County auditors told the Penobscot County Commissioners on Aug. 25 that while most of the 2021 and 2022 financial statements were "good and in accordance" with applicable accounting principles, an adverse opinion tied to GASB 75 reporting on other post-employment benefits and a mounting deficit in the jail fund require prompt attention.

The matter that drew the most sustained discussion was the county's jail fund. "The jail fund is getting to the point where you're starting to see deficits in that fund," the auditor said, noting the fund had a balance of about $462,000 at the end of 2021 and moved into the red by the end of 2022.

Why it matters: commissioners and staff said the county has been using general-fund resources and internal advances to cover jail operations; auditors warned that continuing to treat those advances as receivables inflates the general fund and obscures true budget capacity. "If that's never gonna be paid back, you're artificially inflating your fund balance on your general fund," an auditor said. He recommended writing those items off as transfers rather than holding them as receivables.

What the auditors recommended
- Close gaps in routine accounting controls. The auditors emphasized that bank and subsidiary ledger reconciliations should be completed monthly to avoid multi-year backlogs. "Once that gets behind, it becomes increasingly difficult to catch up," they said.
- Treat long-standing interfund balances realistically. Auditors advised the commission to consider formally transferring unrecoverable jail receivables out of the general fund so future budgets reflect cash the county actually can use.
- Develop a plan to address the operational shortfall. Auditors and commissioners discussed options that include phased write-offs, direct use of general-fund balance to cover the jail deficit, service reductions, or seeking additional state funding.

Numbers discussed in the meeting
- End of 2021: jail fund balance reported at about $462,000 (positive).
- End of 2022: jail fund moved negative; auditors cited a figure of negative $62,000 and described the year's overall deficit as roughly $520,000'$525,000 (as stated in the audit discussion).
- Commissioners and staff said preliminary internal figures indicate the deficit grew in 2023 and could be substantially larger in subsequent years; one speaker estimated 2023/2024 shortfalls in the low millions if the trend continued.

Commissioner and staff responses
Commissioners agreed the problem needs an urgent, transparent fix. Several asked for a near-term accounting entry that would clear unrecoverable receivables and present a realistic general-fund balance for the FY 2026 budget process; staff committed to producing draft year-end figures for 2023 and an updated estimate for 2024 in time for budget deliberations. Commissioners also discussed briefing the county budget committee and the region's legislators so those officials understand the scale of the shortfall.

What the audit did not do
The auditors did not propose a single legislative or policy remedy; they limited their recommendations to accounting practice (monthly reconciliations, clearer presentation of interfund balances) and urged the commission to decide how to allocate reserves or execute transfers. No formal vote or ordinance change was taken at the meeting.

Next steps
Staff said they will complete 2023 closing work and provide a draft figure for commissioners and the budget committee prior to the commission's November budget vote. Commissioners signaled they will consider a motion to reclassify unrecoverable jail receivables as transfers in the coming weeks so FY 2026 budget deliberations reflect corrected fund balances.

Ending note: auditors praised staff progress on catching up overdue reconciliations and urged monthly financial reporting as an internal-control best practice. "I would say monthly," an auditor told commissioners about the cadence for reconciliations, "...so that you're not having to go back."