Audit: Status quo will lead to deficit

Published 12:39 pm Wednesday, November 19, 2008

It’s been more than a year in the making and is 187 pages long.

The Ohio Auditor’s Office Tuesday released the Lawrence County Performance Audit — its review of county offices and practices and its recommendations for improving the county’s bottom line. The report starts with an ominous prediction: if the county continues with the path it is now on and does nothing, it will wind up more than $3 million in the hole within four years.

“The five-year financial forecast … shows the county will experience a negative ending fund balance of approximately $86,000 beginning in 2008. Without changes in operations, the deficit could reach $3.6 million in 2012 or about 28 percent of revenues,” state officials said in their performance review. “For the county to avoid projected negative ending fund balances throughout the forecast period, it will need to make difficult management decisions regarding potential means for increasing revenues and reducing expenditures.”

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The report noted Lawrence County had the lowest overall property tax rates in the state. Of the peers, it had the lowest property values and the lowest millage rates for county-specific operations, 5.6 mils compared to average peer rate of 12.1 mils. Nineteen percent of the county’s revenues come from property taxes.

However, state officials said implementing their changes could result in cost savings “ without an additional voter-approved tax.”

The audit reviewed how things are done in Lawrence County and measured them against common practices in Athens, Scioto and Washington counties, all of relatively similar size and population. Then it used Lawrence County’s figures and information gleaned from peer reviews to create a list of things county officials could do to save money.

Planning for the future

The first recommendations are similar in thinking and pertain to planning, which state officials believe the county needs to do more of in order to get the most for its money. Among them:

— The county should adopt a comprehensive strategic plan that defines its missions and goals and planned allocation of resources. Right now, state officials noted that Lawrence County doesn’t have one, but needs one.

“Elected officials and department heads in county offices and agencies should be included in, and contribute to, the planning process,” the state officials said. “…Strategic planning will enable the county to prepare for future expenditures and provide resources to critical areas that are determined to be essential and/or demonstrate effectiveness. The goals in the strategic plan should be linked to the annual budget, capital plans and the financial forecast.”

— The county should have a detailed five-year forecast “used to assess the long-term financial implications of current and proposed policies, programs and assumptions. State auditors said the forecast is important in that it would, among other things, provide local officials with an understanding of available funding, help them evaluate financial risk and assess the likelihood the services can be maintained.

— The county should have a capital planning tool that identifies and prioritizes capital needs for a minimum of five years.

State officials acknowledged that county officials probably discontinued any talk of capital planning because of budget constraints but pointed out that the county still has capital needs that can and should be addressed, such as purchasing new sheriff’s office cruisers, finding storage space for county records, building a new jail and replacing or repairing the old Dennis J. Boll Group and Shelter Home.

“Because of pending budget deficits, county officials have directed all funds to operations,” the audit said. “Lack of capital asset planning could result in a situation where repair or replacement is needed and no funding is available. Projecting needs and addressing those that are critical to continued operations would help the county better prepare for expenditures that may be necessary to replace some capital assets.”

The auditors noted that by working together, the county officials may be able to combine some needs and address them at one time.

Lawrence County Commissioner Jason Stephens said these suggestions are ones that most encourage him and he thinks other officeholders will be willing to work together to turn these suggestions into reality.

“The budgeting and forecasts, these are things I think will benefit us in the long run,” he said. I think we can ask officeholders to put together a three-year budget projection and we have already started this with our budget hearings, we’re doing them again this year.”

Penny wise

Other recommendations had to do with making the most of county resources and spending what money it does have wisely.

— The county should conduct a review of all fees and charges to make sure the county is getting the most money allowed by law for various services for which it can charge. Such fees include those charged for real estate transfers, recording deeds and other documents, licenses and permits and the like.

“On a per-capita basis, Lawrence County received nearly $38 less in cash receipts from charges for services and fees than the peer average…. This means the county recoups less of the cost of its governmental activities than its peers for certain programs and therefore relies more heavily on its general fund and revenues from taxes,” state officials noted.

— The county should consider centralizing its technology, tech support and other information services. The state officials noted that right now, each department and each office has its own person who performs its IT duties, each office buys its own software and handles IT problems. State officials recommended leaving IT in the hands of a professional and said there is more than one way to finance this.

“Without dedicated and experienced technology staff, technology purchasing may be inefficient, support levels may be reduced and the cost for support and the threat of security risks are increased,” state auditors said.

State officials suggested the county partner with another agency, get help from one of the nearby colleges and universities or even partner with the city of Ironton which likely has the same issues as the county.

State officials said, using local employment compensation figures, such an IT position could cost approximately $50,000 in salary and benefits. If the coordinator was able to offset just one-half the support costs for, say, the auditor’s and recorder’s offices, the county would not experience a net increase in costs by adding the position.

Stephens said an IT coordinator is something county officials may in fact want to look at.

“We do spend money on outsourcing and I know some are fearful of, ‘here we are creating a position.’ But we would still have to find the funds for it,” he said.

— The county should consider centralizing its purchasing and put one person in charge of purchasing for all county operations. State auditors noted right now, each officeholder buys his or her own supplies. If the county put all its eggs under a central umbrella, it could possibly save money by negotiating in volume and making bulk purchases. State officials said the county could even join the National Institute of Government Purchasing or some similar organization.

“Because it has not centralized the purchasing function, the county may overpay for goods and not obtain the best prices based on volume discounts of competitive bids,” state auditors said. While local officials contend the county has no room to store bulk supplies, state officials said bulk supplies could be delivered and ten split up among offices or arrangements made to use “just-in-time” delivery, meaning supplies could be purchased in bulk and would be delivered when needed.

Pay and fringe benefits

Salaries and benefits were reviewed at length and state officials noted Lawrence County pays out more in benefits that its peers. They noted that salaries and benefits can be a big ticket item when computing the county budget. Some of their recommendations for holding these costs in line:

— The county should seek to hold salary increases to one percent in 2009 and limit increases when negotiating new contracts with the unions that represent various employee groups. The state officials also suggested the county analyze salaries and job responsibilities and allow this information to guide them in future decision-making.

— Lawrence County should evaluate its employee health insurance plan to save money, state officials said in their review. State auditors noted that some employees in some offices, such as the Veterans Service Board, Lawrence County Job and Family Services and Child Support Enforcement Agency, treasurer’s office and engineer’s office, do not contribute toward their health care benefits, others pay as much as 25 percent of the health insurance premium. The State Employee Relations Board (SERB) average is only 10 percent. According to the audit, county officials said this is because the treasurer’s office and engineer’s office are members of the Teamsters Union, have Central States Insurance and therefore the insurance is less expensive. State officials responded that if these employees contributed anyway to their insurance the savings to the county “could be sizeable.”

State officials said the county might consider joining a consortium such as the County Employee Benefits Consortium of Ohio, “to increase buying power and reduce health insurance premiums with diminishing coverage.”

Also under this heading, state officials said the county should consider paying its insurance broker a fixed fee rather than a commission so there is no incentive to increase costs.

“County officials interviewed about the compensation of the insurance broker could not identify the amount he was paid and were not aware of the method used for compensation,” auditors noted in their report.

State officials urged county leaders to make changes in other employee benefits as well.

— The report said Lawrence County officials should renegotiate agreements with labor unions for such benefits as sick day accumulation and sick day payouts. Right now when an employee retires, they are paid for accumulated but unused sick days and in some cases, there is no limit on the number of unused sick days that can be accumulated. The report noted that in 2003, eight of the 11 highest payouts went to employees at JFS and amounted to $209,000. One person took home more than $60,000 in unused sick day payout upon retirement, the state officials said. They recommended county officials bring their policy into line with SERB policy.

“Allowing an unlimited number of sick days to be accrued can be costly to the county when sick leave is paid out at retirement,” state officials said. “…If the sick leave payout policies were changed for all departments to reflect the ORC maximum of 31.25 days, the county could save approximately $12,800 annually based on projected retirements. By reducing holidays from 13 to 10 days the county could save approximately $22,000 annually either through cost savings from overtime or through recaptured work. The total costs savings as $34,800.”

The report also noted that some union contracts call for 13 paid holidays when the state employees only get 10. State officials noted that some union contracts (JFS, engineer’s office and CSEA) call for those employees to be paid double time for holiday work while other union contracts call for time-and-a-half for holiday work.

While the county is often rapped for having too many employees, the performance audit showed many offices were at or below peer level. The number of employees actually paid by the commission was at peer level, and the same was true of the recorder’s office. The auditor’s office was listed as being below peer average in spite of having a higher volume of business transactions. The fact was not lost on Stephens.

“If you look at the ratios, generally speaking, our offices do a lot more with fewer people. Lawrence County government is not as inefficient as some would like to believe,” he said.

— The Common Pleas Courts could reduce employees to bring its staff in line with peer averages.

“Unlike Lawrence County, peers (other counties) do not employ court reporters. Instead peers use their administrative assistants or a technology-based solution to perform this function,” state officials said in their review. They recommended realigning job duties to reduce staff and save money.

The sheriff’s office, with a total staff of 45, was above the staff level in Athens County (29) but far below the staff level in Scioto (78.5) and Washington (68) counties. At the current staffing level, there less than one officer per thousand people.

State officials also noted that other counties use different revenues streams to fund their sheriff’s office while Lawrence County relies more heavily on its general fund.

— County officials should work together to find alternative sentencing to alleviate jail overcrowding and alleviate the burden of paying for criminal justice. The state officials noted that since the start of their performance audit, there was an increased use of home confinement and other such programs. The state officials also said the county could further reduce its criminal justice by cutting jail stays.

— The Lawrence County Prosecutor’s Office should update its systems to better track work loads and pursue more grants to help offset the county’s tight budget.