NorCo Gets Unqualified Audit, but It Finds That $9.9 Million Covered Gracedale Deficit Without Council's Approval

Yesterday, Northampton County Council's independent auditor presented a long-awaited report on the county's fiscal health. According to Jennifer CruverKibi, a CPA at MaherDuessel, the county received an "unqualified" opinion of its finances during 2024. She explained that is "the best opinion that a county can receive." But the financial examination also revealed a material noncompliance with government accounting standards when the county made an unbudgeted transfer of $9.9 million from the general fund to Gracedale to cover an operating deficit at the home. This was a material noncompliance because the transfer was made without a Council-approved budget amendment, as required under the Home Rule Charter. 

Council member John Brown suggested that, as a result of the "illegal" transfer of $9.9 million into Gracedale, "there's a negative unassigned balance [uncommitted funds] because they spent money and moved money they did not technically have." But CruverKibi corrected him. She acknowledged that the general fund was used to make up Gracedale's deficit. But despite this transfer, the unassigned general fund balance was still in compliance with the ordinance establishing a financial stabilization fund. 

Council member Kelly Keegan, who marched into the meeting late, chided Brown for using words like "illegal." He retorted that the Home Rule Charter was not followed. "Yes, I used the word 'illegal' because it violates the Home Rule Charter.

Fiscal Affairs Director Steve Barron also took exception. "It's not illegal. I'm still here, I'm not in jail," he remarked. But what really bothered Barron were remarks that Brown made when he spoke by phone to the auditor, when he apparently accused Barron oif fraud. "The f word. The f word in my world is fraud. There was no fraud. We cooperated throughout the entire audit. We talked about these situations. ... Nothing is illegal. Nothing is not transparent. We need to get the f word out of our mouths because I've had enough. Personally, and for the good of the county, we need to get it out of our mouth. ... No money was stolen. Nothing was taken. Knock it off." 

Without using the f word, Brown continued his criticism, saying that Barron intentionally bypassed Council when he moved $10 million into Gracedale to cover an operating deficit. "I personally think it's wrong, and there should be repercussions for it going forward."

There will be. 

It's called an election. 

Keegan then went on to say that three Council members have accused the county of fraud and malfeasance and that there was missing money, presumably in reference to the Republicans. 

"There was no missing money, correct?"

CruverKibi's response. "We're not aware of any material missing money. The definition of fraud is the intentional misappropriation of assets or fraudulent reporting. .... Everybody was very transparent about the financial numbers the whole time. We never felt there was cooking of the books." She said that Gracedale is a bit more difficult because of  "the timing of the close out." She explained that anticipated revenues can differ markedly from what is expected. She even suggested that a deficit could really only be determined by looking at the following year's collections. 

Council member John Goffredo asserted that, contrary to denials of illegality from Barron and Keegan, the county did violate the Home Rule Charter when it transferred money into Gracedale without Council's assent.

Back in April, Executive Lamont McClure assured Council that Gracedale is self-supporting. He did acknowledge that federal pandemic funds were used to help keep the home afloat.

The audit also showed that the county's expenses exceeded revenue in 2024 by $14.1 million. It took in $394.3 million but spent $408.4 million. It balanced the budget via fund balance. This likely reflects the spending of federal pandemic grants. 

My takeaways?

1) An unqualified audit means that the financial statements reviewed comply with generally accepted accounting principles. It is the best kind of audit, but it is also the most common and should be expected. I am unaware that NorCo has ever had anything but an unqualified opinion.

2) Gracedale did have an operating deficit of $9.9 million in 2024. The auditor stated at one point that the nursing home's financials should be examined over two years to determine if there is a true deficit, but this is the second year in a row that Gracedale has had a deficit. McClure likes to call his commitment to Gracedale a "moral obligation," but it is also his biggest headache. I believe the home would perform better with an outside administrator. Cedarbrook relies on a private administrator and has no drama. 

3) The county did act illegally when it transferred $9.9 million to Gracedale because it failed to get Council's approval as required by the Home Rule Charter. Obviously, no crime was committed because Barron thought he was acting properly with a prior period adjustment for anticipated revenue. Violations of the Home Rule Charter are quite common. Brown should know.  He said there should be repercussions, but what repercussions should he have faced when he submitted travel expenses to which he was not entitled or when he gave favored employees multiple step raises without Council approval or when he broke labor law by taking away a union's contracted medical benefits?  As a former Exec, Brown should know there are going to be mistakes because he made them, too.

4) There is no evidence of any fraud, but Brown never made that allegation publicly. He apparently did so in a private conversation with the auditor. Barron probably would have been smart to deal with that allegation privately as well because I can see the anonymous slurs already. But Steve is right to be offended by such a scurrilous remark that has no support in anything we know. And I'd agree that Brown's personal vendetta against Barron is contrary to the best interests of the county. You want to say he acted illegally? Fine. But when you accuse a county administrator of fraud simply because he failed to follow the Home Rule Charter, that's a bit over the top. 

5) Now that the audit has been presented, it is my hope that it will be posted online so we all can look at it more closely.