Audit report: St. Croix County “strong and healthy overall”
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By LeAnn R. Ralph
HUDSON — The result for the audit of St. Croix County’s 2021 financials is that the county is “strong and healthy overall.”
There are only two material weaknesses, and both of them are a repeat for St. Croix County and are common among other municipalities, said Jonathan Sherwood of Clifton Larson Allen LLP at the St. Croix County Board’s September 6 meeting.
The first weakness is “material audit adjustments,” which means the auditors must make journal entry corrections during the audit, he said.
The number of audit adjustments that are necessary is improving every year, Sherwood said.
The second material weakness is “segregation of duties,” which refers to the number of people in a department who handle any given financial transaction, he said.
In an ideal situation, multiple people would oversee every transaction. In some St. Croix County departments, there is only one person who handles financial transactions, Sherwood said.
Most municipalities do not have enough employees for segregation of duties, and it is not feasible for the municipalities to hire more people for segregation of duties, he said.
On the other hand, the St. Croix County Board reviews the county’s finances regularly, and that helps provide more internal control, Sherwood said.
Unassigned balance
St. Croix County has a strong unassigned fund balance.
According to the audit report, in 2021, the unassigned fund balance was $19.8 million.
In 2020, the unassigned fund balance was $19.5 million, while in 2019, the unassigned fund balance was $17.16 million, and in 2018, it was $17.24 million.
For a county the size of St. Croix County, the recommendation is to have 33 to 40 percent of general expenses in the unassigned fund balance, Sherwood said.
The 2021 unassigned fund balance was 47.2 percent of general expenses, and in 2020, the unassigned fund balance was 47 percent of general expenses, according to the audit report.
In 2019, the unassigned fund balance was 44.2 percent of general expenses, and in 2018, the unassigned fund balance was 45.6 percent of general expenses.
The minimum would be 33 percent as a set-aside for general operations, and the goal is to have three to four months of general operations set aside to cover expenses if the county were ever in the position of having no revenue coming in, Sherwood said.
Bonding agents, when considering the issuance of general obligation bonds, take into consideration the percent of unassigned fund balance to general expenses, he said.
The St. Croix County Board has established a policy of always maintaining 25 to 35 percent of general expenses in the unassigned fund balance, Sherwood noted.
Clifton Larson Allen conducts audits for many neighboring counties, and in 2021, there was a significant increase in unassigned fund balances, he said.
The increases in unassigned fund balances were largely due to money received because of the COVID-19 pandemic, such American Rescue Plan Act (ARPA) funds, Sherwood said.
Since there is a deadline by which the ARPA funds must be spent, the additions to unassigned fund balances due to ARPA and other COVID money will be spent down in 2022 and 2023, he said.
HHS
St. Croix County Health and Human Services had a year-end balance of $3.7 million in 2021, compared to a year-end balance of $2.7 million in 2022, representing about a $1 million increase, Sherwood said.
For most counties, health and human services is among the largest of the county’s budgets, he noted.
The increase in St. Croix County’s health and human services year-end balance is due mostly to ARPA and COVID funding, and those reserves will be spent down in 2022 and 2023, he said.
Capital projects
The capital projects fund contains money for one-time major capital improvement projects, Sherwood said.
St. Croix County’s capital improvement fund had a fund balance of $8.1 million in 2021, compared to a fund balance of $7.9 million in 2020, he said.
The 2021 fund balance contains some ARPA and COVID money, Sherwood said.
Health care campus
The health care campus (which includes short-term rehabilitation and long-term care) has had a change in net position by a significant margin, Sherwood said.
The net position was a negative $58,861 in 2018, was a negative $477,198 in 2019; and was a negative $440,094 in 2020, according to the audit report.
In 2021, the change in net position was a positive $524,267, representing an increase of almost $1 million, Sherwood said.
The health care campus received $1.5 million in additional one-time COVID funding, he said.
Without the one-time funding, the health care campus would have had an operational loss of about $300,000 in 2021, Sherwood said, adding that the St. Croix County Board should continue monitoring the health care campus budget.
Highway dept.
The St. Croix County Highway Department’s financials are strong and healthy for 2021, Sherwood said.
According to the audit report, the unrestricted fund balance was $5.9 million in 2021.
In 2020, the unrestricted fund balance was $4.8 million, while in 2019, the unrestricted fund balance was $4.7 million, and in 2018, the unrestricted fund balance was $2.1 million.
Internal services
The internal services fund includes a variety of items, such as liability insurance, health insurance, workers compensation, and retirement health savings.
St. Croix County is self-funded, and the premiums that are set should meet or exceed the claims, Sherwood said.
The total internal services fund in 2021 was $6.9 million, while in 2020, the total was $8.1 million, and in 2019, the total was $9.01 million. In 2018, the total was $9.04 million.
The county may want to consider increasing the premiums, Sherwood said.
Long-term debt
State law allows a debt limit of 5 percent of the equalized value of a municipality, Sherwood said.
St. Croix County’s long-term debt obligations were $75.4 million in 2021, while in 2020, the obligations were $58.8 million.
In 2019, the county’s obligations were $83.3 million, and in 2018, the obligations were $65.5 million.
The general obligation debt subtotal was $54.8 million in 2021.
In 2020, the general obligation debt subtotal was $59.3 million, and in 2019, the general obligation debt subtotal was $63.8, while ini 2018, the general obligation debt subtotal was $61.4 million, according to the audit report.
In 2021, St. Croix County had a borrowing capacity of $622 million.
In 2020, the county’s borrowing capacity was $577 million, and in 2019, the borrowing capacity was $531 million, while in 2018, the county’s borrowing capacity was $484 million.
General obligation debt as a percent of debt limitation was 8.8 percent in 2021 and was 10.3 percent in 2020.
In 2019, general obligation debt as a percent of debt limitation was 12 percent, and in 2018, general obligation debt as a percent of debt limitation was 12.7 percent, according to the audit report.
Government center
There is not much to update on the government center project, said Ken Witt, county administrator, during his report to the St. Croix County Board.
St. Croix County is planning an approximately $90 million project to expand the size of the government center and to remodel the existing government center.
The county is getting close to bidding out one of two large bid packages, Witt said.
The first bid package, which will focus on the core and the shell of the government center expansion, will be sent out soon, and the bids are expected back within two months, he said.
The second bid package will focus on the interior of the government center and the remodeling and will be sent out in February, Witt said.
A presentation on an updated project cost will be part of the St. Croix County Board’s October meeting, he said.
