Agenda - 11-18-1986 - Laserfiche WebLink

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—' '-' `~--' - '-'--- -- '— } 072' *tate ' f Nora Carolina • ; �� =�� ^ n +n^ent o� *ate Treasurer H*nmwc (Bp,'cs State and Local Government Finance Divi,96m TREASURER and the Local Government Commission JOHN 0. FOuT DEPUTY TREASURER November 7, 1986 Mr. Donald WillhOit, Chairman Orange Co. Board of Commissioners 203 Lexington Road Chapel Hill , North Carolina 27514 Dear Mr. W17lhni1: Each year the staff of the Local Government Commission reviews the annual audit reports of local governments. Again this year, the staff was . looking particularly for signs of financial and~ budgeting problems the within � |e report. • We want to bring to your attention certain problems which are reflected in your audit report. The sale of bonds and the interest rate obtained in the market is directly related to financial management. We feel improvement in the following areas could enhance your position in` "p the bond market: The NorthSideAenUvations Fund has a deficit which should be funded in the current fiscal year budget [G,S. I59-I3( 3)2], • We are particularly concerned about the recent trend in the percent of fund balance available for appropriation in the General Fund. The following illustrates this trend: FY ended June 30, 1884 - 16,2I percent FY ended June 30, 1985 - 8.87 percent FY ended June 30, 1986 - 3.96 percent The amount of fund balance available for appropriation has decreased to th e point where it is now less than 4% of the total expenditures in this fuUd Based upon our observation, tux-levying governmental units have cash flow ^ problems when the amount of fund balance available for opprVpriati0D drops below 8% of the actual expenditures for the year then ended. • The federal government has cut, and will continue to cut, the mount of support to local governments.. Therefore, an analysis of revenue for each local government is needed to det erm i ne what leYel of f u U hm7ance is appropriate. It is difficult for units of government to reduce Spending rapidly. The largest portion of variable costs is salaries, and d Most units reduce salary costs through attrition. Even if a unit was willinU Co terminate ewplVyeeS, most units are on direct reimbursement for r unempl ' -``t compensation. Therefore. employee costs may not be greatly for the first year after termination The need for building alarger fund balance is apparent. Plans for reducing costs in anticipation future cuts should be formulated now. mwN.Salisbury Street, Raleigh,North Carolina m:o1 (919) 733-8004 An Affirmative Aoum/Evu^/0n»^r�n �l�nr�xo