Cobb County exceeded bond resolution limits in transferring water system revenues to the general fund and making loans to the solid waste division in three of the past 13 years, according to an independent audit released Tuesday.
The transfers likely will result in about $1 million being repaid from the county’s general fund.
The audit was requested by Commission Chairman Tim Lee in November during an investigation into the county’s water system by The Atlanta Journal-Constitution.
Independent auditors were asked to research whether the county’s expansion of the water system to include storm water and solid waste services violated terms of a water system bond resolution. The expansion occurred in 1994 to allow the county to use water system revenues to pay for expenses in the other areas.
Since then, at least $158 million in water system money has gone toward those expenses -- $130.7 million for storm water management and $27.3 million for solid waste, according to data obtained by the AJC last year.
The audit report said Cobb did not violate the bond resolution by expanding the system to include storm water services because the guidelines do not expressly restrict adding facilities to extend and improve the system and water system revenues may be used for those expenses.
The solid waste division did not constitute an expansion of the system because it is maintained as a separate enterprise fund, auditors found.
Loans made from the system to solid waste did not violate the bond terms, according to the audit, because the loans did not reduce income available to pay water system bond debts. The bond resolution allows the county to make transfers from the water system for other uses, but at specific times and using only 10 percent of gross revenues from the previous year.
Cobb was found to have exceeded the 10 percent threshold for transfers in fiscal 2002, 2003 and 2009, resulting in about $10.4 million in excess transfers, used partly as loans to solid waste, the audit found.
Tuesday’s audit findings vary from opinions given by bond experts to the AJC in December. Those experts said most of the county’s actions violated bond restrictions that were agreed to by the county.
Bill Brice, Cobb’s water system director from 1994 to 2007, told the AJC that the funding moves were inappropriate because water and sewer customers were expecting to pay for water services only.
The county paid back $9.4 million of the solid waste debt. An additional $17.9 million was written off in 2009, the AJC reported in December.
Lee recommended the county repay the remaining $1 million in excess transfers to the water system. That repayment, which has to be approved by the commission, would have to come from the county’s general fund, which currently has a $20 million deficit.
To prevent future problems, Cobb officials plan to work with the bond council to resolve some issues in the bond resolution, as well as put policies in place to ensure the 10 percent threshold is not exceeded in the future, said Jim Pehrson, the county’s finance director.
Auditors said the county’s actions detailed in the findings have not hurt ratepayers.
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