Auditor gives Columbus County clean opinion but flags three material weaknesses and warns fund balance has fallen to about 19%

The county's external auditor presented the fiscal year 2024 audit to the Columbus County Board of Commissioners and said the financial statements received an unmodified (clean) opinion, while also reporting three material weaknesses and multiple corrective actions that the county must address.

Liam Bagasala, audit director at Malden and Jenkins, told commissioners the audit covers July 1, 2023, through June 30, 2024, and that the firm issued a clean opinion on the basic financial statements while also identifying three material weaknesses that require management attention.

Bagasala said one material weakness related to capital-asset reporting and required adjustments to construction-in-progress, including two school projects identified in the audit. He described a second material weakness as a prior-period restatement tied to how the county records opioid settlement revenue after guidance from the Government Finance Officers Association and the North Carolina Local Government Commission. The third material weakness concerned the county's financial close and maintenance of accounts; auditors posted about 31 journal entries after receiving the trial balance to correct books and records, including entries to record leased vehicles and deferred inflows.

Bagasala also told the board that the county's available general fund balance as a percentage of expenditures declined from roughly 44% in fiscal 2022 to about 19% in fiscal 2024. He said the Local Government Commission (LGC) uses a target near 39% for counties of this size and that a measure below 20% produces an LGC alert. "You need to come up with an action plan for fixing this indicator or concern, and you need to submit that to [the] Local Government Commission within 60 days," Bagasala said.

The audit report disclosed other issues auditors said the board must address, including:

- Late audit filing (the fiscal 2024 audit issuance was delayed to January 17, 2025, after an extension to Dec. 31); - Budget ordinance violations disclosed in the financial statements (three funds went over budget); - A single-audit review of federal and state grants that produced an unmodified compliance opinion overall, with one significant deficiency noted in the Section 8 housing program related to a late REAC submission; - Multiple annually budgeted funds with deficits and a list of funds and construction-in-progress projects that auditors recommended closing out before the next fiscal year; and - Repeated management recommendations, including improvements in segregation of duties, updating personnel policies for upcoming GASB pronouncements, and remitting unclaimed checks to the state as required.

Bagasala summarized management-level adjustments auditors made to the county's books during the audit and recommended that commissioners consider options to restore the fund balance: increasing revenue (for example, property tax changes), decreasing expenditures or developing a multi-year corrective plan the LGC can review. He also offered advisory services and free continuing professional education for county staff.

Commissioners asked auditors questions about where the county's expenditures had increased and how department budget requests feed into the adopted budget; Bagasala pointed them to exhibit 5 of the financial statements and reiterated that the county appropriated about $10.9 million of fund balance in the amended fiscal 2024 budget, which contributed to the decline in available fund balance.

Next steps recorded in the meeting: commissioners have 60 days to submit a corrective action plan to the North Carolina Local Government Commission describing steps they will take to address the fund-balance indicator and the audit findings. Auditors said they will review the county's draft responses before submission.

The presentation and questions occupied a substantial portion of the meeting; no formal acceptance motion of the audit was recorded in the transcript excerpt provided.