Auditor gives Montgomery County a clean FY24 opinion, flags segregation-of-duties as ongoing issue

John Aldridge of Brown Edwards & Company delivered the Montgomery County comprehensive annual financial report for fiscal year 2024 and said the firm issued an unmodified, or "clean," opinion on the county's financial statements.

The clean opinion, Aldridge told the Board of Supervisors on Jan. 13, covers four audited components: the county, the school board, the economic development authority and the public service authority (PSA). He reviewed the county's statement of financial position, long-term liabilities and the county's fund balance categories.

Aldridge highlighted several items of note for supervisors. The county reported $125 million in governmental activities assets and capital assets that include $40 million in nondepreciable land and $255 million in depreciable assets. Long-term obligations included roughly $17.5 million of debt due within a year and about $194 million of other outstanding debt. The county's unassigned general fund balance was reported at $44.7 million, which Aldridge said equates to about 3.6 months of reserves.

He pointed to cash and investments earmarked for capital projects (about $46 million in cash and $95 million in investments), noting those are bond proceeds that remain to be spent on projects such as the Christiansburg High School. Aldridge warned the board about federal tax arbitrage rules that can require localities to remit earnings on tax-exempt bond proceeds and said some localities recently paid several hundred thousand dollars in arbitrage calculations; the county's recent bond proceeds should be monitored for that risk.

Aldridge also reviewed the PSA (water and wastewater) results, saying water showed an operating loss of about $41,000 and wastewater an operating loss of about $317,000, and he recommended ongoing monitoring of rates and operations.

On audit findings, Aldridge reported no findings for federal and state compliance testing included in the report, but reiterated a recurring comment: limited segregation of duties in financial processes because of staffing levels. He described existing mitigating controls but said the condition remains and must be disclosed. When supervisors asked about remedies, Aldridge said hiring one to two additional finance staff members would materially reduce the condition but that the board should weigh cost versus risk.

County staff thanked Aldridge and noted that a recent finance hire and additional support from the CFO and staff are already working on improvements. No formal board action was taken during the presentation.

Ending: The report and its bound copies will remain part of the county record. Aldridge took questions from supervisors and indicated staff and the board can follow up with the auditor if they want further detail or additional analysis on topics such as arbitrage, pension liabilities and the PSA operating results.