Montgomery County financial reserves dwindled by nearly $8 million over the past three years because of a string of poorly drafted budgets, according to an audit by the state Comptroller’s Office.
The audit report, released Friday, claims the county Board of Supervisors has long relied too heavily on the fund balance — essentially the county’s savings. In 2010, the fund balance was reported as more than $19 million. At the beginning of this year only $11.4 million remained.
According to the report, the county’s financial condition, while not dire, might become so if nothing changes.
“The County’s declining financial condition is the result of poor budgeting and financial management practices,” the report claimed, “and the Board’s failure to develop and use long-term financial plans.”
A fund balance, much like a household savings account, is generally used on one-time expenses while recurring costs must fit within regular revenue. Auditors, when looking through three annual budgets, noticed county savings were spent on recurring costs.
“County officials told us they appropriated fund balance to minimize real property taxes,” the report said.
The problem is, county reserves are gradually depleting just to pay regular bills. If 2013 goes as the budget suggests, the county will enter 2014 with just $9.5 million, less than half the fund balance of a few years ago. Eventually, the county will either have to raise property taxes or cut services.
Audit findings were announced shortly after the county board decided to self-insure its employees. Under the new system, the county pays for medical bills of employees, rather than the rates of a separate insurance company. Such a system can be cheaper, but may require large emergency funds — funds the county is diminishing.
Auditors recommended the county draft better budgeting procedures along with a multi-year financial plan. They also suggested county officials watch the use of fund balance more closely.
County board Chairman John Thayer could not be reached for comment on the audit Sunday evening, but said in a statement attached to the report that the board will pursue actions to remedy the situation.
“The board will be forced to make some difficult decisions in some form of budgetary cuts if we continue to rely on fund balance for county operation,” he wrote.
The county government is set to change over on Jan. 14. A nine-member legislature and executive elected in November will replace the current board of 15 town and city ward supervisors. Thayer said that new government will be in charge of drafting the long-term financial plan.