A review of New River Behavioral Health (NRBH) minutes show the Board and Finance Committee met monthly from 2008 (to now). While the Board (commissioners from 5 counties of Alleghany, Ashe, Avery, Watauga, and Wilkes) attempts to place responsibility for the financial debacle on the CEO, CFO, and Smoky Mountain Center (none of which had voting power) the actual fault lies in the (NRBH) Board’s willful negligence.
Since 2008, they had 3 CFOs and 1 financial analyst present monthly the financial situation and possible courses of action. Obviously, the Board was given full disclosure, including audited financial statements. Within six months, they were warned of a projected $1.3 million operating loss and were given options to correct the shortfall. When does the staff become uncomfortable bringing bad news to a group that blatantly ignores it? The Board chose not to address the deficit. New River Service Authority (the new NRBH) began with $3.8 million less in funding than the previous provider; that is when the Board should have cut expenses. Instead, they initially gave the employees a 4 percent salary increase but later rescinded the raise. The financial statements consistently revealed operating losses: 2008 – ($1,966,208); 2009 – ($1,040,132); 2010 – ($765,705).
How did NRBH stay in business? In 2008, $3,518,763 was transferred from the previous provider. The operating losses came from these funds. When this transfer sum and additional funding dried up, they just kept spending and ignored fiscal reality. The minutes show that NRBH refused to reduce the number of employees, because that meant revenue losses. They forgot or ignored the truth that employees cost exceeded revenue generation. However, to stop the ‘hemorrhaging’ NRBH spread themselves thin by expanding the service area.
Yes, the staff is responsible for mismanaging claims processing and receivables. There may even be embezzlement. However, despite the receivable problems, this operation was doomed to fail. Was the Board, again, chosen commissioners from the 5 counties, running a Ponzi scheme? Did their plan catch up with them? Now, they are blaming everyone except themselves. Even more profoundly, who do they expect to pay for this failure? Of course, the taxpayers.
The Board struggled to maintain this socialized mental health system. However, it finally became more than their individual fund balances could potentially handle. They finally did what should have been done initially; that is, turned it over to a private provider. Ashe County’s Judy Poe is the first commissioner on record to call for a shut down; the other county board members went kicking and screaming. Now, Commissioner Poe needs to review the minutes herself. Also, as with any contract which places liability on a county, the county managers and finance directors should have been monitoring, and included with the county audits, the finances of this 5-county government organization. We expect the counties to collect on insurance bonds and personal liability before seriously considering dipping into the taxpayers’ funds. We expect far more accountability from those elected, staff, contracted auditors, and the Local Government Commission. Last, but certainly not least, we call for Rep. Jordan and Sen. Soucek to initiate a thorough state investigation and ratify real reform laws.
Deborah Greene
Boone
"Once again I will state that there is no contract between Martin Starnes and NRSA for audit services. I have been assured this by the firm as well as staff members of a NRSA member county.
Please let me know if you have additional questions.
Sharon G. Edmundson, CPA
Director, Fiscal Management Section
State and Local Government Finance Division
North Carolina Department of State Treasurer
325 N. Salisbury Street
Raleigh, NC 27603
Phone: (919) 807-2380
Fax: (919) 807-2398"
"The County also participates in a joint venture to operate Smokey Mountain Center with fifteen other local governments. Wilkes County appoints two board members to the thirty-member board and one member to the advisory board of Smokey Mountain Center. The County has an ongoing financial responsibility for the joint venture because Smokey Mountain Center's continued existence depends on the participating governments' continued funding. None of the participating governments have any equity interest in Smokey Mountain Center, so no equity interest has been reflected in the financial statements at June 30, 2010. In accordance with the intergovernmental agreement between the participating governments, the County appropriated $324,000 to Smokey Mountain Center to supplement its activities. Complete financial statements for Smokey Mountain Center can be obtained from the entity's offices at 44 Bonnie Lane, Sylva, North Carolina 28779."
The 5 counties did not enter into a joint venture to operate Smokey Mountain Center. The only correct statement in that footnote is the reference to a commissioner appointed to the SMC board. None of the 5 counties operate SMC; they operate NRSA. The joint venture was with 5 counties and not 15. The funding obligation is not to SMC; it is to NRSA. SMC and NRSA are two separate entities. SMC is a local management entity which NRSA contracted with to provide the required local management services as required by NC State Law. It would appear that Martin Starnes & Associates, Inc. never looked at the interlocal agreement or they would have known that this footnote was grossly inaccurate. And, by not reading the agreement, Martin Starnes & Associates, Inc. failed to read the "liability statement" and therefore the financial information that should have been part of the Alleghany and Wilkes financial statements was not. And, now the NRSA has selected this same auditing firm to audit the NRSA itself.