Purpose of Audit

The purpose of our budget review was to determine whether the significant revenue and expenditure projections in the County’s adopted budget for the 2013 fiscal year are reasonable.

Background

Rockland County has been experiencing financial condition difficulties in recent years. The general fund deficit has increased from $31.5 million at December 31, 2008 to $96.5 million at December 31, 2011. These deficits were mainly caused by operating deficits ranging from $11 million in 2009 to $29.2 million in 2011. In addition to the deficit in the general fund, the County had unrestricted deficits of $109.5 million in the hospital fund and $17.2 million in the internal services funds as of December 31, 2011. We estimate that the general fund deficit could increase to at least $110 million as of December 31, 2012.

Key Finding

We identified significant revenue and expenditure projections in the adopted budget that are not reasonable and could result in an increase in the County’s accumulated deficit. Specifically, the 2013 budget lacks provisions for decreasing the general fund deficits. The County could face a significant shortfall in sales tax revenue if the County does not receive the budgeted amount. The County has budgeted for a 4 percent increase in sales tax revenues for 2013 when sales tax collections are projected to decrease by 0.6 percent in 2012 and only increased 0.1 percent in 2011. If the Town of Orangetown does not reimburse the County for tax certiorari moneys during the 2013 fiscal year, the County will have an additional revenue shortfall of $2 million. If property is not sold, the County will experience a revenue shortfall of $2.4 million in 2013. It is unlikely that the $550,000 contingency appropriation will be sufficient to cover the annual average $2 million of uncollected taxes. The 2013 budget appropriation of $158 million for personal services appears to be insufficient. The County budgeted salaries as if no employees were taking the early retirement incentive that will be offered in 2013 and then accounted for a savings of $4.3 million in a separate budget account as a negative expenditure amount.

Key Recommendations

• Develop and implement a long-range financial plan to eliminate these fund deficits.
• Closely monitor sales tax collections and reduce spending if projections fall short.
• Review the appropriations for the tax certiorari moneys and personal services and consider adjusting them, if necessary.
• Discontinue to practice of relying on non-recurring revenue for operating expenditures.
• Closely monitor and take necessary actions to reduce other appropriations if savings of $4.3 million is not achieved for the early retirement incentive.