FONDA – A state audit places the blame for Montgomery County’s financial problems on poor budgeting and mismanagement.
The state comptroller’s audit, which covered Jan. 1, 2010, to May 31, 2013, criticizes the county Board of Supervisors’ financial practices, including the way the board uses the fund balance.
“The county’s declining financial condition is the result of poor budgeting and financial management practices and the [Board of Supervisors’] failure to develop and use long-term financial plans,” the audit said.
According to the audit, the board did not adopt realistic and structurally balanced budgets. Instead, the audit said, the board consistently relied on appropriating fund balance, a non-recurring revenue, to pay for recurring expenditures.
In two of the last three years, the audit said, the county has faced operating deficits.
“As a result, the financial condition of the general fund has diminished in recent years,” the audit said.
As of the end of 2012, Montgomery County reported a fund balance of $11.4 million in the general fund. Compared to Jan. 1, 2010’s total of $19.2 million, there was a drop of 41 percent, or $7.8 million.
“We also found that the county’s cash on hand declined from twice its average monthly expenditures in 2010 to about $324,000 less than the average monthly expenditures in 2012, and the county’s contingency appro-
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priation is not adequate for current financial conditions,” the audit said.
The audit’s recommendations to the board include:
Establish written policies and procedures governing the budgeting process, including the development of structurally balanced budgets, and define reasonable amounts of unexpended surplus funds the county should maintain.
Develop a multiyear financial plan to establish goals for funding long-term needs and reduce reliance on the appropriations of fund balance.
Closely monitor the county’s use of surplus funds and identify other funding sources.
Investigate taxes received to ensure only collectable amounts are reported, and make adjustments to account for uncollectable taxes.
Develop and adopt budgets that include realistic estimates for revenues and expenditures, along with appropriating fund balance only in amounts that are available and necessary.
Monitor cash flow and use that information as a part of the budget process.
Evaluate the county’s contingency accounts to ensure they are sufficient for unexpected events.
Michael Chiara, Amsterdam 5th Ward supervisor and member of the county board’s Finance Committee, said the state has its own methods on how to budget.
He said there is a difference of opinion about how to use the fund balance. He said portions of it should be used to reduce the tax burden.
The board, in a written response to the audit, said it would pursue establishing written policies and procedures. The board said it would adjust the resolution the county has for fund balance accordingly.
“If these are not completed by the end of the year, the county executive will be advised as to what the state is recommending,” the county said in its written response.
The county will have a new form of government next year, with a county executive and a county legislature. The new government will develop a multi-year financial plan, according to the county board’s response to the state.
The board also said in its response it will make “difficult decisions in some form of budgetary cuts if we continue to rely on fund balance for county operations. We will continue to pursue other funding sources, but our options are very limited.”
The board said it would try to reconcile with the city of Amsterdam to determine if taxes receivable on the county books are collectable. Also, the board says it will try to adopt budgets that include revenues and expenditures that are reasonably estimated, and the treasurer will develop a monthly cash-flow report that can be reviewed and understood by the county board.