Northampton County audit findings detailed; commissioners table $6.4 million interim financing resolution

Northampton County officials reviewed a string of audit findings and the county—s status on the Local Government Commission—s Unit Assistance List during their September meeting, and deferred action on a proposed $6.418 million interim construction loan for the Phase 6 water project.

The county—s contracted accounting consultant, Jeff Best, told the board the county completed three years of delayed audits (fiscal years ending 06/30/2022, 06/30/2023 and 06/30/2024) in roughly 12 months and warned that incomplete audits can affect grant funding and the ability to borrow. "If the county, if these audits are not completed, they will affect grant funding and also the ability to borrow money," Best said.

Leslie Edwards, the county—s finance director, presented the audit findings and a corrective-action summary that the finance office has begun implementing: bringing bank reconciliations current, creating new reconciliation forms requiring staff and director review signatures, establishing separate AP warrant processes for year-end payables and reclassifying several grant funds into distinct project or grant funds. Edwards said the most serious issues are recurring reconciliation delays, budget violations and record-timeliness problems that are scored over multi-year windows by the Local Government Commission (LGC).

"We have updated procedures in the finance office," Edwards said. "It's just going to take some time to see these fall off because they are looking at a 3-year trend." She said some findings will require research back to 2021 and that several items should be removed in next year—s audit once reconciliations are complete.

Davenport & Company, the county—s financial adviser, presented three bank proposals for a short-term construction loan (also called a bond anticipation note) to bridge project costs until USDA long-term funding is released. Ted Cole of Davenport described the three offers and recommended United Community Bank—s term, saying it offered prepayment without penalty and a fixed rate of 4.07 percent if the county closes by Oct. 17.

Cole said the USDA commitment is about $6.5 million and that the construction loan would be repaid with USDA funds once the project is complete and the USDA executes its drawdowns. "We—re recommending United Community Bank at their rate of 4.07," Cole said.

Several commissioners said they needed more time to review the loan terms, LGC timing and the county—s financial projections before authorizing a findings resolution required by the LGC. Commissioner (name not specified) moved to table consideration of the preliminary findings resolution and to hold a special called meeting so the board could "fully digest what we—re about to enter into." The motion to table passed with unanimous ayes; the county will schedule a special meeting before the LGC—s Oct. 6 session if needed.

Why this matters: Northampton County remains on the LGC—s Unit Assistance List, a supervisory list for units with late audits, internal control concerns or other indicators that require enhanced monitoring. Many of the audit items are multi-year, so even current corrective work will take time to reduce the county—s LGC score.

Other finance items discussed: the finance director presented the monthly financial report, noting general-fund revenues and total expenditures are roughly comparable to last year at this point; the county adopted a budget amendment to add an $85,320 Golden Leaf grant, a $500 donation to the register-of-deeds conference and an $18,288.98 veterans grant; and staff described a lead service line project funded through an interest-free loan (for which the board asked for more time before voting).

Votes at a glance - Motion to table the findings resolution for Phase 6 interim financing (construction loan request to select a lender and adopt a findings resolution): mover: Commissioner (name not specified); second: Commissioner (name not specified); outcome: tabled (motion carried, unanimous aye). Note: Davenport had recommended United Community Bank at 4.07% with prepayment flexibility. - Budget amendment (Golden Leaf grant $85,320; $500 donation for register of deeds; veterans grant $18,288.98): mover: Commissioner (name not specified); second: Commissioner (name not specified); outcome: approved (unanimous aye). - Lead service line project resolution to accept state funding/loan: motion to table for additional review: mover: Commissioner (name not specified); second: Commissioner (name not specified); outcome: tabled (motion carried, unanimous aye).

What—s next: County staff and the financial advisers will provide additional materials requested by commissioners ahead of a special called meeting to consider the preliminary findings resolution. The LGC will review the county—s proposed financing on Oct. 7 if the county meets the application schedule.