While fiscal issues remain, Luzerne County government’s new 2021 audit shows solid progress, officials said.
Focusing on the general fund operating budget, the county brought in $940,000 more than planned on the revenue side and spent $3.1 million less than anticipated, according to a county council briefing last week.
With other calculations factored in, the net result was a $4.8 million surplus.
“That tells us that overall, the county was fiscally responsible in 2021,” said Adam Hartzel, a certified public accountant and senior manager at Bakertilly, which completed the audit.
Accurate budgeting was particularly challenging in 2021 because COVID-19 still impacted county operations, Hartzel said.
C. David Pedri had served as manager through the first half of 2021, and Romilda Crocamo became acting manager on July 7 last year following Pedri’s resignation. Brian Swetz is the county’s budget/finance division head.
Randy Robertson, who started work as county manager June 13, told council members after the presentation the level of accuracy in the $137.7 million 2021 budget was “extraordinary” considering the uncertainty when it was approved at the end of 2020. He later joked that Swetz has a “good crystal ball and tea leaves.”
Swetz said he prefers conservative budgets with the potential for surpluses instead of unrealistic and overly ambitious estimates. He also has noted much of the savings stemmed from a high number of budgeted staff positions that were not filled, which helped the county come out ahead but also contributes to staff burnout and higher overtime expenses.
Running total
Last year’s surplus boosted the county’s fund balance reserve from $19.6 million to $24.4 million at the end of 2021, Hartzel reported.
Councilman Tim McGinley said that figure is impressive compared to the $16.9 million deficit the county had wrestled with at the end of 2014, or the third year of the home rule government structure.
Council and the administration worked to implement sound budgets and directed one-time windfalls toward deficit reduction and then growing a reserve that provides a cushion in emergencies and helps the county achieve better interest rates, he said.
“It was a combination of department heads working hard to keep the budget in line and council making tough decisions,” McGinley said.
Hartzel said the fund balance is a indicator of an organization’s health.
The Government Finance Officers Association (GFOA) recommends an unrestricted fund balance totaling approximately two months of a typical operating budget, which would be approximately $23.3 million for the county, he said.
Council voted last week to introduce an ordinance that would transfer $2 million from the reserve into the county capital projects fund because it has dwindled to $276,206. The ordinance would require a public hearing and majority vote at a future meeting to take effect.
Big picture
Expanding the view beyond the annual general fund, the county as a whole had $356.6 million in assets and $378 million in liabilities in the snapshot reading on Dec. 31, the audit said.
Those assets include buildings, equipment, roads and other infrastructure and receivables, Hartzel said.
Liabilities owed to others include debt repayments and an unfunded pension liability, he said.
With other considerations tallied, the net result is on overall deficit position of about $49 million, Hartzel said.
Through 2030, the county must pay $223.8 million in debt, he said.
The employee pension plan has a net pension shortfall of $63.4 million that must be closed over time using employee and county contributions and investment earnings, the audit said.
Hartzel noted the county’s pension plan is approximately 83% funded and said 65% is a benchmark for a distressed plan.
“So you’re in good shape from a funding standpoint,” he said. “You’re well above that threshold.”
Findings
Auditors identified three material weaknesses.
The first relates to segregation of duties, or the need for different workers to be involved in some aspects of the accounting process as a check and balance. This finding has been in county audits for many years, with officials blaming limited staffing.
Another finding involved account reconciliation and audit adjustments in some accounts, and the third dealt with some agency accounts not processed through the county’s centralized financial accounting system.
Hartzel said the county has shown “steady improvement” in its procedures because it had more audit findings in the past.
He congratulated the county for obtaining an “unmodified opinion” in the audit, which is the highest level of assurance in presenting financial statements.
McGinley said the findings are small compared to past ones but urged the administration to strive to eliminate them.
Robertson said the audit provides a confidence level that the county is “moving in the right direction” and said the administration wants to “continue advancing” its fiscal position.
Councilman Brian Thornton said a “very bright silver lining” has been the county’s success paying off debt, with the county owing $465 million at the start of home rule in 2012. Thornton credited council members involved in those efforts and the home rule form of government.