Attention to detail

 

Goochland County retains its AAA credit rating from bond rating agency Fitch, which recently downgraded that of the U S Government. Our county is the smallest by population in the country with three AAA ratings. This did not happen by accident.

On August 1, the county’s audit committee met. Its agenda included the kick-off for the Annual Certified Financial Report (ACFR), a preliminary report on year end results for FY23, and an update on Tuckahoe Creek Service District (TCSD) debt.

The purpose of this committee, said Chair Ken Peterson, District 5 Supervisor, is to assist the Board of Supervisors in fulfilling its oversight responsibilities for financial reporting, internal control systems, and the audit process.

Annual Certified Financial Report

Betsy Hedrick and Andrea Nichols of PBMares (pbmares.com), the county’s outside auditors, were introduced.  They briefly explained their firm’s audit process.

 “We don’t take a cookie cutter approach. We tailor everything to your specific facts and circumstances and not only as the entity, but from year to year…. We begin our process with a brainstorming session to obtain an understanding of the processes, look at main transaction cycles and ensure that the controls that should be in place actually are in place.”

PBMares is always devising new approaches to annual audits, including ways to apply data analytics. Nichols touched briefly on items that will be added to the Annual Certified Financial Report (ACFR) this year, including an entry on the balance sheet for capitalized unfunded pension liability, and capitalized leases.

Looking ahead, Hedrick said that the Government Accounting Standards Board (GASB) is expected to issue a new standard on the financial reporting model that will include revised definitions. The goal of the changes is to make financial statements more transparent and easier to understand.

PBMares is reaching the end of its multi-year contract with Goochland. The county is expected to issue a request for proposals (RFP) to select its next auditing firm in coming months.

The ACFR will be presented to the board for approval in December and be posted on the county website as are those for previous years.

Preliminary FY23 results

Director of Financial Services Carla Cave presented the preliminary report on results for FY23, which ended on June 30. Final numbers will be available at the end of August. (See August 1 board packet for details.) So far, projected revenues exceed the budget, even after approximately $3 million was used to fund a significant reduction in the personal property tax rate on vehicles, by about $10 million. As in past years, the surplus will be applied to items not funded in the FY23 budget, chiefly the capital improvement plan (CIP).

In 2018, the county compiled a 25-year CIP for all major projects, other than utilities, which included ballpark cost estimates, and a timeline for completion. During the annual budget process, CIP items scheduled for that year are revisited, as is a five year “look ahead” to keep breast of actual conditions. CIP projects are prioritized on a county wide basis to identify revenue sources well in advance of their need. In recent cycles, the CIP has been generous to school projects, especially the new Goochland Elementary School, currently under construction. Future CIP projects include new fire-rescue stations and a circuit courthouse.

Cave said that the county is in compliance with its financial management policy guidelines that apply to debt and assigned market balances. This policy, first adopted in 2018, includes thresholds for debt and creation and use of a revenue stabilization reserve—rainy day fund—"to insulate itself from fiscal crisis and economic disruption.”

Conditions that might trigger use of revenue stabilization reserves were discussed. In 2020 when the impact of the pandemic on county revenue was unknown, the supervisors pared the proposed budget anticipating a significant shortfall rather than dip into reserves. As things turned out, revenues were stronger than anticipated and expenditures were revised upward several times during that budget year. The reserve, was not touched.

Cave suggested further adjustments to the policy, which the audit committee will review in coming months and make recommendations to the supervisors about possible changes.

 (Go to https://www.goochlandva.us/DocumentCenter/View/4422/Goochland-Financial-Management-Policies-Effective-May-1-2018 for the entire document)

 

TCSD update

While a sitting board of supervisors cannot compel a future board to do anything, it can leave a mess to be cleaned up. The TCSD is a prime example.

Peterson said that the TCSD debt, issued in 2002, includes some zero-coupon bonds, issued at five percent or more, which cannot be paid off early. (Think taking out a 30-year home mortgage and being forced to make every payment even if you have the money to pay it off early.) There are four more payments on these bonds, the next being due in October. In the next six years, all the higher rate bonds will be paid off. Those remaining are 2.5 percent or less, thanks to careful refinancing over the past few years, and can be paid off early at par if the district generates more revenue than expenses.

“The idea would be to do it (pay off the debt) as soon as feasible, which will do two things. One, eliminate the ad valorem tax that everybody hates, and two, release the county from the restrictions imposed by the debt. In the next six years, we’ll get rid of all five percent interest bonds.”

As the health of the TCSD improves, surplus revenues could pay down remaining debt early and eliminate the dreaded ad valorem tax. (Full disclosure, GOMM world headquarters moved to the TCSD a few years ago and pays the tax.)

 

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