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Columbia’s accounting is so tangled that city officials did not realize they have paid about $18 million more for health insurance and other costs in the last three years than was budgeted.
The deficit in the city’s risk management fund was largely because of the increase in health insurance costs and claims.
So far, the city has been able to cover the deficit with its bountiful end-of-the-year surpluses.
But with health care costs increasing every year, Columbia’s auditor is warning city leaders that unless they change their health care plan and properly account for the increases, they could find themselves unable to pay the city’s bills.
It’s the latest chapter in the city’s accounting woes, a two-year saga that has led to the resignation of the city’s finance director and a public apology from Mayor Bob Coble and city manager Charles Austin.
Tonight, Coble and council members will appoint area business leaders to an advisory committee to find candidates for the city’s next finance director, who will be in charge of ensuring the city keeps track of its $227 million in public money.
Robert Hill, CEO of South Carolina Bank and Trust, has been nominated by the mayor and other council members to serve on that committee. He said the city’s inaccurate projections for health care costs are a symptom of a larger accounting problem.
“The city has a lot of rebuilding to do in that department,” he said. “For our city to grow and prosper, if we don’t have a healthy foundation in place, then there could be trouble ahead.”
Austin is considering a proposal to require employees to pay more for their health insurance.
He could take the proposal to City Council members in August during a two-day retreat.
The city is self-insured, but BlueCross BlueShield of South Carolina administers the program for about 2,000 employees.
The city pays about 3.4 percent more per employee for its health care plan than other S.C. cities of comparable size, according to BlueCross BlueShield.
Austin said city officials have been aware of the underbudgeting problem since last year, but have not been able to determine how big a problem it was because of the city’s troubles with its accounting.
“We can’t continue to pay more than we budget,” Austin said.
In the 2005 budget year, the city’s risk management fund was at a $500,000 deficit, which was easily absorbed by the city’s $18 million surplus. The next year, the city’s risk management fund was at an $11 million deficit, said Bud Addison, senior manager with Webster/Rogers LLP, which is leading the city’s audit.
In 2007, the city budgeted $6.9 million for health care costs. It paid $15.2 million — about $8 million more than budgeted, according to records, which are being audited.
“You can see if the trend of (an) $11 million deficit continues, in a year or two you are at a deficit balance,” Addison said. “Bond-rating companies will not like that.”
Most of the deficit comes from health care costs.
The city already has implemented changes to help cut health care costs.
In January, it moved to a mail order program for prescription drugs that Coble said will save the city about $400,000 a year.
In addition to finding ways to cut health care costs, the city has brought in a team of accountants from the S.C. Municipal Association to help balance its books.
“It’s a daunting job,” said Wanda Charping, who also is working with troubled Gaston in Lexington County. “It’s kind of like when you are reconstructing a home. You open up a wall and you might find something.”
Reach Beam at (803) 771-8405.
