Columbus – Significant deficit fund balances and incomplete financial records prompted Auditor of State Dave Yost today to declare Madison Township (Richland County) in a state of fiscal caution.
“Madison Township has some difficult choices to make and hard work ahead,” Auditor Yost said. “But with this early notice, officials have the opportunity to take the necessary steps to bring the township back to fiscal health and prevent further problems.”
Based on the township’s financial records as of April 19, 2012, Madison Township met four fiscal caution conditions. The township failed to reconcile account journals and ledgers with their bank for 27 months and failed to bring its financial records to an auditable condition within 90 days of their “unauditable” declaration on January 17, 2012. In addition, the township’s 2008-2009 audit included a number of citations, such as negative cash fund balances and appropriations exceeding estimated resources. A review of finances at December 31, 2011 found that Madison Township had deficit fund balances in the amount of $78,001, which exceeds two percent of estimated revenues by $69,287.
The Auditor of State’s guidelines for a declaration of fiscal caution include (1) unauditable financial records; (2) significant deficiencies, material weaknesses, direct and material noncompliance as disclosed in the financial audit; (3) deficit fund balances; (4) a carryover fund balance of less than one month’s average expenditures for two consecutive years, and (5) a failure to reconcile accounting journals and ledgers with the treasury.
Under the declaration and in accordance with Revised Code 118.025, the city has 60 days to submit to the Auditor of State a plan to correct the budgetary conditions that led to the declaration of fiscal caution, including eliminating deficit fund balances.
The authority to declare a state of fiscal caution for municipalities was established through the course of Ohio’s biennial budget passed last year. Auditor Yost believes that, rather than through sudden declarations of fiscal watch and emergency, local governments should be provided with earlier notice of financial concerns. Instead, these political subdivisions should have access to the same tool provided for school districts, allowing a declaration of fiscal caution. Under fiscal caution, the subdivision has an opportunity to make adjustments to avoid a declaration of fiscal watch or emergency.
A full copy of this fiscal caution declaration may be accessed online.
The Auditor of State is one of five independently elected statewide offices under the Ohio Constitution. Auditor Yost’s office is responsible for auditing over 5,600 state and local government agencies. Staff also works in partnership with state and local governments to deal effectively with financial, accounting and budgetary issues.