Late audit shows Hoke County had to pay big water bill, fund balance hit record high

By Catharin Shepard • Editor • Although the audit was submitted late, the news Monday night was mostly good for Hoke County when an auditor presented the annual report to commissioners.

The county’s available general fund balance hit a new record high, after successive years of commissioners putting money aside into the fund. At the end of fiscal year 2023, Hoke had an available general fund balance of $50.8 million, representing over 80 percent of its yearly expenses.

That’s higher than many similar-sized counties, much higher in some cases, according to auditor Ko Tang Cha-Moses of Martin, Starnes and Associates. Cha-Moses presented the audit to the county commissioners at the board’s meeting Monday night.

Commission Chairman James Leach pointed out that the amount in the county’s general fund is higher than it’s ever been.

“That’s extraordinary, 80 percent. I’ve never heard of it,” Leach said.


Martin, Starnes and Associates gave the county audit an unmodified opinion.

“That is the best opinion that we can give in an audit. It just means that the financial statements are not materially mis-stated to its readers,” Cha-Moses said.

The audit firm also praised county staff for their cooperation. Finance officer E.J. Prevatte retired, and the position has not been permanently filled. Finance officer Garvin Ferguson is serving as the interim.

There were some issues that the county will have to address in writing to the Local Government Commission. For one thing, the county submitted its audit to the state just last week, when the original deadline was five months ago, Cha-Moses said. The delay was at least partly due to a computer issue.

“We just sent it last Friday. It was due October 31, November 30 at the latest,” the auditor said. “The reason for that was the county underwent MUNIS upgrades. MUNIS is the county system that tracks all of the financial activity for the county, so there was an upgrade to that software sometime in August. Data was lost, so then there was data recovery part of the year that was occurring. It’s not something that would happen overnight.”

Additionally, in 2023, the county had to pay over $2.5 million to Fayetteville PWC for apparently using more water from PWC than expected. The county buys water from the neighboring utility system, for Hoke County customers.

The expenditure was “due to an unexpected water capacity bill that the county received in ’23. In my discussions with Garvin, that’s a one-time deal for that unexpected bill,” Cha-Moses said. “Basically, the county used more than its allotted amount.”

Cha-Moses later explained, “Let’s say the county pays its water bill every month, so you’ve got the 12 months that’s budgeted for. You’ve got your revenues. Typically, in recent years I’ve not seen the water and sewer go into a net loss…there’s a range you can see in water gallons, and so the county went over the capacity. So, because of the overage in capacity, the company (PWC) billed the county a huge invoice for going over.”

Talks about water service and availability in Hoke County came up in other matters at the meeting. Commissioner Tony Hunt mentioned that the county is working on a water study to get a better idea of where things stand.

Historic fund balance

The Local Government Commission expects county governments to keep money in a general fund as a sort of savings account. For counties with annual budgets of under $100 million, including Hoke, the LGC wants to see the local government’s general fund balance of at minimum 20 percent of the local government’s yearly expenses, Cha-Moses said in discussion with the board members. Hoke’s available fund balance was far above that at 80 percent.

“When you’re looking at fund balance, it’s important because it measures the county’s financial resources available,” Cha-Moses said.

The county’s fund balance has grown by tens of millions of dollars in recent years. In 2021, the available fund balance was at just under $30 million. In 2022, it was $37.4 million. In fiscal year 2023, it was at the reported $50.8 million.

Not all money in the general fund can be used to pay for county projects. There are different categories of fund balance money: assigned, unassigned, nonspendable, restricted and committed. The county’s total general fund balance was $59,847,218 as of the end of fiscal year 2023, but the available fund balance is only part of that. The rest is made up of nonspendable, restricted and committed funds.

All told, the unassigned general fund balance was at $47 million for the 2023 fiscal year, up about $12 million from 2022.

“So that means, unassigned, if we wanted to go out and do a $40 million project, that’s the money we could use. In theory,” Hunt clarified. “But you wouldn’t want to do that, because if you just left $7 million in, you would get below your percentage.”

County revenues and spending

The county’s revenue was up by about $8 million in 2023 over 2022, and spending also rose during that time period. The county brought in about $68.8 million in 2023, compared to $60.6 million in 2022; the county spent about $51.1 million in 2022, and $55.4 million in 2023, according to the presentation.

Ad valorem taxes made up about 50 percent of the county’s income, with local option sales tax revenue making up around 24 percent, restricted intergovernmental income making up about 16 percent and all other revenue, 10 percent.

The county collected over $34 million in ad valorem taxes in fiscal year 2023, up from about $30.4 million in 2022. Hoke took in about $16.7 million in local option sales taxes in fiscal year 2023, up from $15.1 million in 2022. Restricted intergovernmental funds amounted to $10.6 million.

As for expenditures, 93 percent, or over $51.6 million of Hoke County’s expenditures in the 2023 fiscal year went to five areas: public safety, human services, general government, education and debt service.

Spending on public safety, including the Hoke County Sheriff’s Office, jail and emergency communications, was $14.6 million and made up 26 percent of spending; funding at around the same amount for human services, including the Hoke County Department of Social Services and similar agencies, made up another 26 percent of spending; $9.6 million of general government spending accounted for 17 percent; $7.5 million in education spending for Hoke County Schools was 14 percent of the budget; and debt service of $5.5 million amounted to 10 percent of the budget. The remaining seven percent was for all other expenditures.

The education spending listed was only for the current expense money given to the school district and did not include money dedicated from the county to school capital outlay/school construction funds, Cha-Moses noted.

<02>Enterprise funds

<01>Enterprise funds for water and sewer saw a loss of $2,594,011 in 2023 due to the payment to PWC. The total net position of the fund was $47.2 million; cash flow from operating activities was $167,796 and required debt service was $1.6 million.

Overall, current assets for the water and sewer funds had gone down from 2022 to 2023, dropping from about $11.4 million, to $6.9 million. The quick ratio was a drop from 7.04 percent to 3.57 percent; the LGC wants such funds to be at minimum one percent, Cha-Moses said.

In the solid waste enterprise fund, the total net position was about $7.9 million, with $388,064 in cash flow from operating activities.

Performance indicators

The county had several performance indicators of concern, and the county will have to provide a written response to the LGC within 30 days of the presentation to the board, the auditor said.

The indicators were: a net loss for the year in the water and sewer fund due to the $2.5 million water bill to PWC; the audit being late; significant audit adjustments; and an issue with the finance director performance bond.

Cha-Moses addressed each of the issues.

“There’s a water study going on right now so that should address a little bit of that concern there. When you guys draft up your response, you’ll want to mention that in your response,” Cha-Moses said of the loss in the water and sewer fund.

The audit being late was partly due to the MUNIS computer system issue, she said.

The “significant audit adjustments” were due to  the county having to book finance journal entries after Prevatte retired, which “kind of just tipped it over to where the Local Government Commission would want to see an audit finding for that,” the auditor said.

As for the finance director performance bond: in January 2023 the state law changed and the amount of the finance director’s performance bond is now based on the operating budget, so the finance director’s performance bond should have increased to $1 million. That wasn’t done, so the county received a finding on the audit for that. The county is in the process of getting the bond updated for that position, officials said.

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