Auditor issues county clean opinion and material weakness

Audit Presented Late for Third Consecutive Year

WINNSBORO – Fairfield County failed to follow “certain accounting, reporting, and reconciling procedures,” resulting in incomplete and inaccurate financial reporting, according to the 2023 audit.

Mauldin & Jenkins, the Columbia financial firm that conducted the audit, issued a “material weakness” in the audit.

The material weakness stems from Fairfield needing to perform $28.7 million in adjustments across five county funds in order to close its books for 2023, resulting in an internal control breakdown, according to the audit.

An internal control safeguards “assets against unauthorized acquisition, use, or disposition, and includes controls related to financial reporting and operational objectives.”

“The County did not properly account for certain activities or prepare and review all reconciliations typically required as part of the financial close and reporting process,” the audit states.

Further, the audit recommended the county adhere to internal controls, provide education to accounting personnel, and cross-train staff in accounting practices “to make the accounting function stronger and more capable.”

Audit findings were presented at Monday night’s Fairfield County Council meeting.

Grant Davis with Mauldin & Davis told council members the county is still in a far better financial position than during the 2022 audit, when the county reported $95 million in unrecorded activities.

“If you read it carefully as compared to last year, you’ll note some important differences from 2022 to 2023,” Davis said. “Even though we did have internal control deficiencies, things are much more positive from an accounting and financial reporting perspective than they were as part of that 2022 report.”

Davis said the material weakness noted in this year’s audit stems from the “over-recording” of debt payments associated with the Fairfield Facilities Corporation Fund.

“There were some things that were recorded out of an abundance of caution to not be back where we were in 2022,” he said.

The “over-recording” issue stems from bonds the Fairfield Facilities Corporation issued in 2013. Proceeds from additional bonds issued in 2021 were applied to repay debt on the old bonds.

Davis said once debt payments are deposited with a trustee, it’s no longer the county’s money, though the payments were recorded as such.

“The county recorded the proceeds of those cash accounts and we had to take them off,” Davis said. “That debt is not debt to the county anymore. The debt for all purposes is diffused.”

Fairfield Responds to Audit

Fairfield accepted the findings of Mauldin & Jenkins, attributing to negative findings to “numerous changes and challenges” in the county’s finance department that delayed the audit’s completion.

“We will continue to review and improve internal control policies and procedures in an effort to eliminate errors and identify deficiencies from both operational and financial perspectives,” the county said in a statement.

Fairfield has been tardy in completing its annual audit in 2022 and 2023.  State law requires counties to submit annual audits to the state Treasurer’s Office by December 31.

For the 2023 audit, the state granted Fairfield an extension without penalty, moving the deadline to March 31. In 2022, the state withheld about $5 million in state funding from Fairfield County because of the late audit.

Davis added that the negative findings in the 2023 audit weren’t serious, noting the audit document was completed before the extended March 31 deadline.

“We tried to reword the verbiage in this controlled deficiency to reflect that there have been improvements,” Davis said.

Councilwoman Peggy Swearingen asked if the audit would be published on the county’s website. Interim administrator Clay Killian said that it would be, and the document was accessible online later Monday night.

Councilman Dan Ruff asked whether the 2024 audit would be completed on time.

“Going forward into next year, are we going to be able to start on time to be on time? I was promised it [being late] wasn’t going to happen this time and it did,” Ruff said.

Davis expressed confidence the audit would be done on time.

“Given the time frame that we’re at now, there’ll be plenty of time to get any changes from 2023 closed out and be ready to rock and roll for 2024,” Davis said. “Of course, we’re open to starting sooner if the county is ready. I don’t see any issue with starting sooner and having it issued before December 31.”

The audit reported the county’s fund balance at about $16 million, a decline of about $1.9 million from 2022.

Davis attributed the decrease to several unspecified transfers between county funds. He noted the county has about five months of operating revenue in reserve.

“Your expenditures for FY 2023 amounted to about $34.5 million, or about five months of fund balance in June 2023,” Davis said. “If you didn’t take in another dollar after June 30, you could operate for five months spending at 2023 levels, which is a pretty healthy place to be.”

It remained unclear whether or not the $16 million included any restricted funds. Davis left the meeting after his presentation, and Killian said he’d inquire whether restricted funds were included in the balance.

Other Business

Council voted to purchase a new car for the Sheriff’s office for approximately $47,000. An additional $8,200 will be needed to upfit it for service.

Council also voted to contract to pay the county’s auditing firm, Mauldin & Jenkins, $40,000 to help the county appeal some of the$1.4 million of fines and penalties levied on the county by the IRS.

Deputy Administrator Synithia Williams said the short term rental issue update is being delayed until a new director of the county’s planning department is hired. Interim Administrator Clay Killian said he expects a director will be hired soon.

Gregory Sprouse with Central Midlands Council of Government gave an update on the Comprehensive Plan.

Councilwoman Peggy Swearingen questioned whether there is a timeline for implementing the plan.

Don Goldbach, resident from District 2 said the Comp Plan is a big wish list of things the county wants to do, but said it lacks smart implementation guidelines.

“The implementation has to do with who, what and when to do these things,” Goldbach said. “We need to transition from just a wish list to the specifics of implementing the plan.”

Sprouse said the plan lays out goals for short term (up to 2 years), middle term (2 – 5 years) and long term (up to 10 years).

While speaker Randy Bright, a resident from Ridgeway District 1, praised Sprouse’s presentation of the plan, he, too, called for the specifics of accountability – the who, what, when – of carrying the plan out.

“It’s the same problem Fairfield County has always had with implementing the Comp Plan,” Bright said. “There’s no accountability.

“For example, last year’s plan for population was the same as this year’s plan. The last one said, “Grow the population with economic activity and other stuff. But there were no specifics about how to do that. So, we shrunk the population and our economic activity was such that we still remain in the bottom 30% [of the unemployment rate] of all counties in the state.”

A public hearing for the Fairfield County comprehensive plan, originally scheduled for March 25, has been rescheduled for the April 8, 2024, County Council meeting. This will also push back the tentative date of the final reading to April 22, 2024, for county council to adopt the Comprehensive Plan.

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