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Stark County defends high reserves as auditors flag Century Code violations
Summary
State auditors found Stark County maintained general-fund balances above the 75% carryover limit and reported material weaknesses in mill-levy and budget calculations; county officials say reserves fund multi-year infrastructure projects and that they have been reducing levies while avoiding debt.
State auditors told the Legislative Audit and Fiscal Review Committee on Dec. 9 that the Stark County 2023 audit showed material weaknesses and noncompliance in how the county calculated its general-fund mill levy and special revenue fund budgets under North Dakota Century Code.
"The amount to be levied ... must be computed" by deducting reserves and other items, Auditor Josh Galien said, but testing showed Stark County assessed a 25.88-mill levy while the Century Code calculation indicated zero mills should have been assessed using the criteria in the statute. Galien said the county used a cash-reserve figure significantly lower in budget calculations than the actual bank balance, producing the finding.
Neil Messer, chair of the Stark County Commission, acknowledged the county "has excess general surplus funds" but said commissioners chose a long-term, flexible approach to funding large capital projects without incurring debt. Messer described multi-year plans to lower the general-fund levy from prior levels and said the county has reduced its levy several times: "We lowered that amount by $1,000,000 ... and have subsequently lowered the general fund levy in following years."
Messer told the committee the county rejected immediately moving funds into formally restricted capital-project accounts because those funds become inflexible and cannot be used for unforeseen emergencies without a complex process. He said the county preferred to reduce levies gradually while preserving the ability to respond to storms, washed-out bridges and volatility in gross production tax receipts tied to oil prices.
Auditors also flagged material audit adjustments and segregation-of-duty weaknesses for smaller water districts. Galien recommended county officials apply Century Code calculations consistently and use capital-project fund statutes where appropriate.
Committee members pressed commissioners on whether the statute's 75% limitation should be revisited and whether the Legislature should provide clearer options for counties that receive large one-time revenues. Representative Nathie suggested legislative staff research the statute's original intent; Senator Clemens asked whether penalties or enforcement mechanisms exist. County officials offered to work with the Legislature on possible statutory changes.
The committee did not vote on enforcement; members said the discussion would inform possible legislative fixes and follow-up reporting from Stark County on progress reducing excess reserves.
