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Audit rips Franklin County budgeting

Manager replies that state mandates are the underlying culprit

October 11, 2013
By SHAUN KITTLE - Staff Writer (skittle@adirondackdailyenterprise.com) , Adirondack Daily Enterprise

MALONE - An audit conducted by the Office of the State Comptroller blasted Franklin County legislators for failing to balance the county's budget and for depleting the county's fund balance.

The audit reviewed the county's financial records for the 2009 through 2012 fiscal years. The resulting report, titled "Fiscal Stress," explains that a "county in good financial condition generally maintains adequate service levels during fiscal downturns and develops resources to meet future needs."

The audit repeatedly states that Franklin County legislators have failed to do those things and points to the county's fund balance, which has dropped from $16.5 million to $5.7 million - that's 65 percent - from the start of the 2009 fiscal year to the end of the 2012 fiscal year. It opines that the continuous, sharp decline in the fund balance indicates a "deteriorating financial condition" and predicts that the fund balance will continue to decrease through 2013 because the general fund budget is not balanced.

In his response to the audit, county Manager Thomas Leitz wrote that state mandates are the culprit behind the county's budgetary woes.

"While your findings related to our declines in fund balances are technically correct, these fund balances have been deliberately decreased to alleviate the burden on taxpayers caused by mandates beyond our control," Leitz wrote. "We have also seen recent declines in real property tax collections, and subsequent increases in delinquencies, which further justifies the use of fund balance."

Leitz wrote that the board has already moved to correct some of the budget problems.

"The board of legislators has established an audit findings committee and this audit will become a part of future agendas," Leitz wrote. "Following a review by the committee, we will begin the process of creating a corrective action plan for review by the full board of legislators."

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Pipeline payment

The audit found that the county incurred $1.4 million in unbudgeted expenditures during the first half of 2013, when it made payments to the Franklin County Industrial Development Agency to construct a natural gas pipeline through the northern portion of the county.

The Board of Legislators passed a resolution on April 21, 2011, authorizing the county to make the contribution. County officials had anticipated issuing debt for $1 million of the expenditures but were later informed they couldn't because the county doesn't own the infrastructure.

County officials stated that the cost would instead be funded with $1 million in surplus funds and $422,000 from the county's economic development reserve. The remaining $30,000 was transferred from the county's contingency appropriation and was included in the 2013 budget.

The audit expects those unbudgeted expenses to have "a significant impact on the general fund's condition at the end of 2013."

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Borrowing for bills

Earlier this year, the county also incurred a cash flow shortage and subsequently didn't have enough money to pay its bills and other obligations, so it issued a short-term debt in the form of a $4 million tax anticipation note on May 31. As a result, the general, county road and road machinery funds had a combined negative balance of $1.4 million.

The cash-flow shortage prevented the county from fully paying its nine school districts and six villages in April. The county owed $8.8 million to the schools and $859,766 to the villages but only disbursed $4.9 million to those entities.

The county finally disbursed the remaining $4.8 million in June, after it received the $4 million tax anticipation note.

The county is expected to pay interest charges totaling $25,600 on the tax anticipation note if it holds it until it matures on May 30, 2014.

According to the audit, "Had the county maintained healthier cash balances, it could have had sufficient resources to sustain operations and would not have needed to issue short-term debt. If the County does not take action to improve its cash-flow situation, its cash position will deteriorate further, resulting in continued cash-flow shortages and reliance on short-term debt to finance operations."

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Nursing home

The audit also found that $3.8 million in transfers from the general fund were used over the last four years to meet short-term obligations at the nursing home when its fees did not cover expenses. That money was not paid back at the end of each year, as required by state law.

The county also budgeted $600,000 less for the nursing home in its 2013 budget than in 2012, which Leitz said was because he expects the county's health care costs to go down.

The nursing home is expected to merge with Alice Hyde Medical Center in 2014, but the audit notes that the county will pay $1 million a year for 10 years to Alice Hyde to pay for its operation.

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Contact Shaun Kittle at 518-891-2600 ext. 25 or skittle@adirondackdailyenterprise.com.

 
 

 

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