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Audit Reports County Spending More than Revenues Recommends Council Replace Council Administrator

Article Date: 
16 September, 2011 (All day)


The county received a report on 2010 finances from their independent auditor.  The auditor reviewed the county’s revenue and expenditures and provided comment on controls and policies in the county government.  The provided comment on the status of the theft from Morgan County by the former council administrator, Garth Day.

“During the year, they County has been dealing with the discovery and prosecution of an embezzlement of funds by a former County employee. The County has been working to identify and recover the missing funds and pursue insurance claims for unrecovered amounts. While some matters are still pending, it is the opinion of management and legal counsel that losses, if any, will be minimal and have no long-term adverse financial consequences to the County,” reported the independent auditor in the analysis of the budget.   

He provided further insight on the need for a coordinating position in the county.  “The departments are not legal jurisdictions.  So there has got to be consistency in application and implementation of policy and procedures in Morgan County.  Payroll is …a substantial portion of your budget.  There are issues going all over the place with the payroll…There are issues that need to be addressed…You are not the united departments of Morgan County.” The auditor continued, saying, “There is too much fragmentation…as council members you are fragmented as well with different responsibilities it is difficult to coordinate. It all.  I definitely can see why the other council chose to go the route they did… It is something you need a solution for.”  He suggested that this is a problem that the council needs to address.  There were no recommendations on how the position should function, but there was a clear recommendation that the county needs a position to provide a coordinating function to bring consistency between departments.

The auditor also reported on the financial position of the county.  They said, “As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of Morgan County, assets exceed liabilities by $7,657,150. The largest portion of Morgan County’s net assets (40%) is in non-capital assets, which reflects the County’s financial stability. The capital assets (e.g., land, buildings, machinery and equipment, and infrastructure), less any related debt still outstanding used to acquire those assets, is used to provide services to citizens; consequently, these assets are not available for future spending. Although the County’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. With almost half of the County’s net assets capable of being liquidated to meet these obligations, the County has sufficient resources to more than meet its routine operational needs.”

The report on the county’s current spending vs. revenues was significantly less rosy, however.  Last year the net assets of the county reduced by 1.5 million.  They reported that the county’s general fund has “significantly gone down.”  In 2010 the county spent $265,000 more than revenues.  

The overspending was primarily due to revenue shortfalls.  In the past the county has collected between 95% and 98% of taxes.  In 2010 the collection rate fell to only 83% primarily due to the failure of several developers who then did not pay taxes.  Two of the significant outstanding portions have been paid this year, but collection rates remain an issue for the county.  The council budgeted to overspend the revenues in 2010 and has budgeted to overspend in 2011 as well by $114,000.  The amount overspent may be greater if collection rates remain low.  The council is also facing revenue shortfalls, overall, because the taxable value of property in the county was reduced in this year’s assessment as property values have fallen in the current market.

The new council now faces the task of examining the 2011 budget to determine the status of expenditures and the needs.  They will be doing this just in advance of the budgeting process for next year.  The concern of the council was reflected in their reluctance to consider the request by Member Kippen to add a full time supervisory position for the parks crew.  

The council will also be taking up the recommendation on how to proceed with the position of council administrator that they had previously decided not to fill.  While the county is in no immediate danger, fiscally, the current expenditures are not sustainable if the economy continues as it is.