LOST enigma untangling

Accounting practices questionable, other answers still sought

FAIRFIELD – The good news from Monday night’s County Council meeting is that, according to the accounting firm of Elliott Davis, LLC, hired by the County to review its accounting procedures in regard to its handling of Local Option Sales Tax (LOST) revenue, the Fairfield County government has not been accumulating millions of dollars of LOST revenue instead of giving it back as tax credits on property tax bills.
The bad news is that, for eight years, the County government apparently didn’t exactly keep track of all those millions of dollars of LOST revenue.
While accountants Tom McNeish and Brian D’Amico of Elliott Davis did not put it so plainly in explaining how the County handled the LOST funds, the pair concluded, before a packed house at the Fairfield High School auditorium, that the County had not used best practices in handling the funds, did not have ready records of how those funds were estimated and credited      and had no procedures in place to assure such. Going forward, the accountants suggested the County immediately establish and implement rules and procedures for how the LOST funds should be estimated, reported, credited and otherwise handled and accounted for.
The issue bubbled up early last Spring when county tax payer Maggie Holmes and her attorney Jonathan Goode, of the Goode Law Firm in Winnsboro, questioned the County’s handling of the LOST revenue. Fairfield County voters passed the LOST referendum in 2005, earmarking 100 percent of those revenues for property tax relief. According to S.C. Statute 4-10-10, a 1-cent sales tax revenue is to be returned to property owners each year in the form of a credit on their property tax bills. These tax credits are given based on the County’s estimate of how much LOST revenue it expects to receive each year. Since the tax credit is applied prior to the County receiving the LOST revenue, to prevent a shortfall, any revenue in excess of the estimate is held back to be credited the following year and by law cannot be accumulated from year to year.
A Freedom of Information Act (FOIA) request to then County Administrator Phil Hinely netted Holmes two pages of information last March, including one titled “Sales Revenue Received and Credit Billed 2006-2012” that detailed not only extremely low estimates of the LOST revenue from FY2007 through FY2013, but an accumulation of the excess revenue (resulting from the low estimates) from year to year in the amount of $5.4 million. It then listed an amount of $2.4 million budgeted as a credit for the 2013-14 fiscal year. That amount is also reflected as a millage reduction on the Council’s Resolution Establishing Millages for fiscal year 2013-14. The result would have amounted to a 21.37 sales tax credit next year.
On Aug. 2, at a special called Council meeting, the County’s outside consultants explained that the County was indeed crediting the LOST revenue to the tax payers, albeit in an unorthodox two-phase method – first as a millage reduction each May when the County adopted its resolution establishing millages for Fairfield County and, second, as a traditional credit on the property tax bill in the fall. They also conceded that the estimates of revenue were low, but they had not determined to what extent the County might be accumulating the monies year to year.
At Monday night’s meeting, McNeish and D’Amico said they had concluded their review of the County’s LOST revenue and distributed handouts that they said gave an accurate accounting of how the LOST revenue was remitted, estimated and credited each year. It bore little resemblance to the amounts in the document provided in Hinely’s FOIA response to Holmes last March. While Michael Kozlarek, an attorney with the Parker Poe consulting firm, had said at the Aug. 2 meeting that he was not aware that any of the LOST revenue remittances were less than the previous year during 2006 through 2013, the handout showed that, on two occasions, 2009 and 2010, the revenue remittances were lower than the previous year, and the County had to make up the difference which amounted to $76,312 in 2009 and $81,823 in 2010. The handout did not reflect the $2.4 million credit budgeted for 2013-14 in the Hinely FOIA document.
McNeish said the Council would, in fact, revisit the resolution it passed in May to establish the millage rate for Fairfield County for FY2013-14. It will vote on a new millage resolution that will no longer reflect a sales tax credit. Interim County Administrator Milton Pope said that while changes will be made in millage amounts, the numbers won’t change in this year’s budget.
The handout also reflected a carryover from 2013 in the amount of $805,660 that Pope said would be credited to the taxpayers next year.
Goode and Holmes said after the meeting that some of the mystery surrounding the LOST estimates and tax credits have been cleared, but other pieces of the puzzle still seem to be missing and that some of the numbers still don’t add up.
“I am frustrated by some of the numbers,” Goode said. “The sales tax credits listed in the handout don’t match the sales tax credits for the same years on the County’s Resolution Establishing the Millages. They should be the same numbers.”
Council’s next meeting is Oct. 14 at 6 p.m. A location has not yet been determined.

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