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Board out of compliance with state due to lack of an audit

Friday, July 5, 2013

By DEBBIE HALL - Bulletin Staff Writer

The Fieldale Sanitary District Board is not in compliance with certain state requirements for an audit.

Some fear that as a result, Fieldale residents may have to help pay for years worth of audits, while others say it may show why some state laws should be changed.

The state auditor notified the Fieldale board that it is out of compliance for not submitting the annual audit within three months after the Dec. 31 end of its fiscal year. The report would have been submitted to the Auditor of Public Accounts, according to a June 7 letter from Martha S. Mavredes, state auditor of public accounts.

Mavredes said in an email the issue arose after her office “received an inquiry from a citizen, Benjamin C. Shires, who asked whether or not there had been an audit and if not, who was responsible for compliance with the audit requirement.”

Shires said he contacted the state when he learned no audit of the fund had been done.

As a result of his inquiry, Mavredes said she sent a request to the sanitary district’s board asking for a copy of its audit because state law requires “each authority, commission, district or political subdivision with financial transactions in excess of $5,000 per year” to have an annual audit and file it with Mavredes’ office.

The sanitary district’s expenses average between $15,000 to $20,000 annually, according to Darrell Jones, the county’s chief financial officer.

The sanitary district was created in the 1940s, mainly to run the water and sewer system used by residents and the Fieldale towel plant, Jones said. The sewer portion of the operation was turned over to Henry County in the late 1970s or early 1980s, “and when Fieldcrest finally shut down 10 or more years ago,” the water portion of the operation also was turned over to the Public Service Authority, he added.

The PSA accepted the water system at no cost, with the understanding that the state would help with grants to make the connection and to improve the infrastructure, according to reports.

The county became the sanitary district board’s fiscal agent on Jan. 1, 2011, Jones said. At the time, the district had five or six bank certificates that totaled about $200,000, he said. Those certificates were combined into one, and the county withdraws an annual amount from that single certificate to pay the sanitary district’s expenses.

The district basically has three expenses — a $1,100 to $1,200 per month electric bill for street lights; a $100 monthly fee paid to the clerk of the board for processing the sanitary district’s transactions; and the cost of mowing public areas, such as along streets, during the summer, Jones said.

The only income the sanitary district receives is interest on its balance (now $160,000), and the $96 annual contribution some merchants pay to help keep the street lights on, Jones said.

“Technically, the district should have an audit for each of the past years,” Mavredes said in the email.

Whether it complies with the state requirements will be up to the sanitary district’s board of directors. Currently, there are seven members, but the Henry County Board of Supervisors can appoint up to 10.

County Administrator Tim Hall said it is not uncommon to have vacancies on boards. He noted that sanitary district board members are not paid for their services, aside from the $100 monthly fee to Betty Arnold, the board’s secretary.

With $160,000 on hand, Jones said the board eventually will run out of money. He is concerned that will be sooner than later if the board must pay for 60 or 70 years worth of audits.

Each year’s audit would cost $4,000 to $5,000, regardless of the number of transactions in a year because the amount of work the auditor is required to do is the same, according to research Jones said he has done.

“Obviously, there is no way to come into compliance with 60 or 70 years worth of audits” on the small amount of funds the district has, Jones said.

Fieldale residents may have to pay the difference, he added.

Mavredes said she does not have the authority to enforce the law or require the sanitary district board to have an audit done for each years it has existed.

“I am gathering information to determine whether I should talk with legislators about changing this section of the Code of Virginia to reflect some other measure of when an audit is required,” Mavredes wrote in the email.

The $5,000 threshold needed for an audit “was developed years ago and may no longer be appropriate,” Mavredes said.

Jones said that the discussion is ongoing, but “I personally do not want to see the persons of Fieldale lose (money) for an audit that I don’t feel is necessary. It seems like a total waste of money for them to spend that when, to me, it’s just not common sense or necessary.”


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