Carter County’s budget for the 2014-15 fiscal year has been approved by the state, but a letter from the Comptroller’s Office said the state has “detected deficiencies” within the budget that could lead to future financial problems.
During Monday’s meeting of the Carter County Commission, Mayor Leon Humphrey said he received the letter that same day. As directed in the letter, Humphrey provided a copy to each of the 24 commissioners and also read the letter into the official minutes of the meeting.
“We have reviewed the budget and have determined that projected revenues and other available funds are sufficient to meet anticipated expenditures,” Sandra Thompson, director of the Office of State and Local Finance, said in the letter. “Our review of the budget is based solely on the information we have received and is for determining that the budget appears to be balanced.”
Thompson continues, saying the letter constitutes approval by the Comptroller’s Office of the county’s budget, but she added, while the budget “meets basic statutory requirements,” the review detected deficiencies “that could possibly lead to financial problems in the future.”
The first of the deficiencies Thompson noted was the fund balance for the General Purpose School Fund.
“The County had a beginning fund balance of $3.162 million, and if it spends according to the budget, the remaining fund balance is projected to be virtually unchanged,” Thompson said. “The projected ending fund balance as of the end of fiscal year 2015, however, represents less than one month’s average expenditures of $3.230 million.”
Thompson also noted the same issue with the fund balance for the school federal projects fund.
“With regard to the fiscal year 2015 budget for the School Federal Projects Fund, the County plans to spend 100 percent of its expected revenue and projects the fund’s ending balance to remain unchanged at $19,091,” she said. “This amount represents less than one month’s average expenditures of $85,186.”
“At this level of spending, the County may not have the necessary working capital to sustain operations until federal grant money is received,” Thompson added. “State statutes require the County to maintain a balanced budget on a continuing basis and to only make expenditures if monies have been appropriated and cash is available.”
Thompson directed the Commission and the Carter County Board of Education to complete a “cash flow analysis” and send the results along with recommendations for working capital requirements to the Comptroller’s Office by Nov. 30.
After reading the letter, Humphrey asked County Finance Director Ingrid Deloach if she would like address the concerns Thompson brought up in the letter.
“In regards to the General Purpose School Fund’s fund balance, I have been very adamant in telling you this is an issue,” Deloach said, adding she was surprised the issue had not been addressed previously by the Comptroller’s Office. In recent years, Deloach said, that particular fund balance had dropped to approximately $224,000, far below the more than $3 million it is now at. She said the fund balance has been an issue for years and while county has been working to improve the fund’s stability more work is still needed.
Deloach also addressed Thompson’s concern regarding the school federal project fund, saying the letter contained a “misstatement.”
According to Deloach, the fund identified by Thompson as the school federal project fund is actually the school system’s Head Start Fund, which does receive federal funding.
That fund does not accrue a fund balance, Deloach said, because federal rules require that grant money be used in the grant year which it is received. “If we don’t use those funds we lose them,” she said.
Deloach said she will contact the Comptroller’s Office for clarification on what it is asking the county to do and she will work with the school system to comply with the requests of that office.