Beaufort County says it will be $5.4 million over budget. What caused this?
Just seven months into fiscal year 2021, Beaufort County government anticipates it will be $5.45 million over its $130 million budget. County officials have proposed a budget amendment to move money from various accounts to cover the anticipated shortfall.
A number of factors caused the shortfall, including hundreds of thousands of dollars spent in legal fees and lawsuit settlements, $2.27 million in unexpected salary increases, an increase in spending by the information technology department and $605,000 to allow employees to cash out their paid time off.
Unlike Congress, which can run a deficit, local governments must balance their budgets, which means either cutting spending or raising taxes. Across the country, towns and counties have made significant cuts due to expected revenue declines from the COVID-19 pandemic.
Beaufort County, in its 2021 budget, froze employee raises and made cuts to departments such as information technology — a department that has seen an influx in costs this year due to virtual meetings and new equipment.
Although a budget amendment halfway through a fiscal year is typical for most local governments, a $5.4 million shortfall is the “biggest I can recall ever seeing,” Council member Brian Flewelling told a reporter Thursday.
“I’m very concerned about it,” he said. “I’m not happy that the budget process was incomplete or inaccurate in previous years. We’re required by law to have a balanced budget, and thank goodness we have the money” to cover the deficit.
Flewelling said the shortfall reveals a problem with how previous administrations prepared their budgets, not taking into account an increase in employee expenses over the years. But, he said, “it shows me this problem won’t happen again.”
The discovery of the deficit comes as the county is still reeling from a year that saw a condensed budget because of COVID-19 and setbacks due to the departures of several top employees — including the resignation of its chief financial officer during budget season and the forced resignation of its administrator.
In the midst of several controversies, lawsuits and settlement pay-outs have been frequent. The County Council has also approved projects and programs that were previously not in the budget.
With new Chief Financial Officer Whitney Richland and new Budget Director Pinky Harriott on staff, county officials noticed that several line items in the budget exceeded or were “at risk” of exceeding the amounts approved by council in June.
According to the county’s report, the budget deficit was caused by:
▪ A $2.27 million shortfall in employee salaries
▪ A $866,000 shortfall in the information technology department’s budget
▪ A $625,000 Culinary Art Institute payment from a 2015 intergovernmental agreement
▪ $605,000 that allowed employees to cash out their paid time off
▪ $390,000 in County Council legal fees
▪ A $300,000 shortfall in the county attorney’s office professional services line item. The report called this “legal issues.”
▪ $125,000 for County Council to settle a lawsuit over county employees’ health insurance
▪ A $100,000 grant to start the Beaufort County Distance Learning Fund
▪ $90,000 in “pre-purchase” funds for the proposed New Riverside library
▪ $42,000 for County Council to settle a lawsuit with developers over the Whitehall park on Lady’s Island
▪ $35,000 for finance to conduct an internal audit.
Officials were tasked with moving money around in the budget to make up for the shortfall and identified three sources of revenue equaling $5.65 million: $5.1 million in service fees due to a “record year” in the register of deeds office, $100,000 from the County Council’s unclassified operating account, and $450,000 from a personnel cost reimbursement line item — where money had been “sitting,” Richland said.
The budget amendment, approved by the county’s finance committee this week, is expected to go before the full County Council for three readings before its approval. The council’s next meeting is on Monday.
$2.27 million salary shortfall
The largest shortfall identified in the budget is in county employee salaries, which was $2.27 million higher than what council approved.
Eighteen departments — from the county’s Emergency Medical Services department to the sheriff’s office communications team to the attorney’s office — are spending more on salaries than what council approved, according to financial information obtained by The Island Packet and Beaufort Gazette.
Explaining the salary shortfall to the county’s finance committee this week, Richland said salary personnel costs were likely rolled forward from 2019 with no adjustments. She said she didn’t know how closely the budgetary amounts were followed when the budget was created.
The financial information obtained by the newspapers shows that several departments also had a salary deficit, to a lesser extent, in fiscal years 2020 and 2019.
“Had they been accurate to begin with, we would not be in this situation that we’re in today,” Richland told the committee.
She said the shortfall was discovered when county staff obtained financial information from the human resources department and compared the full salaries of employees to the amount budgeted.
During the meeting, Council member Chris Hervochon asked Richland whether the shortfall was the result of the county not performing cost variance analyses on a consistent basis. A cost variance analysis is important when budgeting because it compares the actual incurred cost of an item to the expected or budgeted cost.
“Yes sir,” Richland responded. She added that the hiring of a budget director will help the county catch these issues sooner.
