David Enzastiga, CPA, Rish and Enzastiga – Financial Audit FY 16/17
Mr. Enzastiga is expected to issue an “unqualified” opinion on the county’s financial statements for the FY 16-17 fiscal year. In this context, unqualified means without reservation, as opposed to not qualifying, and is the best opinion the external auditors can give. Highlights of the audit are as follows:
· Unreserved/Unassigned Fund Balance (p.22, Balance Sheet) stands at $11.8 million, or 5.9 months’ operating expenses. Significantly, this takes into account the county’s $3.25 million grant to Samsung, which appears on the balance sheet as “Assigned for econ development.” It also takes into account a $375,000 expense to purchase additional property to benefit that project. It is generally recommended that local government cash reserves be between three and six months’ operating expenses.
· General Obligation Debt (p.37, Notes to Financial Statements) stands at $2.4 million, while the county’s ability to borrow without referendum is $10.8 million. This means that the county is utilizing only about 22% of its indebtedness capacity.
· Estimation of the Tax Levy’s Ability to Produce (p.25, Budget and Actual) remains extremely accurate. The revenue budget estimate of $16,075,706 was within $71,848 of actual collections, which came in at $16,147,554. That’s a difference of less than one-half of one percent. Knowing the carrying capacity of the tax base is essential to good budgeting.
· “Tax Breaks” for Industries (p.50, Notes to Financial Statements) appear in the financial statements for the first time, pursuant to a new accounting rule, GASB 77. For the subject fiscal year, this amount was calculated at approximately $1.9 million. This calculation uses full taxation potential – 10.5% assessment ratio, no FILOT, no special source revenue credits – as the baseline. In reality, however, the county would never secure significant investment under these terms. Competition from other jursidictions and the inherently higher tax rates in smaller counties would make significant new investment virtually unavailable to Newberry County and counties like it, absent the statutory incentives available at council’s discretion.
· The cost of post-retirement health care benefits (p. 52, Net OPEB Obligations) was over $100,0000. Actuarial studies show this number doubling over the next five years, tripling over the next 10 years. Administration recommends consideration of diminishing or perhaps even eliminating this benefit in the near future.