Recurring audit finds a financial flaw in the structure of Iowa's mental health regions
The Hawk EyeAug 17, 2021
Aug. 17—The Southeast Iowa Link mental health and disability services region got a clean bill of health on its annual audit except for a requirement
According to the audit, the results of which were presented during a SEIL meeting last week, the region does not have recorded liability for compensated absence, meaning the region does not have money to cover an employee if they were to leave and be entitled to a payout of those benefits, but those liabilities are recorded somewhere else: in the county budgets.
"Those would be reported in the audit of each county that has employees of
When a governmental entity is audited, the auditor is not simply looking at the entity's financial records. They are looking at the whole package, part of which includes whether good government principles are being followed. As a result, even though compensated activity liabilities are taken care of, because they are not directly taken care of by the SEIL region, this counts as a mark against the region on its audit.
SEIL Chief Executive Officer
"Management has not recorded a liability for compensated absences in governmental activities and, accordingly, has not recorded an expense for the current year change in that liability," the audit report states.
There is, however, no penalty for the region for the error.
The error itself may be an unintended consequence of the way
Prior to regionalization, counties levied for mental health services and paid their own expenses. But under the region system, each county is required to pay a designated amount to the region through its mental health levy.
The region then writes a check back for the county if need be. The amount paid by each region is correlated to a certain per capita expense the county is supposed to pay. In the SEIL region, the counties must pay the region
The amount the counties get back from the region has nothing to do with what it pays in.
The money
The money included in the liability for compensated absences for the two advocates does exist, it just exists in
There is a hope this might be eliminated with the new mental health funding bill. One question that has been asked is how employees would be paid since counties would no longer have Fund 10, the fund that pays for mental health services, under the new bill, which went into effect
One idea would be for all of the current mental health employees to become region employees. If this were to happen, the region would be responsible for liability for compensated absences and the note would be eliminated. Another idea that's been discussed is that the fiscal agent would employ all mental health employees. If that were the case, the region would see issues on every audit.
On paper, it looks like the SEIL region massively overshot its budget, with a deficit of
The large deficit is driven by counties in the region, which are required to spend down their own ending fund balance.
The spending of ending fund balances, which generally are kept to ensure continuity of services until the next round of property taxes are received, now is mandated by law. Under the Fiscal Year 2020 budget, the counties were trying to race their way down to a 20% ending fund balance.
Over the next several years, the ending fund balance is going to take an even bigger hit. The counties will be required to have a total ending fund balance of less than 5%. Any more than this amount in the regions will see their reimbursement by the
In
Usually, expenditures and revenues are roughly the same with ending fund balances slightly growing or shrinking based on the fact that the levy rate can't perfectly be broken down to account for every dollar spent, though if an ending fund balance was spent down, it may have to be built back up intentionally to keep it at a level where it can sustain itself.
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