JACKSON — The results of an audit report have prompted a hiring freeze, a freeze on all capital outlay spending and delay both the Phase V water system improvement project and the new Northampton County Department of Social Services building.

On Monday, the Northampton County Board of Commissioners voted to implement the freezes after hearing a report from the county’s Auditor Bryan Starnes with Martin-Starnes & Associates. County Manager Wayne Jenkins said the hiring freezes are effective as of Monday and applies to all county positions with the exception of public safety.

Northampton County’s report reflected the same economic scenario other communities around the state, including the inability to predict revenue during a national economic downfall with the state budget facing a $3.2 billion deficit going into 2011-12.

Among the audit highlights there were no questioned costs with regards to federal and state awards. Starnes said internal control findings—renewals in child support and approval on water and sewer adjustments—were dealt with by management.

The general fund summary, without transfers, showed revenues at $26.35 million and expenditures at $25.23 million. Starnes noted that transfers to the debt service fund were just over $1 million.

“So pure revenues and expenses, revenue is just a little bit higher than expenditures in 2010,” he said. “Total revenues compared to expenditures plus transfers, which is the money that you take out of the general fund and set aside to pay your debt service payment, the expenditures out-pace revenue by about $400,000. So your fund balance went down about $400,000 in your general fund.”

He continued, “You have more fund balance, but your fund balance percentage is going to go down because you have money due to the general fund from a capital project that was waiting for a debt to be issued and it just didn’t get done before June 30.”

Starnes’ report showed the county’s total fund balance for the general fund down by $412,815 from last year to $4.4 million. He further reported $2.3 million of the total fund balance is for required reservations and more than $2 million is for the unreserved fund balance. He added Northampton’s situation is similar to other communities around the state.

“I could take the names out and go across the state and the slides are going to look very similar,” he said. “The recession really hit in the Fall of ’08 and it’s really starting to show itself in local government fund balances.”

Starnes said most communities have made the same decisions as Northampton County, holding off on major expenditure cuts, in hope revenues would recover in the shorter term. However, this has not been the case with sales tax which Starnes said will be slow, forcing local governments to make more difficult decisions.

Starnes said the projected fund balance at the mid-year review was just over $5 million with the actual $581,964 less than that estimate. He said the difference is due to local options sales tax and federal and state grants monies under projected amounts as well as a transfer to the solid waste fund which was not in the original budget.

“It’s hard to project revenues in this type of (economic) environment,” he said.

Starnes said the county’s unreserved fund balance dropped from 13.52 percent from last year to 8.28 percent.

“If we were to do an unreserved fund balance adjusted and taking into account the capital projects waiting on the debt to issue, it would be up around 10.5 percent,” he said.

Starnes continued that the county would still get a “unit letter” from the Local Government Commission.

“The state has taken a very proactive position on making sure they are doing their do diligence to make sure everyone is aware of the circumstances,” he said. “Frankly, if your fund balance is below 12 percent they sent a unit letter out, it used to be if it dropped below eight (percent). And all they want to know is your plan. …They’re just wanting to know that you’re not digging anymore unnecessarily.”

Starnes said the total fund balance percent of expenditures stands at 17.66 percent.

“It just says that for every dollar we spend we’ve got 17 cents in reserves to cover that dollar,” he said.

Other highlights Starnes noted included the fact that property tax collection percentage has stayed steady for the past three years.

“The worst picture of all,” according to Starnes was the information about sales tax which showed a $900,000 drop from last year. Again he noted, Northampton County’s drop in sales tax mimic what was going on across the state.

Starnes said the departments did a good job in maintaining their budgets and even decreasing them.

The water and sewer fund stands at $2.58 million in revenue and $2.1 million in expenses. Starnes said the fund generated $993,329 in cash and debt service consumed $925,614.

“We still don’t have a lot of room for capital needs,” said Starnes.

The solid waste fund’s revenues stands at more than $2 million and expenses at $2.22 million. Starnes said the fund had negative cash flow and had a $200,000 transfer from the general fund.

“We know in difficult times you are trying to ease the burden of your citizens, you’re all in the same boat, your water and sewer funds and solid waste funds are a perfect example, they’re as low as they possibly can be but not too low,” Starnes said. “But you also have to take the human interest into the equation and ask can we wait one more year before we make a rate adjustment.”

Jenkins noted there was a solid waste adjustment in 09-10.

Starnes gave the board a picture of communities across the state by sharing a survey done by the North Carolina County Commissioners Association.

Last year, 16 counties increased the tax rate by an average of 3.3 cents.

Of the 95 counties that responded, 49 counties cut budgets again from 2008-09.

Forty-four counties had a hiring freeze and 43 counties cut positions. Fourteen counties laid off existing employees and 595 county workers lost their jobs. Meanwhile, seven counties implemented mandatory furloughs.

Twenty-five counties of 95 that reported in the survey saw a decrease in property valuations.

Thirty-one of 100 counties saw the assessed value above market value.

In 2009-10 sales tax is down nearly five percent from the year before and 2008-09 is 10 percent of 2007-08.

Starnes concluded that the commissioners should take into account that there will be a lot of unknowns coming from Raleigh.

“You have to know the conditions of the state government in order to anticipate what may happen to you locally,” he said.

He noted 50 percent of the state’s budget is education and that what goes on in the state level will “watershed” to the local coffers.

Starnes noted there would be changes coming soon from the state level in the short term, within the next two budget cycles.

He said overall the county’s finances were in good shape, but officials would need to “draw a line in the sand” as to where to stop.

Commission Vice Chair James Hester asked if the county could expect cuts in federal funding.

Starnes said anticipating what was going to happen was the most fruitless effort anyone could do. He added the best scenario was to be prepared for the unpredictable, especially with projects relying on federal reimbursements and/or grants.

After further discussion, Jenkins recommended the commissioners implement an immediate hiring freeze with the exception of public safety (sheriff’s office, detention center, E-911, emergency management, EMS and code enforcement), freeze all county capital outlay spending effective immediately and delaying the new DSS building and Phase V water improvement projects until the mid-year audit report and readdress the matter at that time.

“They were painful,” said Jenkins.

Hester motioned to accept the recommendation from Jenkins. The motion was seconded by Commissioner Virginia Spruill and passed without objection.