Surry County audit issues clean opinion but flags landfill and airport financial strains

Surry County commissioners were told Feb. 3 that auditors issued an unmodified opinion on the county's FY2024 financial statements, but that several enterprise and special-purpose funds show financial stress that warrants monitoring.

Travis Keever, the presenter for the audit, said the firm issued a clean opinion on both the financial statements and the county's compliance with federal and state grant requirements for eight programs subject to single-audit testing. "We issued an unmodified opinion on those financial statements," Keever said.

Keever told commissioners there were no material weaknesses identified in internal controls and no reportable instances of noncompliance with laws and regulations in the scope of the audit. He said the audit's testing included samples of expenditures, payroll, and walk-throughs of finance processes.

But the auditor also described several financial-performance indicators of concern reported to the North Carolina Local Government Commission. The landfill fund now carries a closure and postclosure liability that produced an unrestricted net deficit of about $7 million; working capital fell to roughly $530,000 (about 1.3 months of expenditures), and the fund recorded an operating loss of about $363,000 for the year. Keever said the liability reflects the requirement to accrue expected monitoring and closure costs over the life of the landfill.

The audit also flagged the Mount Airy–Surry County Airport as over budget in its operating fund (about $38,000) and in two capital project funds. Keever said those overages primarily reflected contractor bills received after fiscal year end that were accrued into FY2024 but had not been budget-amended. The airport showed negative working capital, a negative unrestricted net position of roughly $475,000 and negative operating cash flow; capital grant receipts produced a positive change in net position for the year.

Keever noted one timing issue in the 911 fund: a deficit fund balance expected to be resolved when anticipated grant revenues are received in FY2025. He also said cash-to-expenditure ratios in two water and sewer funds looked weak for FY2024 but that this was driven by a one-time transfer of assets to the City of Mount Airy that inflated expenditures for the year.

County commissioners asked clarifying questions about the landfill liability and airport operations. Keever explained that engineers estimate postclosure monitoring costs and that the accounting standard requires recognizing that liability over the operating life of the facility. On the airport, Keever said the LGC's benchmarks focus on operating cash and quick-ratio measures that show the airport has more current liabilities than current assets at year end.

The presentation concluded with county-wide totals: roughly $80 million in total assets across governmental funds, about $108 million in revenues and approximately $119 million in expenditures; property taxes and local option sales tax were the largest revenue sources. Keever summarized the audit as a "clean audit opinion and no findings."