County scrambles to pay past-due bills
For the last week, the county manager has been focused on one thing — the budget.
And it hasn't been for positive reasons.
Since the fiscal year began in July, Bruce Swingle has found issues with county finances that he's calling "concerning and unacceptable."
At this point, the county is experiencing what Swingle termed a "cash flow issue" tied to the collection cycle for property taxes. Those taxes are collected in May and November, and the county is in the crunch that many households find themselves — waiting for the next pay check.
"Since taxes don't start until next month, we are reducing expenses so we have sufficient funding to pay the bills," Swingle said.
And speaking of bills, Swingle says the second budget concern the county is tackling is an adjustment to it's "agenda" for the budget, changing the priorities that need to be covered by this budget.
The new priorities consist of nearly $1 million in bills that have gone unpaid, in some cases, for years.
"We've had to reallocate funds in the budget to pay these old expenditures," Swingle said. "I can't say why they weren't paid, they just weren't."
The outstanding bills run a gamut of expenses — unemployment insurance, federal withholdings for employees, equipment for the county jail purchased four years ago, even items as simple as gloves.
At this point, there's no money in the budget for these old expenditures. So, Swingle met with each department head and asked them all to cut 5 percent from their operational costs, pulling $1 million out of budgeted expenditures to cover the unpaid old bills.
Swingle said some employees' federal withholdings were not calculated properly as far back as 2007 and as recently as 2010.
During a county commission budget workshop in May, staff disclosed that the county's unemployment premium jumped from $9,000 to $181,000 because the premium went unpaid last year due to a "lack of available funds."
There is an IRS lien against the county for the miscalculated federal withholdings, Swingle said, for just under $30,000. The unemployment insurance premium came back down some to $150,000, but that doesn't make the money appear in the general fund.
"Unfortunately, we are finding a lot of unpaid bills," he said. "I really don't know what happened. What I think is since the county really only has a set amount of money for operations, when expenses extended beyond that amount or were about to, some bills weren't paid.
"But what happened for sure, we just don't know," Swingle said.
While not exactly an old bill, the county's conversion from one software package to a new system has come at a price.
In September, the commissioners unanimously approved a seven-year, $329,000 contract with Tyler Technologies, out of Texas, severing it's relationship with Triadic Enterprises, a Deming-based company. After it's initial purchase of the Triadic software decades ago, the county had been paying about $75,000 a year for software support.
With the approval of the Tyler contract, Triadic threatened to pull it's support to the county. To cover the changeover period, the county approved a software support contract with Triadic in January for $6,000 a month that expires at the end of December.
So far the county has paid Triadic at least $48,000 on the contract. Swingle said the county still needs to negotiate the contract price for the second half of the fiscal year, January through June 20, 2013.
"The changeover is taking longer than anticipated," Swingle said, thus eliminating the county's ability to terminate the Triadic contract early. "We are not on schedule because the treasurer's office and finance are not balancing. This has been an ongoing issue."
Swingle said to fix the problem, the county would need to hire accountants to work with both departments, something that can't be done until the county's cash flow increases.
"We need help to get our books in order," he said. "We need to set up a system that complies with generally accepted accounting practices."
And until those two departments balance, the software transition cannot be completed either.
The inability of the two departments to come to financial agreement isn't something new, the manager said. For nearly a decade, the county's annual audit has reported the same finding.
"Because of the inability of the two systems to communicate and balance, it's a struggle to know what our revenue and budget allocations are, and where we're really at," Swingle said. "These issues were identified in the audits — the lack of internal controls and the inability to adhere to accepted accounting principals.
"It's not a matter of money is missing. This is concern for the county's ability to determine, at any given time, what revenue we have in relation to the finance department, accounts payable and expenditures."
Swingle said the commissioners are very concerned about the repeated audit findings and are committed to correcting the problems.
"They do want to take the steps to implement the internal controls and operations needed to correct the audit findings," he said.
Another expense was revealed when the county submitted it's budget to the state's department of finance and administration. DFA found that the required one-twelfth for road funds had not been established. Swingle said the county is looking at about $227,000 it needs to set aside.
Monday afternoon, Swingle authorized the transfer of $1.5 million from county investments into the general fund to help with the cash flow problem.
"We were hoping not to do that, but things were getting too close," he said. "We are still exercising the same precautions. This just gives us a little more money to work with until the taxes start to come in."
The funds from the county's investment pool are separate from the state-mandated three-twelfths reserves the county must hold out for operational costs.
Swingle said the investment monies do not have to be replaced, but the county "easily can, as soon as tax dollars start coming."
Even with the sudden, unexpected belt-tightening, Swingle said there will be no employee layoffs or a reduction in force. Instead, nonessential operational expenses have been reduced in all departments by 5 percent, and there will be no hiring except for public safety positions and departments have eliminated some travel and training money.
Swingle said the county has also been able to realize some salary savings due to vacant positions.
"The community should see no difference in the level of services provided by the county," Swingle said.
To stretch the available funds further, the manager said the county would have to temporarily adjust the timing of paying bills.
"We don't want to be late, but we might not pay bills as quickly as we have in the past, so we can let the revenue catch up," he said. "These kinds of technical glitches can't happen. The miscalculation of the federal withholdings can't happen.
"The county collects about $14.5 million in revenue for the general fund. That's not enough money to effectively provide the services we are obligated to provide to the residents under our current business plan. We have to readjust our business model."
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