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Auditor and financial adviser warn Northumberland faces about $1.3 million shortfall, shrinking reserves
Summary
Consultants told a joint meeting on June 17 that clerical errors, unrelieved purchase orders and late invoices have left the county and school division with roughly a $1.3 million operating shortfall and a rapidly shrinking reserve ratio, and recommended immediate, short‑term and multi‑year steps to stabilize finances.
County finance advisers and an outside audit team told the joint meeting of the Northumberland County Board of Supervisors and School Board on June 17 that errors and unrecorded liabilities have produced an estimated $1.3 million shortfall for fiscal 2025 and have reduced the county’s unassigned fund balance sharply.
An independent consultant working for the county said the most pressing matters included incorrect payroll tax filings that produced a net tax payment exposure of roughly $30,000, $644,000 in open purchase orders with about $142,000 that appeared no longer needed, and about $305,000 in invoices or expected purchases that had not been entered into the purchase‑order system. “Based on our analysis … the net net on that … is around a $30,000 net payment that is due,” the auditor said during the presentation.
Davenport & Company, the county’s financial adviser, showed the boards that the county’s unassigned fund balance — a standard reserve measure — had been roughly 25% of annual expenditures at the end of fiscal 2023 but is projected to fall near 5% by the end of fiscal 2025 if current estimates hold. Davenport Senior Vice President Kyle Lauks said that drop could put the county’s credit rating at risk and create cash‑flow pressure that would likely require a short‑term revenue anticipation note to manage tax‑collection timing: “That unassigned fund balance … has dropped from about 25% to something like 5%,” Lauks said.
Consultants recommended immediate steps, including: (1) avoid drawing any more fund balance in the current budget; (2) complete a detailed reconciliation of open purchase orders and invoices; (3) prioritize drawing down restricted grant funds appropriately for reimbursable costs; and (4) begin competitive bidding for any necessary short‑term borrowing to manage cash flow. Over the medium term, consultants recommended producing a multiyear budget and adopting a formal fund‑balance policy to guide future decisions.
Auditors told the boards they had focused first on payroll tax filings because of notices from state and federal tax authorities, then on accounts payable and reimbursements; the $1.3 million estimate reflects outstanding purchase orders, newly identified invoices and revenues that are expected but not yet drawn down. The auditor cautioned that the number was “pretty conservative” and that a few late invoices could change the total; the team said it would provide an itemized list of the components behind the $1.3 million estimate.
Board members responded that immediate monitoring and a joint plan to reconcile balances and tighten purchasing and reimbursement procedures were needed before the FY26 budget is finalized. Davenport and the audit team offered to continue work on a detailed multiyear plan and on options for temporary borrowing and reimbursement of capital outlays.
The presentations underscored why the boards moved forward with the MOU that places school finance oversight with the county: both advisers said stronger, clearer procedures for encumbrances, invoice approvals and state reimbursements are central to restoring a stable reporting process and fund balance.
