Audit Reveals Benson’s True Budget Burden

By Emily Weaver
Daily Record of Dunn

BENSON – The Town of Benson finished fiscal year 2024 almost $850,000 in the red — a larger sum than the almost $600,000 reported in July.

Auditor Jay Sharpe guided Benson commissioners through the findings of his company’s final audit on Sept. 18, pointing out pitfalls along the way. The city’s unassigned fund balance — or the amount of money it should have left over after paying off its other obligations in the general fund — was $846,000 in the negative, Sharpe said.

Part of that was because the city’s water and sewer department and electric department had to siphon money from the general fund just to keep operating last year.

The town had one-fifth of the amount it needed in current assets to pay down its obligations in the water and sewer fund in 2024, Sharpe said. Benson had about half of the cash it needed to operate its electric department, he added.

His audit found two main findings and they weren’t good:

“The first one is the over expenditure of the budget,” he said. “The budget was over-expended in several areas. The amount that it was over-expended by was material to the financial statements. I think in 2023, you had a significant deficiency related to that, but it did increase to a material weakness because of the amounts of the over expenditure.

“Material weakness No. 2 is inadequate controls over the financial reporting and closing process,” he said. “That’s part of the reason the audit took so long. There were not controls in place to insure that the numbers, when we received them, were materially correct. We worked thoroughly through months and months to try to get those numbers correct. We were finally able to do that recently and we were able to get the audit to the Local Government Commission.”

Benson officials were preparing how to answer the obvious questions state officers with the Local Government Commission would have after receiving its audit last week.

Explaining its negative reserve fund may be a big one.

Interim Town Manager Steve Harrell explained the role of an unassigned fund balance in a municipality’s budget.

“… That’s a reserve that municipalities should have based on their budget,” he told the board. “If a municipality has a general fund of between $1 million and $9.9 million and we have just over a $5 million general fund, the minimum threshold that the LGC is looking for is a 34% fund balance. That means that Benson should have right at $2 million in their unassigned fund balance and so we’re $846,000 to the negative … at the end of last year. We don’t know what the fiscal year 2025 (will bring), hopefully it will have improved. The median for towns with our budget is 63%, however, I would caution you about that number because a number of those (towns) are from communities on the coast where the property taxes are higher and they also have built a larger reserve because they have to deal with natural catastrophes like hurricanes. But the minimum we should have is 34% and so that’s something the town should be working toward for the next three or four years.”

The water and sewer fund should be better next year, he added.

“I will tell you that I think that your fiscal year 2025 will be much better because you all did go up on your water and sewer rates following your water rate analysis that you did a little over a year ago,” he told the board. “… Also there were additional rate increases for this year and as you know our cash position on July 18 was $135,000 to the positive so the water and sewer fund is now beginning to do what it is supposed to do.”

A cost of service study, which will likely prompt another change in rates for Benson customers, should start to fix deficits in the electric department, too. But it will take time.

“This is a thing that did take a drastic turn between ’23 and ’24,” Sharpe told the board. “I went back (and checked). In ’23, you did have unassigned fund balance when I presented that and that was within what we’d like to see it as so there was a huge dropoff between ’23 and ’24 in the numbers. A lot of that, I think, is over expenditures in the capital projects and some of that is the proprietary funds are not operating, what I would consider, efficiently. They’re not making as much money as they should. The electric fund is losing money from the 2024 audit. Obviously, those are business type funds and any time you’re running a business, you don’t want to lose money and so that’s something obviously y’all should take into consideration, but we can’t direct you on how to correct that because that’s a management duty. …”

Commissioner Will Chandler said he wishes they had a clearer picture of the town’s finances earlier … before things took a “drastic turn.”

“We’re getting more information, now, in the last two months than we’ve got in the last two years,” he said. “I think you’ll see in 2025 we’ve got more of a handle on it than we’ve ever had before: electrical, water and sewer.”

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