This blog originally founded by Blogger who holds a theological degree and a doctorate in Counseling Psychology. Taught Psychology for 32 years and is now Professor Emeritus. Is a board-certified psychologist and was awarded the Lifetime Achievement Award in his profession. Ministered as a chaplain, and pastored Baptist and Episcopal churches. Publications cover the integration of psychology and theology. Served in the Army, the Merchant Marines and the Peace Corps.

Friday, October 21, 2011

How Much Are Watauga County Taxpayers on the Hook For Now?

To: Sharon G. Edmundson, CPA
Director, Fiscal Management Section
State and Local Government Finance Division
North Carolina Department of State Treasurer

Our intrepid investigative reporter, Inquiring Mind, is seeking the information regarding  county liability (taxpayers) in the New River Behavioral meltdown.  She asks:  how much is the actual liability of the NRSA to be passed onto the counties? In addition to the $3,000,000 deficit
there appears to be other liabilities outstanding and still accruing.

Regarding the interlocal agreement, Article IV Section 3 Item (c), signed by Allegheny, Ashe, Avery, Watauga and Wilkes, the financial statements shows an Unfunded Actuarial Accrued Liability (UAAL) of $1,875,795. Is that UAAL reduced due to separation of service from the NRSA? What is New River Service Authority’s (NRSA--"the Counties") UAAL?

Also, the agreement includes:  "Pursuant to G.S. 122C-141(d)(3), as enacted by North Carolina Session Laws 2006-0142, all liabilities of NRSA shall be paid from its unobligated surplus funds, and if said funds are not sufficient to satisfy such indebtedness, the remaining unpaid portion of the same shall be apportioned to and paid by the Counties (emphases blogger’s) on the same pro rata basis that the Counties have appropriated and contributed funds to NRSA during such time as this agreement has been in effect."

Article I, Section 1 of the interlocal agreement defines Counties as "There is hereby created by and between Allegheny, Ashe, Avery, Watauga and Wilkes (hereinafter referred to collectively  as "the Counties"), a joint agency to be known as the New River Service Authority. Said joint agency is hereinafter referred to in this Agreement as "NRSA"."

The financial statement states: "However, the counties are not responsible for financing deficits or guaranteeing debts of the Authority, nor are the counties entitled to surpluses.  Accordingly, the Authority is not included in the reporting entity of any other governmental unit in accordance with Governmental Accounting Standards No. 14, "The Reporting Entity.”"

With regard to the "the Counties", this statement is inconsistent and brings me back to the question, why, with this potential liability, was this financial statement not part of "the Counties" financial statements?

The financial statements (also) mentions a defined benefit Health Care Benefit Plan that pays for retiree health care. Is this again not another liability? How do we get a copy of this plan?  Noted the financial statement didn't speak to a separate report regarding this plan. It requires 25 years of service; however, how was service defined since "the Counties" assumed certain liabilities when they signed the interlocal agreement?  Did prior service count? What is that liability? When does it end?

The financial statement also states that the Health Care Benefit Plan is a pay as you go plan. The premiums are being paid by the NRSA. When does that obligation end?  The financial report states that this contribution is running 4.4% of payroll which is about $1 million, is this correct? The financial statement states that no funds are set aside and that all is paid from operating funds.  It also refers to a written plan, is this not an obligation of "the Counties”?

The NRSA employees are participants in the Local Government Employees Retirement System (LGERS) according to the financial statement.  If the employees are paid through October of 2011, is there a liability toward NRSA's funding obligation accruing; when does that funding obligation end?
Raleigh’s Response:
The UAAL is the present value of what the actuarial service determined to be the total liability for the retiree health benefit as it is currently written. It is provided for informational purposes; there is no legal requirement for NRSA (or any other government) to fund this immediately.  Only the unfunded annually required contribution is booked as a liability on the financial statements. As long as they are paying the premiums as they come due for the eligible vested employees/retirees they are current on this obligation.

For other questions, Raleigh directs us to the local agreement document.

Inquiring Mind: The NRSA is dissolving so what then?
Raleigh’s response:
I have forwarded this question to our Retirement Services Division for a more complete response
Inquiring Mind to Deron: You guys might want to find out what it is that you need to do to stop the accrual of additional liability and just what that liability is.

I am very disturbed with the lax attitude that has been demonstrated in the past. So, now that we are in this mess, it would be nice if the job that should have been done is actually done now.


inquiring mind said...

Another issue that IM is concerned about is Smoky Mountain Center and the role they have played or failed to play that resulted in this debacle.
Their exact role and the make up of their board in relation to the New River Service Authority is very cloudy to say the least (maybe by design or lack of design). The following comes from the Smoky Mountain website and we want Smoky Mountain to do just what it says - tell us exactly what their role as LME and how much did they receive in income from NRSA for such role.

"Key Issues
Community Education Regarding the Role of SMC as the LME- New River LME has
been working over the last several months to inform county government, community
stakeholders, CFAC, consumers, family members and providers of the plan for New
River to establish a public, intergovernmental provider organization and the related need
to identify another LME to perform management functions in the 5 county region to meet
the legislative mandates defining the requirements for a 6 county/ 200,000 population
LME area. Most of this effort focused on gaining support by counties for developing the
intergovernmental provider organization and related separation of provider and LME
SMC will work to education the community on the distinction between the LME and
provider organization and to inform the community of the role of the LME in the delivery
of mental health, developmental disability and substance abuse services."

They mention that NRSA could have chosen any LME. And, it is very disturbing that Smoky Mountain appears to be the organization that sold "the Counties" on the idea of the interlocal agreement. And, it appears that Smoky Mountain benefits from that agreement. And, it appears that Smoky Mountain, as the "LME, Local Management Entity" would have had a hand or lack of hand in the debacle that we are in today. So, why would we trust Smoky Mountain to be the one to recommend the replacement service provider?

inquiring mind said...

The NCDHHS (NC Dept of Health and Human Services) is charged with monitoring the interlocal agreements and LMEs like Smoky Mountain. If you think that the Smoky Mountain-New River Service Authority resulted in unfair business practices (an effort to shut out private providers), then contact the following:

DHHS Mailing Address

2001 Mail Service Center
Raleigh, NC 27699-2001

inquiring mind said...

For more on how the New River Service Authority was to fit into Smoky River Center's business plans, visit this link.

inquiring mind said...

For the Smoky Mountain News on the NRSA see the following link.

inquiring mind said...

What was in the NC DHHS review findings for December 1, 2009?

Time for a closer look!

inquiring mind said...

Question to LGC:"The financial statement states: "For the fiscal year ended June 30, 2010, the expenditures exceeded the authorized appropriations by the governing board for....."

I didn't think that they could legally do that? Is there not some personal responsibility on the part of the finance officer?"

Answer: "GS 159-28 requires that obligations be budgeted so any expenditure that exceeds the appropriation is in violation of that statute. At times units have gone against the bond of local officials for various violations including this statute. 159-28( c) provides for personal liability of the board (those voting in the affirmative) if they vote to approve an expenditure that violates the law."