External auditor gives Sullivan County a clean opinion, warns of fiscal pressures and nursing home deficit

Drescher Malecki, the county——s external auditor, issued an unmodified opinion on Sullivan County—s financial statements for the year ended Dec. 31, 2024, and told the Sullivan County Legislature on Monday that the county faces several near-term fiscal pressures, including a flattening in sales-tax growth and the tapering of federal pandemic-era funding.

The clean audit means "we believe that the financial statements of Sullivan County for the year ended 12/31/2024 are fairly stated and can be relied upon," Matt Montalvo, partner at Drescher Malecki, told legislators. He said the audit found no material weaknesses or reportable findings and that the firm will send a management letter with recommended best practices.

Montalvo said the county posted a general fund surplus of about $8 million in 2024 and a total fund balance of roughly $95 million, but cautioned those cushions are likely to be tested in coming years. "Sales tax, which is your biggest non-property revenue source, is running flat and may start to decrease," he said. He added that much of the uptick in federal revenue resulted from stimulus and ARPA funds that are now waning.

Why it matters: sales tax and federal aid have been the top drivers of the county's recent surpluses; as those sources flatten or decline, the auditor said pressure will shift to the real-property tax levy and the county—s budgeting decisions.

Key financial trends and figures

- Sales-tax and other non-property revenues increased sharply after COVID but slowed between 2023 and 2024, the auditor said. Montalvo described the recent trend as "almost running flat." - Sullivan County recorded a general fund surplus of about $8 million in 2024. - The county—reported total fund balance at about $95 million; the auditor noted classification matters that affect how much of that balance is available for operations, including a large non-spendable amount representing an interfund advance to the county—care center. - The county——s unrestricted (available) fund balance was about 27.6% of the budget in 2024, in line with regional averages and above the two-month (approximately 17%) best-practice minimum Montalvo referenced.

Nursing home / care center (enterprise fund)

Montalvo singled out the county-operated care center (the nursing home/enterprise fund) as an area with large long-term accounting obligations. On a full-accrual basis the care center showed a fund deficit of about $16.5 million as of 2024; much of the care center—s current liability reflects an interfund advance from the general fund that the auditor said totals roughly $23 million.

From an operating cash perspective, the care center———s cash operating loss improved from about $8.4 million earlier in the five-year window to roughly $1.4 million in 2024, Montalvo said, but he cautioned that the long-term obligation and whether the general fund intends to recover advances remains a key fiscal question for the county to monitor. "If it came due, you'd have to pay these," he said of long-term obligations, while noting some amounts are estimates or subject to reconciliation.

Other auditor observations and recommendations

- Implementation of GASB (Governmental Accounting Standards Board) disclosure standards increases transparency about long-term liabilities (pensions, retiree health, compensated absences) but does not directly affect the county——s annual fund-balance cash position, Montalvo said. - Long-term debt has trended downward as principal has been paid, though the county may face new capital needs that require borrowing. - The auditor recommended continued attention to succession planning because many experienced county officials are approaching retirement, and suggested early development of policies around artificial intelligence tools and vendor pitches. - Drescher Malecki reported no compliance findings in the single-audit review of federal funds.

What the county officials said

Nancy Buck, Sullivan County treasurer, introduced the audit and noted staff efforts to prepare for auditors. She praised internal staff work that allowed remote read-only access to systems and singled out an employee, Shannon, for special recognition for organizing the county's records for audit review.

Legislators—asked questions about the care center accounting and the nature of deferred outflows and long-term liabilities. Montalvo explained the difference between the full-accrual net position and the cash/operating view used to assess short-term operations.

Ending note

Montalvo closed by reiterating that, while the county achieved an unmodified (clean) opinion for 2024, fiscal headwinds—flattening sales tax, dwindling federal stimulus dollars and program-driven state aid increases—mean budgeting will be more challenging in the coming years and the legislature should plan accordingly. "Budgets are going to be really difficult over the next couple years," he said.

Discussion status: presentation and discussion only; no formal action was taken on the audit during the meeting.