County audit shows depleted funds

By Dan Linehan
Free Press Staff Writer

MANKATO July 24, 2008 11:28 pm

— An annual state audit of Blue Earth County revealed few surprises, but it did paint a picture of the county’s depleted finances after two major projects that got off the ground in 2007.
The $13 million extension of Victory Drive put the public works fund $2.5 million in the hole.
And the $42 million Justice Center drained the county’s reserves and put it deeper in debt, which has long been the funding plan.
The Office of the State Auditor conducts yearly reviews of Minnesota’s counties, and a representative stopped by the County Board this week with a summary.
It’s not typical, auditor Barb Cullen said, for a major fund to be so far in debt, but there is an explanation.
A big part of the Victory Drive project’s cost came from land purchases, and federal funding meant to cover it was based on appraisals, she said. But each property owner appealed and was awarded more money, which had to be covered with local funding.
Public Works Director Al Forsberg had another explanation: Much of the nearly $6 million in federal funding was spread out over five years, so the county had to borrow to get the project done now.
The county could have waited until all the money was in the bank, but its strategy makes economic sense for two reasons, he said.
First, inflation in construction costs over five years exceeds what the county could earn by investing the money. Second, the public will be able to use the road years ahead of time.
The fund should be in the positive in two or three years, Forsberg said.
The fiscal story of the Justice Center — the county’s biggest project ever — is a bit different.
In addition to draining the county’s reserves, it was the chief cause of a debt increase of more than 230 percent, to more than $22 million.
None of that, though, was unexpected, County Administrator Dennis McCoy said.
Aside from the impact of those two endeavors, auditors found several mistakes in the county’s ledgers.
One of the eight corrections was solved by moving $1,897,979 to the correct fund; other mistakes involved revenues improperly assigned as expenses and vice-versa.
McCoy said the county typically catches errors like these before turning over their books to auditors, but it was a busy time for the finance department.
They were switching over to a new software system and preparing documents to obtain certification from a professional association for government finance professionals. (The certification can help the county’s bond rating, which helps save money on borrowing)
Greg Hierlinger, deputy state auditor, said mistakes such as these are common in counties of this size.
And, because the county made all the corrections, auditors didn’t take further action.
McCoy said the audit had “not a lot of surprises.”