Minor Findings, Unfunded Mandates in County Audit

WINNSBORO (Jan. 15, 2016) – Although the Elliot Davis auditing firm noted two findings in its 2015 audit of Fairfield County, the firm reported to County Council Monday night that they had issued an “unmodified opinion” of the County’s financial statements.

“Based on our audit procedures, we in our opinion believe that your financial statements are materially correct,” Brian D’Amico told Council Monday. “As we performed our audit tests, we didn’t find any material misstatements as part of our audit work.”

The County’s bottom line, however, did diminish from 2014 as a result of new accounting standards that require local governments to show their share of the unfunded liabilities from the State Retirement System and the Police Officers Retirement System. Fairfield County’s share of that burden, D’Amico said, came to $19.3 million.

“It’s one of those thing that we have to put on our books,” Interim County Administrator Milton Pope said. “Through the process of this new accounting rule, we have to take on the liability for those things.”

The cash contribution the State is requiring the County to pay, D’Amico said, has not changed and is being remitted on a regular basis. How the liability will affect the County’s credit rating, he said, remains to be seen.

“This is the first year that any governmental agencies will be recording this, so what we haven’t really seen is how this ultimately going to affect your credit ratings,” D’Amico told Council. “The next time you would have a bond issuance and you should send them these financial statements, it’s almost like you’ll have to have a separate conversation (to say) here’s my balance sheet with the pension liabilities, but here’s what my balance sheet would look like without it for them to give you fair understanding of the true financial position of the County.”

Cedar Creek Road Property

D’Amico noted that last year’s sale of County owned property on Cedar Creek Road netted the County more than $1 million. However, that property had not been previously recorded in the County’s past financial statements. The Finance Department notified auditors of the error, D’Amico said, then went back and evaluated other properties that might also have not been recorded.

“In doing so, we calculated a restatement related to these pieces of property, and that totaled $923,000,” D’Amico said. “It was a handful of properties. That was one of our findings.”

When the properties were originally purchased, prior to 2003, financial statements were reported on a cash basis, D’Amico said, “So when you would make a land purchase, you didn’t have to capitalize it, you didn’t have to put it on your balance sheet.” In 2003, standards changed, he said, and the County hired a third party to reevaluate the County’s position to include all land, equipment and buildings.

“These pieces of property were just missed as part of that,” D’Amico said.

Treasurer’s Office

Auditors also found in the Treasurer’s Office that a third party is completing bank reconciliations on behalf of the Treasurer.

“That would be OK, except that we need someone else to review, preferably the Treasurer or someone in her office, to review those and make sure those reconciliations are taking place appropriately, correctly, accurately,” D’Amico said.