Brown: Gracedale Lost $38 Million Over Two Years: McClure Covered Without Council's Approval

John Brown was Lamont McClure's predecessor as NorCo Executive and currently serves as an at-large member of NorCo Council. Last week, both at the Finance Committee that he chairs and later at a full meeting of County Council, he made some serious allegations about Gracedale's finances, claiming it has actually lost $38 million in 2023 and 2024. Perhaps even more seriously, he insists that the McClure administration periodically moves money from its own general account into Gracedale to make up for these losses without a budget amendment or seeking the approval of County Council. Brown is seeking re-election, so his motives could be political. But he has something that has yet to be released to the general public, and that is the annual report of an independent auditor. That should be available when the auditor formally presents its findings, which hopefully will be soon. 

Brown's j'accuse:

According to Brown, page 8 of the independent audit shows that Gracedale had an operating loss of $9.9 million at the end of 2024. It exceeded the adopted budget to cover revenue shortfalls The administration transferred money into Gracedale from unassigned funds without a budget amendment or Council authorization. "We didn't approve it. I assume [Fiscal Affairs Director] Steve Barron approved these transfers, it did not come from county council, and this should be accountable."

"I feel this body's been lied to about who did this, what it was for, and where the monies came from, why I don't know why a Budget Amendment was not brought for in January February in order to address this."

"So I'm stuck." ...

"So if the fiscal Department is able to just move money whenever they want, then what controls do we actually have?

"I think this is a severe breach of the checks and balances for what we're supposed to give."

He called what happened a "pattern." He noted that, according to page 25 of the audit, Gracedale had a zero fund balance to start 2025 and has a total operation loss of $38 million in two years. "How they're going to plug that, I don't know."

"If you, as a private sector, did the same thing and publish it financial reports against it, you'd go to jail for, right?"

"You'd go to jail for it." 

"Because for the government, you can get away with it, but it's deceiving the public, it's deceiving this body financially with that. And we have to make decisions, they come forth with budget amendments, they want personnel, approval, so and so forth, how are we supposed to know? So this is, for me, is a complete lack of trust."

Barron's Defense 

Fiscal Affairs Director Steve Barron was asked by Council member Jeff Warren to address Brown's indictment. "It's really, really simple," he said. He noted that the home currently is sitting on 10 months of receivables, and he informed Council when he presented this year's budget that the home is a challenge. 

He noted that the transfers are authorized under an accounting principle known as a prior period adjustment, which is exactly what Brown did in 2014 when he was Executive. 

Barron said he would prefer to have gone the budget amendment route but was unsure exactly what number to present. He added that prior period adjustments have only been done two or three times and accountants dislike using that tool. It was necessary at Gracedale because of an ordinance providing that once money is sent to Gracedale, it must stay there, and the county is unable to claw it back. 

The Fiscal Director went on to say that the county has received an unqualified opinion in the external audit, which is the highest-level opinion the county can obtain. It also has the highest bond rating of all 67 counties. 

In addition to waiting 10 months for reimbursements from Medicare and Medicaid, Barron noted that the Intergovernmental Transfer Grant that was supposed to come in two years may now take as long as five years. He finally observed that Gracedale operates on a modified accrual basis of accounting.

Brown unsatisfied. - He characterized Barron's explanation as the same "song and dance" he's presented now three or four times.

The Independent Auditor. - When the county's independent auditor presents, and this can't be soon enough, we'll know whether Brown or Barron is at fault.