The Aiken County “Comprehensive Annual Financial Report” for the year ending June 30, 2015, demonstrated improvements over last year’s report.
Recall that last year’s Aiken County “Financial and Compliance Report” for the year ending June 30, 2014, found serious material weaknesses in the County’s internal control processes.
“Certain balance sheet accounts were not reconciled, including the reconciliation of bank accounts to the general ledger, during the year on a timely basis,” reported the auditors from the firm Cherry Bekaert.
Additionally, they noted: “These deficiencies resulted from ineffective policies and procedures over financial reporting in accordance with generally accepted accounting principles.”
In this year’s audit, however, the auditors concluded that this finding was corrected.
This is good news. Public confidence in the County’s financial management is critical, and this turnaround followed the hiring of Lynn Strom as Aiken County’s finance director.
There also was a major turnaround in the General Fund balance. It shrank last year to $3.8 million following unanticipated cleanup costs in the wake of the February 2014 ice storm.
In 2015, however, the General Fund balance rose by $22.5 million to $26.3 million. This resulted from the receipt of federal reimbursements for the ice storm cleanup. The General Fund balance is approaching 2013’s $29.2 million end of year balance.
This fund balance is important because it serves as the County’s “rainy day” – or “icy day” – fund.
The continued work-off of the County’s outstanding general obligation bonds is another positive sign. In 2012, this debt stood at $41.7 million (or $275 per capita) following a $28.6 million bond issue for the new administrative complex.
This outstanding debt dropped from $38.6 million ($248 per capita) in 2014 to $37.1 million ($229 per capita) in 2015. The 2015 reduction included the liquidation of debt issued for the hydrogen laboratory at the Savannah River Research Campus and the USC Aiken Convocation Center.
Because of this reduction, the County’s debt margin grew in 2015 to $22.6 million compared to $12.6 million in 2012. The debt margin is the difference between outstanding debt and the statutory debt limit based on 8 percent of the assessed value of property within the County. It measures the amount of general obligation debt the County can legally issue.
On the down side, the County’s net position took a nearly $60 million hit due to a change in government accounting standards. This change requires the County to record on its books its share of the state retirement system’s net pension liabilities for County employees. Its impact, at least on paper, was enormous.
The timing of this year’s audit report also improved. The report for the 2014 fiscal year was issued almost at the end of fiscal year 2015, which was too late for County Council to take corrective action during the budget cycle. These delays were caused by the confused state of the County’s financial data prior to Strom’s hiring.
The audit report for 2015, however, came out last month. If Council takes the time to thoroughly review and understand the data, they could utilize it in their upcoming fiscal year 2016-2017 budget deliberations.
Finally, the audit report returned to the “Comprehensive Annual Financial Report” or “CAFR” format, versus last year’s slimmer “Financial and Compliance Report” format.
What’s the difference? Primarily, a CAFR contains additional statistical detail and features a 10-year comparison of data.
This data includes changes in net position and fund balances, assessed property valuations, millage rates, principal property tax payers, outstanding bonded debt and associated debt ratios, changes in the debt margin and demographic and economic statistics for the County.
The CAFR gives both County Council and the public a plethora of information regarding the County’s financial health.
This year’s CAFR, though hardly an entertaining or quick read, contains grounds for optimism regarding County finances. Yet fiscal storm clouds loom before Council.
Will Council issue the proposed $9 million in bonds to upgrade the Langley Dam? Doing so will erase recent progress in retiring outstanding debt. If pursued, Council must convince the public this project is worth the fiscal pain.
And how will Council balance next year’s budget? This year’s budget used one-time revenue to bridge the gap between revenues and expenditures. This revenue won’t be available next year. Balancing the budget while avoiding a millage rate hike will be tricky.
Remember, an audit only captures a snapshot in time, and past performance is no guarantee of future results.
The Aiken County CAFR is available at www.aikencountysc.gov/financial_reporting.php.
Gary Bunker is a former member of Aiken County Council.