Auditors give Howard County an unmodified opinion and flag OPEB funding and GASB reporting changes

Howard County's independent auditors issued an unmodified opinion on the county's FY25 financial statements and walked the council through accounting and disclosure changes that affect how certain liabilities and risks are reported.

"We are issuing an opinion on those financial statements regarding whether or not, they are reasonably free of material misstatements," Jonathan Griffin, a manager at CLA, told the council. Griffin said the firm issued an unmodified opinion and summarized that GASB 101 and GASB 102 were implemented this year; GASB 103 and GASB 104 will change reporting of the management discussion and certain asset classes in coming years.

The auditor and finance staff highlighted changes driven by GASB 101 (compensated absences/leave accounting) and GASB 102 (risk and concentration disclosures). "This standard has an impact on the reporting construct, but again, not much on operations," Griffin said of GASB 101, noting a FY24 restatement related to leave liabilities.

Council members also focused on other post-employment benefits (OPEB). Rafael Hiller, Howard County's director of finance, said the county has increases in the OPEB trust balance and is contributing annually to reduce net liability: "Every year, the county has been putting in approximately $13,500,000," he said. Hiller said the trust's assets are closer to $400 million and that the plan is roughly 22 to 23% funded on a consolidated basis that includes component units; the remaining net liability for the county's portion is in the low hundreds of millions of dollars.

Hiller emphasized the county is making progress but that full funding will take many years. "We are paying for retiree health care," he said, "but it's going to take years to get there." Auditors noted it is common for local governments to carry significant OPEB liabilities and that most peer governments are also far from fully funded.

Council members asked detailed questions about the water and sewer fund's pooled-cash allocations, receivables and net position. Finance staff explained the pooled-cash sweep process, clarified that the fund's net position includes a large share of capital assets (about $373 million in capital assets), and said annual capital budgeting and asset-management analyses drive rate recommendations and replacement schedules for aging infrastructure.

The presentation closed with auditors and staff offering to provide reconciliations and more detailed roll-forwards of reserves and fund balances at the council's request.