Comptroller audit blames legislators - Press-Republican: Local News

Comptroller audit blames legislators

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Posted: Thursday, October 10, 2013 3:28 am

MALONE — A scathing state audit faults Franklin County for repeatedly adopting budgets that do not balance and using reserve funds to run the government.

County Manager and Budget Officer Thomas Leitz said in his response to the state that the findings “are technically correct,” but the county purposely spent down its reserves “to alleviate the burden on taxpayers caused by mandates beyond our control.”  

The State Comptroller’s Office conducted a review of the county’s financial records between Jan. 1, 2009, and June 30, 2013, and repeated an opinion it offered in June that Franklin County is in significant fiscal stress — meaning it does not bring in enough money to meet expenses.

“The legislature routinely relied on appropriating significant amounts of fund balance and reserves to finance operation … as a result, the general fund realized annual operating deficits, a declining fund balance and a declining cash balance over the last four fiscal years,” the report states.


The funds were so low that the county took out a short-term, $4 million tax-anticipation note to pay its bills, the report states.

“The county’s financial condition will likely decline further during 2013 because the general fund balance is not structurally balanced,” the June audit states, in part because the county had $1,452,000 in expenses in the first six months of the year that it didn’t account for in the adopted budget.

The report also found the county should have at least a month or two months’ worth of cash available to pay its bills, meet payroll and any other required payments.

Also, the county’s fund balance went from $16.5 million in 2009 to $5.7 million in 2012.

The situation was made worse during that time when the county was not paid the $3.5 million in slot-machine profits from the Akwesasne Mohawk Casino that it had expected to receive in 2011 and 2012.

Half of the expected funds were received in July 2013, and the county is including continuing revenue from the casino in its 2014 budget.


The state audit also pointed out that the line item for health-insurance costs was almost $600,000 less for the 2013 budget compared to 2012 and questioned the reasonableness of the move.

Leitz had explained that the county’s health-care costs were projected to go down by $1 million, so he conservatively budgeted less.

The report also found that $3.8 million in transfers from the general fund were used to meet short-term obligations at the County Nursing Home when its fees did not cover the expenses, as expected, the past four years.

The borrowed or advanced money was not paid back by the end of each year, as state law requires, which caused more concern about the health of the general fund, the report states.

County officials told the auditors they were aware the fund was continually short and decided to merge the County Nursing Home with Alice Hyde Medical Center’s to create a joint facility that is expected to open at the end of 2014.

But the audit states that even though the county will pay $1 million a year for 10 years to Alice Hyde for the operation, there will still be expenses after the merger takes place, such as paying for unused vacation and sick time for Nursing Home employees and ongoing utility costs.


The 2013 budget did not contain any money for raises, even though the collective-bargaining agreement with the Sheriff’s Department expired Jan. 1.

The audit said the county had not budgeted for the $1.452 million in 2013 it was expected to pay Enbridge-St. Lawrence Gas for construction of a natural-gas transmission line through the northern part of the county, even though a resolution to that effect was adopted in April 2011.

The county was going to borrow the money but couldn’t since it doesn’t own the pipeline. Instead, it used $1 million in surplus funds, $422,000 from an economic-development reserve fund and $30,000 from 2013 contingency funds.

The audit said those unbudgeted expenses “will have a significant impact on the general fund’s financial condition at the end of 2013.”


The state also found fault with the county’s lack of long-term plans for its finances and priorities.

If such plans were in place, legislators could have made better decisions, “which may have prevented the county’s declining fiscal health,” the audit said.

If a plan isn’t developed, it could mean “further depletion of the county’s fund balance, continued cash-flow shortage and a reliance on short-term debt and undesirable constraints on the county’s financial flexibility in future years.”

Leitz told the Press-Republican that some of the recommendations are already being addressed, such as formation of an Auditing Committee to look at shortcomings indicated by the current and previous audits performed by the county’s independent auditor.

And he said he tracks information for a five-year forecast of expenses that is used as part of budget development.

But, at the same time, “the local economy is not thriving, and every dollar added to residents’ taxes results in a long-term negative impact,” Leitz said.


Finding an alternative revenue source to property taxes to fund the government is a priority, “and a number of legislators believe the bed tax will produce an increase in sales tax,” he said.

Franklin County was not successful this year when to sought permission from the State Legislature to create a 5 percent occupancy tax on all overnight guests. The plan had been for the money collected from the fees to go specifically toward tourism so property-tax dollars that now pay for such activities can be directed elsewhere.

Legislators have said they intend to reintroduce a resolution for creation of an occupancy tax when a new State Legislature convenes in January.

Email Denise A.