million in 2003 to $26 million in 2007, he said.
So, overall revenues for last five years increased at a greater rate than expenses, Stone concluded. “Which is not what we’re seeing in most local governments in Virginia,” he noted. “We’re seeing a lot of them that are facing deficits. You guys have actually increased your fund balance over the last five years.”
By taking out a debt service payment of $670,000 in 2006 that wasn’t due until 2007, Carroll County was $4.3 million to the good, the auditor said.
“That was driven by several revenues that were higher than the prior year,” Stone said. “Real estate taxes were up $2.3 million higher, interest income was $222,000 higher; you had EMS charges [after] you took over the ambulance service, $340,000; you received payment from the city of Galax, you received two payments in one year... $275,000; and those were really the big drivers that brought your fund balance up.”
Stone pronounced Carroll’s fund balance a healthy one.
“Going into a weak economy, you’re in a position I think that a lot of localities would like to be,” he said.
Auditors recommend keeping 10 percent of the county general fund and schools budget as a reserve, which would run the government for five weeks, he said.
To make a comparison about where Carroll stands in Virginia on debt service, Stone included the Public Service Authority debt.
Information required by the state from the localities must include this kind of debt, so Stone said he had to figure that in for the comparisons to be accurate.
That said, Carroll’s total debt is $53 million. The auditor broke that down to per capita numbers — what’s owed per person in the county.
Carroll’s per capita debt comes in at $1,758, while the average is about $2,300 statewide, Stone said.
Because larger localities tend to carry more debt, he also compared Carroll’s debt to counties with similar populations, like Wythe and Pulaski. He found that Carroll’s peer group had per capita debt in the $1,800 to $1,900 range, so the county is right in line with that.
It looks to Stone like the fund balance trend will continue this year, but flatten out some.
When asked about the statement of net assets and the statement of activities in the audit, Stone said those are exhibits that can be ignored. The net assets include the value of all the county buildings and vehicles if they were sold today.
But that’s not really going to happen. “You’re not going to sell the courthouse,” the auditor said, for example.
It’s good planning to have money set aside for emergencies, County Administrator Gary Larrowe said.
From 2003 to 2007, the fund balance grew from $4.1 million to $10.4 million.
Dickson told The Gazette after the meeting that the audit report figures were a “very pleasant surprise.
“It was good to find out we had more than we thought,” he said.
That knowledge, had it come to the supervisors earlier, could have made a difference in the budgeting for fiscal year 2008-2009, which was approved Monday with a 6.5-cent real estate tax levy increase, Dickson said. “If we would have known in advance I’m sure there would have been something we could have done.”
But the supervisors had to set the budget by the end of June, so there wasn’t much time to make any big decisions, he said.
Dickson wanted to stress that the PSA debt is handled differently than other kinds of county debt.
The Public Service Authority debt comes from water and sewer construction projects, and the money that pays for those comes from fees paid by users of the water and sewer systems rather than the county taxes, he said.
Another purpose of the audit is to check the controls that the county has in place, Stone said. Ever since Arthur Anderson helped Enron fix their books, standards have gotten tougher.
The auditors did have three financial statement findings about Carroll’s processes.
• did not update its fixed asset listing for the 2006-2007 fiscal year, which may cause “errors and omissions” in the financial statements.
County officials responded that they would “complete an inventory of all capital assets and develop a listing of depreciable assets,” the audit noted.
County officials will also review assets to make sure they are adequately insured.
• did not include “all necessary adjustments” based on generally accepted accounting principles in the material provided for the audit, which could cause a “material misstatement” to occur.
• found the fixed asset listing for the school board contained errors.
In the future, the school board will provide “additional oversight” to make sure those lists are correct, the audit noted.
About the non-compliance matters the audit found, Dickson said county officials are already working on those. “Any non-compliance we want to fix and they will be fixed.”\