Pender County audit: clean opinion, LGC concerns on water/sewer cash ratios and two compliance findings

Pender County Finance Director Meg Blue and auditors from Martin Starnes & Associates presented the county's fiscal year 2024 audited financial statements to the Board of Commissioners on Jan. 21, 2025. Auditor Bao Tao said the firm issued "an unmodified opinion. This is a clean opinion and the best opinion."

The audit showed the county's general fund maintained a sizable fund balance and that the county met several positive performance indicators, including timely audit submission and a stable property tax collection rate. The audit noted the general fund available balance as 50.5% of expenditures for 2024, and the available fund balance reported as $6,190,000 for 2024. The combined water and sewer fund reported declines in unrestricted net position and a cash-to-expense ratio the Local Government Commission (LGC) flagged for review.

Why this matters: the LGC uses the submitted audit and its data input sheet to identify statutory or financial triggers that require a county response. Meg Blue told commissioners the board must file a written response within 60 days addressing all negative performance indicators and any audit findings.

Key findings and performance indicators - Clean (unmodified) opinion from Martin Starnes & Associates: "We issued an unmodified opinion," Bao Tao said. - LGC performance items: the water and sewer quick ratio fell to 0.51 (below the LGC minimum threshold of 1), and the water/sewer cash-to-expense ratio (5.57%) is below the LGC's typical concern threshold (16%). The firm recorded these as LGC performance indicators requiring explanation. - Major programs testing: auditors tested six major federal/state programs. The Medicaid cluster had one finding related to eligibility; the regional economic reserve grant had one reporting finding. Other tested programs had no findings. - Statutory items: the audit flagged a statutory violation for an over-budget condition connected to the Pender Development Authority (listed in the audit) and a prior deficiency related to the finance officer's bond that the county reported was resolved in September 2024. - Enterprise funds: solid waste showed improved unrestricted net position (an increase reported in the audit) and healthy quick ratios; utilities (combined water/sewer) saw a decrease in unrestricted net position (noted in the audit as about $1.86 million) attributed to capital investment timing and project activity.

Board follow-up and timeline Blue and the auditors told the board the LGC expects a written response signed by the board, the accounting manager and the finance director that explains corrective actions for negative indicators and audit findings. Blue added the county will provide the management discussion and analysis (MD&A) and expects to provide the LGC explanation in the required timeframe.

What commissioners asked and staff clarified Commissioners asked for and received clarification that some ratios will likely improve once expected loan proceeds tied to a utilities project are received; finance staff said the county had fronted roughly $13 million for a project and is awaiting proceeds that will change the cash position when posted. Meg Blue said staff would provide the full audit electronically to any commissioner requesting it.

Ending Commissioners did not take a separate formal vote on the audit presentation itself but were informed of the LGC response requirement and the specific findings that require a board response.